Core is designed to be nimble and user-oriented. Given the multitude of variables at play in early market formation, it is valuable to highlight three particular levers or switches in the protocol’s design. The three levers govern:
- What to do with early CORE token rewards received by the DAO.
- What CORE’s burn rate should be.
- What quantity of CORE tokens should the Treasury delegate to validators.
These three levers are currently operating under default settings, yet are designed with a variable future in mind for Core community decisions.
1. Recycling Early Token Rewards
Some of the early validator rewards were recycled into DAO controlled addresses:
- Early Genesis Validator rewards and staking rewards were sent to the default fee address.
- DAO Validator rewards were collected to separate fee addresses.
- A limited number of CORE tokens (currently ~2,000,000) are currently reserved in the default fee address so that they can be used for various partners and ecosystem projects.
In summary, many early CORE token rewards are currently residing in DAO addresses. The lever in this case is determining what to do with these CORE tokens. The default setting is to recycle them into validator rewards in order to reward those who are securing the Core network. The Core protocol is designed with the flexibility whereby the community can change this policy from the current settings to perhaps burn these tokens, distribute them to CORE holders, or use them for other purposes.
2. Burn Rate
As illustrated in the whitepaper, Core is designed so that a percentage of block rewards and transaction fees can be burned, increasing the scarcity of CORE tokens in circulation. Ultimately, on-chain community governance controls the lever determining the exact percentage. Initially, and for a period of time, rewards to be burned were transferred to the DAO treasury system contract, but have since been burned following the passing of proposal 11. Additionally, forfeited staking rewards (from stakers failing to fulfill their role for the allotted 24 hours) have been burned. As for transaction fees, the lever is currently defaulted to 10% burn.
3. Staking Market Stability
The quantity of CORE tokens that the Treasury delegates to validators is the third lever and relates to early network sustainability. In order for the Core network to maintain homeostasis, Core’s on-chain economics must stabilize, particularly with regards to staking rewards. When staking rewards are fickle and spiky, they may interfere with the stability of the CORE token and network as a whole.
Due to the variance of staking rewards during early market formation, the Core DAO Treasury has been designed with the capability of delegating CORE to validators in order to moderate staking rewards. Balancing the reward stabilization lever, Core DAO may continue to stake more CORE until the reward rate becomes perpetually sustainable in line with other major L1s utilizing proof of stake consensus. Note that as the DAO accrues rewards from its staked CORE, the staking rewards are to be recycled into the unused validator rewards pool. The stable and uniform increases in staked CORE should balance the incentives of Core’s end users to both stake the token and use it for other network functions.
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