Tokenomics and Funding: Division of Block Reward Discussion and Community Matching Fund

Firo Improvement Proposals
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We are therefore right in the subject of the topic: the block-reward distribution.

We agree to allocate a major part of the bock-reward between masternodes and development team.

My reasoning is that it is better to work on increasing the price of Frio, which will benefit everyone, including miners, than on increasing the share of the block reward for the development team (they don’t not ask anyway). How to act on Firo’s price increase using the block-reward? By distributing more than half of the block-reward to players who keep their Firo without selling them: the owners (current and future) of masternodes : there will be less sellers than buyers in the market and Firo price will go up (for traders influence, cf. previous posts) This is why I am for 60% of the block-reward for the masternodes (and 15% for the team, as it proposes, 20% for miners and 5% for a community fund trial).

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First of all I wanted to highlight that I am a Firo GPU miner and I never sold a single Firo token mined. I also have multiple master nodes. I believe in the project and I can see the hard work driven and executed by the team to deliver not only unique privacy implementations but also impressive features.

Most people advocating for reducing the mining rewards are biased because they’re master-node owners. Who doesn’t want free money doing nothing especially with as low as 1000 Firos. I am guilty too to be completely honest.

Firo has been a strong supporter and advocate of PoW, also fully understands that miners need to pay electricity, break even on their hardware and potentially make some profits. So selling the coin isn’t as bad as highlighted but in fact is part of the mining process, and helps moving the asset between hands which leads to equal distribution, look at ethereum being mined and dumped every single day since inception!

Saying that miners don’t support Firo and don’t care about the project is a generalisation and doesn’t necessarily represent everyone who mines the coin. Miners do a lot of work and if they didn’t get rewarded properly, they will just leave forcing the project to PoS.

It’s not expensive to be a Firo master node owner, In-fact it takes 9 million dollars to own 3000 master-nodes with today prices. This amount is not big in crypto space but it’s way more than 51% of all Firo’s master nodes in existence. I truly liked the hybrid nature of Firo and the fact it eliminates the single point of failure.

I suggest raising the collateral of the master nodes from 1000 to 10000 Firos first and let’s have this vote again, when it costs more than 9 million dollars to own more than 51% of all Firo’s master nodes.

This is my personal opinion and I registered an account on this forum to contribute and give my feedback on this exact matter as a miner, master nodes owner and someone who truly cares about the project.

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319

You are a supporter of Firo?
How much have you donated to Code Audit for Lelantus Spark

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I have submitted multiple security vulnerabilities to the team in the past years if this counts!

People donate in different ways and some of us helps keeping the blockchain secure.

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Yes, that counts. Thank you for your efforts

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Thanks for your return.

Yes, you are right, we reason by making global generalities between miners, masternodes, team and community. It is essential to bring out tendencies that allow reasoning. We are aware that within these categories there are variations, exceptions etc…

The collateral of 1,000 Firo for a masternode:
Your calculations and simulations are biased by the fact that a masternode costs today 7,900 sats x 1,000 Firo = 0.079 btc. But masternodes are not all created today: they have existed for several years, at a time when Firo was much more expensive. When Firo was at its highest (even though masternodes didn’t exist at that time, but masternodes were created with Firo bought at those highs), i.e. 0.009 btc per Firo, that’s 9 btc needed for one masternode. So when you write that it’s cheap, it’s wrong because most masternodes cost way more than 0.079 btc…up to cost 9 btc. I think 9 btc for a Firo masternode, you won’t say it’s cheap… yet it’s the price some people paid.

Miners want to amortize their investment in GPUs and their electricity costs: this is quite normal. But these expenses do not correspond to a purchase of Firo on the markets and therefore do not participate in supporting the Firo price. When a buyer buys 1,000 Firo for a masternode, this purchase directly (and strongly) supports the market: this is what Firo needs.

