Quarterly token economic parameter update

Another tranche of NYM tokens have vested, but no parameter changes are required

Author: Nym

July 17, 20235 mins read

Another tranche of NYM tokens have vested, but no parameter changes are required

Nym is a global privacy system that is powered by the NYM token. The NYM token enables a virtuous cycle among users, token holders and node operators of the infrastructure. It serves as a utility token as well as a means to measure mix node reputation, and to reward operators and stakers.

Learn more about Nym token economics.

Every quarter, the circulating supply of NYM tokens increases as a result of vesting tokens being released. This means more tokens are available for people to delegate stake to mix nodes and has the expected effect that mix nodes will eventually reach stake saturation. (Stake saturation is a soft cap to ensure no individual node holds too much power over the mixnet). Usually, when a vest happens, the parameters need to change so that an adequate number of mix nodes reach stake saturation.

Learn more about delegating stake.

Learn more about stake saturation point.

So far, the recent vest, however, has not resulted in a large increase in staked tokens. This quarter, overall staking activity is still far from the target staking supply. For this reason, no adjustments are needed to the parameters. To recap, the current parameters are:

Parameters

Circulating supply: 473 million NYM (API)
Locked staking supply: 29 million NYM
Max staking supply: 502 million NYM
Target staking supply: 225 million NYM
Mix node stake saturation point: 940k NYM

Deep dive

The circulating supply at the time of writing is 473m NYM. In addition to the circulating supply, 10% of the 29m unvested (locked) native NYM tokens can also be delegated as stake to Nym mix nodes.

This means that the maximum amount of NYM tokens that could be staked = 473m + 0.1*294 = 502 million.

The actual number of currently staked tokens, however, is 150 million, meaning 30% of total supply is staked.

A ‘target staking supply’ is set below the maximum (currently 502 million) circulating NYM tokens, because it will never be the case that all of these tokens are staked.

The target staking supply parameter is set to maximise APY, or rate of return, for currently staked tokens, while nevertheless incentivising further staking. It therefore needs to be set somewhere between the maximum staked tokens (502m), and the actual current level of staked tokens (150m).

Setting a target lower than the current level of staked tokens would disincentivise both staking on and operating a saturated node. The saturation levels of a node signify its reputation, and this affects whether the node is selected to the active set (or ‘epoch’) in the mixnet, and earning rewards. If all nodes reach saturation too easily because the target is set very low, then the incentive algorithm no longer works, and staking loses its significance in the selection process.

But setting the target a lot higher could raise the saturation point to unreachable levels. This would harm the APY of mix nodes, and also disincentivise operating and staking.

So, in order to offer a good APY to operators and stakers, the target staking supply for rewards is higher than the current level of staked tokens, but lower than the current maximum of 502m, and set at 225m.

An increase of this target leads to a reduction of APY. Increases are only necessary when the level of staking in the mixnet is approaching the target. Normally, this number increases with rewards being released every month, and in particular with the quarterly vest, as this releases a large amount of tokens that can be staked. However, the current staking level (150 million) is still far from the current target (225 million). For this reason, an increase is not immediately necessary and the parameters will remain unchanged.

This also means that the stake saturation point does not increase with this vest. The stake saturation point is found by dividing the target staking supply by the number of rewarded mix nodes: 225m / 240 = 940k saturation point.

The parameters will be revisited with the next vest to assess whether the total staked in the network is nearing the target.

Over the next months there will be a number of improvements to the Nym token economics, including minimum profit margin, and more opportunities for mix node operators. Stay tuned for updates!

For a breakdown of Nym token economics and the smart contracts foundational to Nym, click here. Learn more about Nym and the token economics: read the token economic whitepaper, bonding and delegating NYMs as stake to earn rewards, and read the guide to bridging NYMs. Find the Nym Developer Portal here.