Constellation Network: Current supply & reward mechanics

With this article I’d like to explain how the current supply & reward emissions are happening for Constellation Network, as I’ve seen a lot of misinformation about that.

Together with Serg we have analysed the tessellation code and on-chain activity to see how new $DAG is entering the circulating supply and calculated a rough estimate of when all supply will be in circulation, with the current tokenomics model

Picture from SkwēGē3D https://t.me/skweGe3D — creator of these physical DAG-HGTP souvenir tokens

Supply Mechanics

Lets start with how new $DAG is entering the circulating supply.

The tessellation (code-name for mainnet 2.0) validators organize & validate global snapshots to the ledger. There are 2 kinds of snapshots:

• Event-Triggered snapshots: this happens whenever an L1 state channel submits data to the global L0 network. This kind of snapshot doesn’t mint any new $DAG. Fees (if any) are distributed to the participating validators
• Time-Triggered snapshots: this happens roughly every minute and mints the $DAG rewards that are distributed to the reward wallets

A snapshot contains an “epochProgress” value which increases by 1 everytime a new time-triggered snapshot occurs (roughly every minute).

There are 4 epoch periods which lasts until a defined epochProgress value:

• Epoch 1: Ends at epochProgress 1.296.000
• Epoch 2: Ends at epochProgress 2.592.000
• Epoch 3: Ends at epochProgress 3.888.000
• Epoch 4: Ends at epochProgress 5.184.000

Whenever we enter a new epoch period, the $DAG that is minted and added to the circulating supply halves. The current epochProgress at the time of writing (Jan 16, 2023 14:03 UTC) is at 1.090.862 (epoch 1), which is minting 658,43621389 $DAG every time-triggered snapshot.

When we reach epoch 2 (which is roughly in about 4–5 months from now), this will halve to 329,21810694 $DAG. Here is the overview of the epoch schedule:

• Epoch 1 (current): mints 658,43621389 $DAG every time-triggered snapshot
• Epoch 2: mints 329,21810694 $DAG every time-triggered snapshot
• Epoch 3: mints 164,60905347 $DAG every time-triggered snapshot
• Epoch 4: mints 82,30452674 $DAG every time-triggered snapshot

This config can be seen in this class:

It takes roughly 2.5 years to reach a new epoch period, assuming we see a time-triggered snapshot every 1 minute.

This is how it will take 10 years, from the start of mainnet 1.0, to reach the max supply, as it was originally planned.

Here is a calculation for the future reward emissions on Jan 16, 2023 14:03 UTC on ordinal 185380, to give a better idea on the impact of the halvings:

Reward Distribution

Now we know how new $DAG is entering the circulating supply but how are these minted $DAG being distributed?

The minted $DAG is being distributed across several wallets:

• Stardust: 10% gets distributed to stardust (so in current epoch 1 this is 65,84362138 $DAG every time-triggered snapshot)
• Softnodes, Validators, Testnet & DTM: The reward calculation for these wallets uses weighing algorithms to distribute the remaining amount.

This can be seen in the following classes:

• Reward weighing config: https://github.com/Constellation-Labs/tessellation/blob/fcfa9fb95b5dbdf70b337f50b380b176464a2806/modules/core/src/main/scala/org/tessellation/infrastructure/rewards/Rewards.scala
• Reward distribution algorithms (seperate class per type): https://github.com/Constellation-Labs/tessellation/tree/fcfa9fb95b5dbdf70b337f50b380b176464a2806/modules/core/src/main/scala/org/tessellation/infrastructure/rewards

The weighing distribution config of these wallets can be tweaked. For example whenever a new softnode staking period begins, the config is updated with the new count of softnodes that are staked for the new period as this is important for the reward distribution calculation for the softnodes.

Note: removing or reducing some of the existing reward pools will not have any impact into the amount of tokens which are minted and enter the circulating supply. The tokens will simply be distributed to the other reward pools, based on the weighing algorithm.

Final Thoughts

This post represents the current implementation of the reward distribution & supply mechanics. The team is currently revising the tokenomics model so this might slightly change in the future.

No details are communicated yet about what could possibly change, so anyone that is mentioning an increase of max supply is simply speculating. The changes to the tokenomics can be applied to different aspects, for example: changing the amount of $DAG that gets minted every snapshot to a more elastic amount instead of a fixed amount per epoch, based on network usage and utility (but this is just me speculating).

I hope this post helped people understand the current mechanics and debunk the FUD that max supply will be reached in 3 years time.