If the miners weren’t rewarded properly with 50% of the block-reward while they aren’t supporting Firo’s price with market purchases, they’re now only incidentally participating in network security and they concentrate mining at 80% on a single pool in defiance of the most basic of security rules; then the masternode owners are robbed with only 35% of the block reward while they participate in supporting the price of the Firo with large purchases on the market and they mainly ensure the security of the network.

For the 51%:

  • You calculate that it would take 9 million dollars to have 51% of the masternodes. It would be necessary to create and own a little more than 3,500 additional masternodes to have 51% of the masternodes (4,000 current masternodes + 3,500 = 7,500 and 7,500/2 = 3,500 ). These 3,500 masternodes correspond to 3.5 million Firos. Today there are less than 13 million Firos in existence: if an entity starts wanting to buy 3.5 million, the price of Firo will no longer be the same. The law is probably exponential and you can multiply your figures by several tens (thus several hundred million dollars).
  • The reality is not only would getting 51% of the masternodes be too expensive to be interesting, but also that this rule is completely trampled by miners since the 2Miners pool alone concentrates 80% of Firo’s hashrate. The added security that mining in Firo is supposed to provide is completely non-existent as it only relies on the fact that, until today, the 2Miners pool remains honest. But the risk is great because miners empower a single centralized entity to successfully attack our blockchain. Fortunately, masternodes are there to secure our blockchain, but not th miners, sorry.

Once again, I don’t want to overwhelm miners, I’m just trying to analyze the situation globally based on what already exists, even if I don’t necessarily endorse it.

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323

But proposal is not for Firo be POS, proposal is to adjust rewards to be more fair.

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That’s not how the market works. If you will want to buy 3,000,000 you will not be able to buy them for 9,000,000 USD.

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Thanks for your reply.

When I said it’s cheap to have a master-node, I meant by current pricing and current block rewards, someone who aims to attack the network doesn’t care about how much X or Y bought their Firos at, they calculate how much does it cost/take to control the network, it’s a completely different mindset and it’s about achieving a specific goal.

Buying and mining are two sides of the same coin, if miners didn’t mine, there will be no rewards to distribute in the first place and you will end-up with a single point of failure as highlighted earlier. I have 3 rigs mining Firo ATM and I am mining at a loss as we speak but I continue doing so because I want to secure the network and I believe in the project.

Speaking of miners, as highlighted earlier them selling and dumping shouldn’t affect the project, if there’s proper adoption, people will buy what the miners sell and the asset will move from weak hands to stronger hands, I have 7 rigs mining ETH and I weekly sell half what I mined to compensate my Firo loss along with my electricity and operational usage and everyone mines ETH does the same or similar. What’s the price of ETH today?

Unfortunately, we can’t control where people mine and I agree but it’s better NOT to have a single point of failure rather than taking chances, especially with the fact that Firo needs more adoption, way more nodes and potentially higher collateral to compensate for price fluctuations. And Remember, master-nodes aren’t angels neither and they do sell too!

Your calculations for the 51% are unfortunately theoretical and you are neglecting the fact of bear markets or people selling, everyone sells at some point. I want to assure you that 51% is very real in your situtation especially if it takes 3.5 million Firos to do such an attack with 13 million in circulation.

Firo experienced 51% before and you seen the amount of sophistication on such an attack, do you think a kid in a basement pulled that? unfortunately Firo is not a target of small amateur hackers but sophisticated agencies and potentially governments who oppose privacy coins altogether and this move will compromise the project and makes it an easy target in my opinion.

Now you can’t 51% Firo’s network through the master-nodes because of the miners nor through the miners because of the master-nodes, what happens next will increase the odds of another 51%.

Note: my calculations were for demonstration purpose only, even 18 millions to compromise Firo for someone who really wants to is NOT an amount and it will be shame if we got compromised again!

I advise the community to think twice on this one.

