Dynamic Reward Issuance is coming to Gemini 3h
In the realm of blockchains, the quest for a sustainable and equitable issuance model is akin to the search for the Holy Grail. It’s a complex challenge, balancing the need to incentivize early adopters and maintain a healthy, inflation-resistant economy. At Subspace, we embarked on a multi-month cross-team effort between research, finance, and engineering and partnered up with Blockscience to develop an innovative solution to strike the right balance. In our model, we combine battle-tested economic principles and technological innovation, designed to ensure the long-term viability of the chain.
At the heart of Subspace’s approach is a decay function, reminiscent of Bitcoin’s halving mechanism. Bitcoin’s halving events are dramatic, step-ladder reductions in block rewards that occur every four years. They’re designed to mimic the scarcity of precious metals, making Bitcoin a deflationary asset. However, this approach can lead to sudden changes in miner incentives and network security. Subspace takes a different path. Instead of abrupt halvings, we introduce a smooth curve that decreases block and vote rewards slightly with every block. This gradual reduction is more predictable and less disruptive, providing a steady incentive for early adopters while increasing the circulating supply in a more controlled manner.
The second pillar of Subspace’s model is dynamic rewards based on blockspace utilization. This concept stems from a desired end state of a blockchain token economy: as the chain matures and finds real-world applications, transaction fees should ideally cover the costs incurred by validators and block producers. In the early stages of a blockchain, however, transaction fees are unlikely to be sufficient. Subspace addresses this by offering higher rewards initially, subsidizing the expenses of early farmers. As the chain grows and transaction fees increase, the protocol automatically reduces the issuance of new tokens. This ensures that the token supply is conserved for periods of lower demand and can be issued for longer if needed. For example, if the blockspace utilization is 50%, then the protocol will issue only about a half of the reward. When the block is full, nothing is issued. The utilization-based issuance doesn’t affect vote rewards as they currently do not get transaction fees.
Theoretical models can behave differently than expected in the wild, and there might be bugs in the implementation or corner cases uncovered, so we plan to deploy the new issuance model on Gemini-3h for extensive testing in the coming weeks.
For the farmers on Gemini-3h, this means witnessing their rewards decrease gradually over time - a necessary sacrifice for the greater good of the network’s economy. You will stop seeing the exact 0.1 tSSC hit your wallet, but 0.09999, 0.099998 and so on.
Yet, rest assured this decay does not diminish the value of your contributions to the network. The number of actions (votes or blocks produced) rather than the total tokens received will be the measure of one’s contribution during this testing phase. If you submitted a vote 1000 times but got 97 tSSC instead of the expected 100, it’s the 1000 times you voted that counts, not the tSSC.
On mainnet the reward decay ensures that early adopters are recognized for their role in securing and validating the network, even as the reward structure evolves.
Our plans are to compress the decay curve on Gemini 3h to something easily observable. Remember that the contrived values we will be using on testnet will not be the same as the final mainnet curve. There are a few final steps we are working on to ensure the transition is smooth. First, we expect to release the final software updates that enable us to support dynamic reward issuance and then, because we enjoy a live transaction on a call, we intend to kick things off on an upcoming community event in Discord!