NYM tokens :  where they live & distribution explained

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Learn about the mixnet token economics, NYM tokens and the Nyx chain

Nym is a mixnet that provides powerful privacy protections for ordinary people by encrypting and mixing internet traffic. The mixnet has a utility token called NYM to pay for usage, measure reputation and serve as rewards for the privacy infrastructure. The token economics of the Nym mixnet runs on the Nyx blockchain, a layer-1 blockchain built on Cosmos SDK, for the mainnet.

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The Nyx blockchain is the home of the smart contracts that form the backbone of the Nym mixnet. These smart contracts manage the topology of nodes that make up the mixnet, the staking and rewarding of mix nodes and of course the peer-to-peer transactions where users send NYM tokens to each other. Nyx is a Cosmos blockchain, it uses CosmWasm smart contracts and is written in Rust, compiled to WebAssembly. (Stay tuned for an upcoming blogpost that gives a breakdown of the mixnet CosmWasm smart contracts!)

Now, this means the mixnet token economics is not run through a simple Ethereum smart contract for minting ERC20. Instead, tokens are stored on the Nyx Cosmos chain and then shipped cross-chain to other blockchains, such as Ethereum.

The total supply of NYM tokens is 1,000,000,000 (1 billion). Not all of these are in circulation yet, as there are different vesting instruments releasing tranches of tokens starting from the genesis of the Nyx chain in early 2022.

The team releases quarterly tokenomics updates as more tokens enter into circulation. This is necessary as the increase in liquidity results in a change in the mixnet tokenomic parameters. To give an example: the more native NYM tokens there are in circulation, the higher the stake saturation points for mix nodes.

Note: NYM is a utility token, which will enable users to access the internet through the mixnet. It is a reputation and incentive vehicle for mixnet infrastructure operators.

A bit more complexity: ERC-20 NYM

To enable access for more users, NYM tokens have also been enabled on the Ethereum chain as an ERC-20 token, using the permissionless Gravity Bridge — a Cosmos native blockchain that bridges assets between the Ethereum and Cosmos ecosystems.

The main reason for this is that many centralized exchanges do not support Cosmos chains directly–only some, like Kraken or Deepcoin do.

Nym and Gravity bridge

Gravity Bridge has two different sides, one of which is Gravity.sol, the Solidity contract that holds & releases funds on Ethereum. In contrast to the mainstream trend in regular bridge designs, Gravity.sol is very compact and easy to review. It has been audited by three independent teams (Certik, Least Authority, and Code4rena) and it is not upgradable. It does not contain any trusted parties — it works as a transparent and solid framework to bridge any Cosmos chain to Ethereum.

The way Gravity.sol works is that when the ERC20 NYM contract was deployed by Gravity Bridge, it minted the maximum possible amount of NYM Ethereum tokens — equals uint256, basically a very big number capped by Ethereum design parameters. This is reflected on Etherscan.

This minted number is mutually exclusive from the 1 billion total supply of native NYM tokens. It is merely a technicality that is hardcoded into the bridge contract function, like in the case of all other types of Cosmos tokens that Gravity.sol holds. This phenomenon occurs with every chain that uses Gravity Bridge. However it may be less noticeable given that most tokens originate from the Ethereum side where the maximum supply less than the maximum size of uint256 is less common.

The deployment is done by the bridge contract itself. Deployers have limited parameter control, namely name, symbol and the number of decimal points.

The reason for this is because on the Cosmos side, the Gravity module mints and burns native NYM tokens based on the bridge interactions requested by users, and this way the Gravity contract does not need to be updated to calculate with any tokenomics of any token specifics — it can stay lean and permissionless, working with all Cosmos tokens.

Essentially, Gravity acts like a photocopying machine, which does not count tokenomics and vesting periods, because it only does two things:

1. If Native NYM is burnt it releases ERC-20 NYM on the Ethereum side
2. If ERC-20 tokens get locked, it mints the equivalent amounts on the Cosmos side

Let’s take a look at two example scenarios:

Example 1

Alice won X native NYMs in a challenge and would like to sell it on an exchange where she has an account. As her exchange only supports ERC-20 NYMs, Alice has to bridge her tokens via Gravity Bridge:

1. Alice sends X native NYM over to Gravity Bridge.
2. Gravity Bridge burns these tokens on Cosmos side (1 billion minus X).
3. X amount of ERC-20 NYMs gets released from the bridge contract to the wallet that Alice specified.

In the end, the maximum circulating amount does not change — only X amount more circulates on the Ethereum side, and X less on the Cosmos side.

Example 2

Bob would like to buy Y NYM tokens to stake them on a mixnode, but he only has an account with an exchange which supports ERC-20 NYMs. Bob knows that he has to bridge his ERC-20 NYMs via Gravity Bridge:

1. Bob sends Y ERC-20 NYMs from the exchange to Gravity Bridge.
2. Gravity.sol locks Bob’s Y ERC-20 NYM tokens — this gets added to the already very-big number of NYM tokens outside of circulation held by the smart contract.
3. Gravity Bridge mints Y Native NYM tokens and sends it to the Nym wallet address specified by Bob.

In the end, the maximum circulating supply does not change, because all NYM tokens will have originally been minted on the native Nyx Cosmos chain. In other words, the Y ERC-20 NYMs that Bob bought off the exchange will have at some point been bridged over from Nyx, just like Alice’s tokens. Thus they were burnt before by someone else who bridged those tokens over to Ethereum.

The total circulating supply will always be a maximum 1 billion NYM, across all chains.

Resources

If you want to learn more about how to bridge your ERC-20 to Cosmos read: (https://nym.com/blog/bridging-staking-earning-nym-tokens)

If you are interested in the quarterly tokenomics parameter upgrade read: (https://nym.com/blog/nym-token-economics-quarterly-parameter-update)

If you’d like to know more about how to stake & delegate your tokens read: (https://nym.com/blog/how-to-stake-in-the-nym-mixnet)

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