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It wouldn’t be done in an afternoon. An intelligent actor would do it slowly enough as to not spike the price of the coin. In a bear market it would be pretty easy to just provide a price floor and accumulate nodes over time. The ironic thing is, while said actor was doing this many here complaining about the price of FIRO would likely be talking about how great it was that the price was holding steady vs. presumably other coins dropping in value.

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Something to try to help with the hash rate distribution issue: I just ran across this video What Crypto Am I Mining Now? (Solo & Dual Mining Update) - YouTube and if you upvote the comment I left (the link should highlight it) and/or leave your own respectful comment, he could help get the word out.

Not only does he have a rig on 2miners currently and is obviously a youtuber, but he also does joint videos with a couple of other regular crypto mining youtubers who might be able to help get the word out re: balancing out the hash rate.

Can’t hurt to try…

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it is about PoS, you cannot be PoW without the miners receiving the majority of the reward,
also the proposition is about “community fund”, the proposition suggest we should have more bureaucracy
while the original zcoin vision was even the dev fund to be removed

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In my previous two posts I highlighted the downsides of the purposed block reward division from security, stability and integrity prospectives as a miner, master-nodes operator and security researcher but I didn’t raise any productive solutions nor suggestions to tackle the current raised concerns which are important for the future of Firo and its development.

In an ideal world and with Firo’s hybrid nature, the block reward should be divided equally between both, the master-node operators and miners, those are the ones which provide security and functionality to the block-chain and with their absense there will be no Firo, period.

Now we are under a false impression that miners are bad because they sell and node-operators are good because they hold.

I have some news for you, 1000 Firos are not holding and it’s not an amount in relation to the amount of Firo in circulation and accordingly we need to encourage node-operators to hold more Firo by offering more return in relation to their holdings, this will stabilize the price significantly if applied correctly.

A suggestion here is to offer 3 different tiers of nodes, small which requires 1000 Firos, medium which requires 10000 Firos and large which requires 100000 Firos with block returns of 5%, 15% and 30% respectively while slowly phasing out the small nodes once you have enough medium and large nodes, and that’s very generous compared to every coin which operates in a similar manner out there.

Some miners hold half the Firo they mine, some sell all of it and some hold all of it but by default you shouldn’t expect miners to hold at all, this is not their job and this is not what they do and if you disagree then you don’t understand mining well enough. Miners contribute with their hash power to secure the network, they mint the coins for people to buy and for the team to distribute to node-operators and developers, they require liquidity to keep mining otherwise they won’t be able to effort it!

Centralised mining is a concern and it needs to be addressed actively, that’s why a suggestion here that mining rewards should be 40% on any pool with a floating 10% extra assigned to specific pools (these can change as per the current distribution of hash rate) to redirect and distribute the hash rate as needed, some coins does similar tricks like Flux and their parallel rewards on specific pools.

Now you might ask, you have already exhausted 100% of the block rewards, what about the developers, community and future development of Firo?

Firo is not a meme coin nor an NFT and it requires serious financing for development, audits, research, coins listings…etc and it can’t depend on donations nor wait on miners to give them the financing needed as fractions over a long period of time, it’s just wrong, non-practical and defeats the purpose, developers need job security and must get paid to meet your expectations as a Firo holder.

A suggestion here is to hold 20% of all Firo in circulation as a fund treasury for development, research and community purposes to be spend responsibly in a quarterly basis, this will be essential for rapid development and for shaping Firo’s future in the shortest time possible.

Firo’s difficulty exceeds 100% in almost all pools, FiroPow is electricity hungry algorithm and no one will go through the hassle of mining 2 Firos. Additionally, Firo is not ready for PoS, even ETH is not ready for PoS (see how much ETH is locked along with their value) and instead of kicking Firo’s security we should collectively think of better ways of addressing the issues on hand rather than killing the project.

These are my thoughts, what are yours?

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why not just send the new firo to a burn address
that way, it will be held forever
that will make firo such great currency, much crypto

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The whole idea of this forum is to change the block rewards to a more balanced split (not fix everything wrong including Firo’s price). Basically - rewarding work that is more valuable to keeping Firo healthy with a higher percentage, and less valuable work with a smaller percentage. Having multiple tiers of master nodes is not justifiable - since all nodes do exactly the same amount of work - verify miner blocks, lock the blocks in with chain-locks (preventing a 51% attack on the network) and lock transactions with instasend - all the nodes do the same thing, adding the same value to the network - different tiers is not justifiable (if you want more income then spin up more nodes and protect the network even more - pretty simple). Having master nodes receive a higher percentage than miners is justifiable, since they are now responsible for first line defense of 51% attacks plus the other services just mentioned. Miners should still receive a reasonable share since they are responsible for the actual block creation and we need to retain enough miners to help prevent a 51% attack in the event that the master nodes or chainlocks get disabled (which is possible though bugs, operational problems, or attacks).

As for ‘hold(ing) 20% of all Firo in circulation as a fund treasury for development’ - not sure where you expect those coins to come from - the decision was already made to not be an ICO coin - and the emission schedule is designed to match BTCs - any new coins need to be mined as part of block rewards - and if the emission schedule were to be changed I think that would be a major issue for most people. I would be fine with increasing the Dev percentage by - say - 5% (even though Reuben has said that they are not asking for an increase) - this would obviously have to come from the miner’s reward or likely a smaller increase to the Master Nodes.

I’m not going to re-post everything I’ve posted earlier - but I’ll say one more thing - we need to find a way to increase interest in Firo and help boost Firo’s price - and I doubt anything we are talking about in this forum will help much - the whole market is down, not just Firo - we need to hunker-down and wait it out - there should be better days ahead - so I’ll leave it at that.

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A master-node with 1000 Firos is not a first line of defence and it doesn’t protect you against 51% attacks in the absence of miners. If miners couldn’t at-least cover their expenses, no one will mine Firo and you will have no Firo blocks for master-nodes nor developers, so master-nodes receiving a higher percentage is not justifiable since they are passive consumers who can’t create the actual block themselves.

I won’t repeat myself neither and I suggest you read what I have posted earlier.

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Not going to argue with you - you need to re-read my posts - and I only repeat part of them here “Miners should still receive a reasonable share since they are responsible for the actual block creation” - how you jumped to “it doesn’t protect you against 51% attacks in the absence of miners” I don’t know. It comes down to what the percentages should be - and I’m fine with the latest percentages posted by Reuben for all the reason’s already stated previously.

Reuben’s latest suggestion was:

35% + tx fees Miners
45% Masternodes
15% Dev Fund
5% Community Fund

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I’d also be fine with bumping up the Dev fund to 20% and increasing the Masternodes to only 40% - or some kind of compromise like that.

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40% + tx fees Miners
40% Masternodes
15% Dev Fund
5% Community Fund

this is the only way to remain PoW

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Today, miners are a “weakness” in the security of Firo precisely because they are in the permanent threat to the honesty of a pool that gathers 80% of the mining.
Not only is one entity enough to attack with guaranteed success, but we also know it and it doesn’t even need to spend money. And this problem has existed for several years without miners caring about the security of the Firo blockchain.
If 2Miners attacks our blockchain, it will only be the masternodes that can defeat this attack.

Practice and experience show that majority of miners go for the most profitable, without worrying about security.

There are a lot of miners hoping to mine Firo to use their GPUs once ETH goes PoS. The drop in their share of the Firo block-reward stresses them and I understand it (I remind you of the balance phenomena that there will be between hashrate/difficulty and price). But beware, a number of them are ready to tell lies so that they can earn the maximum amount of money, even at the expense of the project. When ETH is in PoS, there will be so many lost miners looking for a healthy PoW project that I don’t worry about Firo’s hashrate, even with 20% block-reward.

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