How the system of 4 coin pots works within the DMDv4 scarcity model
By: Dmd Diamond
Tags: Dmd, Staking, Governance, Coins, Scarcity

How the system of 4 coin pots works within the DMDv4 scarcity model DMD DIAMOND May 8·5 min read

Through an ingenious system of four coin pots — Claiming, Delta, Reinsert, and Governance — DMDv4 ensures fair and sustainable distribution of resources, where no one gets left behind and not a single coin is lost forever.

Introducing the four pots

In the DMDv4 ecosystem, pots are pools that hold DMD coins. Every pot has its own source (i.e. where the coins come from) and purpose (how these coins are used). Of course, we could use a more common blockchain term like pool or vault, but what’s the fun in that? By contrast, the word ‘pot’ brings to mind magic gold-filled pots from fairy tales, so we went with ‘pots’.

As you may know, the maximum supply of DMDv4 is 4.38 million, and all these coins will be created in the genesis block. They will be automatically distributed between four pots — some immediately after network launch, some over the course of time. Coins will also flow out of the pots towards users, validators, and even new blockchain projects built on DVDv4. The smart contracts governing the pots are written in such a way that nobody can access the coins. Code is law here: it dictates under which conditions coins are moved out.

The coins inside the pots are counted as being out of circulation coins. It is expected that DMDv4 will have fewer circulating coins than DMDv3, as all unclaimed coins don’t count as circulating, either.

To understand the architecture of DMDv4, It’s important to figure out how the four pots work, because they are connected to so many other processes within the ecosystem: transaction validation, coin reinsertion, governance, etc. So please bear with us, even if the description gets a bit technical at times.

Claiming Pot

Origin: initial emission v3

Purpose: distribution among the existing DMDv3 holders

Everyone who holds DVDv3 coins is eligible to claim DMDv4 at a 1:1 ratio — completely free and without giving up their DMDv3. We’ll provide an easy-to-use claiming dApp for the purpose. Before launching DMDv4, we’ll take a snapshot of the DMDv3 network, so that we’ll know how many coins can be claimed in theory, and it’s that number that will go into the Claiming Pot. As users claim DMDv4 over the course of the following weeks and months, the amount of coins in the Claiming Pot will gradually decrease.

Delta pot

Origin: the delta (difference) between the total coin supply and the max coin supply on DMDv3

Purpose: Epoch rewards

As mentioned above, a total of 4.38 million DMDv4 coins will be issued. This number also takes into account the not-yet-released DMDv3 coins (the delta between the total number of coins and the max number of coins in DMDv3). The outstanding difference between the two numbers will be sent to the Delta pot (‘delta’ means ‘difference’ in math). These coins will be gradually released as Epoch rewards.

Reinsert Pot

Origin: unclaimed coins + abandoned coins staked on validator candidates who have been inactive for 10 years

Purpose: Epoch rewards

One of the most interesting features of DMDv4 is the mechanism of reinserting abandoned coins back into circulation. We’re written a whole blog post about it. In short, if DMDv3 holders don’t claim their DMDv4 within a certain period, part of the DMDv4 they are entitled to is recovered by the system. Of these, and the other half goes to the Governance Pot (see below). If they wait even longer to claim the coins, another part goes to these two pots, and so on. This is to encourage users to join the DMDv4 ecosystem as early as possible.

There is one more way that coins can end up in the Reinsert Pot: staking on inactive validator nodes. In DMDv4, validators are retired if they remain inactive for 10 years, and any coins staked on them are classified as abandoned and will be recovered. The idea is that users should check who they are staking on first. Of course, this method of replenishing the Reinsert Pot will kick in only after the DMDv4 ecosystem has been operating for ten years, but we believe in the long-term success of our creation.

In case you are wondering how all those Epoch rewards can be sourced from just the Delta and Reinsert Pots, the answer is simple: the Epoch reward size will gradually go down. However, it doesn’t mean that the real size of the reward for the validators will diminish: everything will depend on the market value of DMDv4 relative to other cryptocurrencies in the future.

At a certain point on the coin rollout curve the coins that flood back into the reinsert pot and the coins that are handed out as epoch rewards will reach a balance, and an indefinitely sustainable system will emerge. Together with abandoned coins, transaction fees are also used to refill the reinsert pot, so that it can never become empty.

Governance Pot

Origin: unclaimed coins plus 10% of epoch rewards

Purpose: ecosystem development

Remember how we said that only half of the unclaimed coins will go into the Reinsert Pot? Well, the other half will end up in the Governance Pot. In addition, 10% of the epoch reward will also be sent into the governance pot, making it a powerful tool that will move the ecosystem forward.

The DAO of the DMDv4 coin holders will decide how to use these funds, be it blockchain upgrades, marketing, grants for promising dApps built on top of DMDv4, or something else. All coin holders will be able to submit such proposals and vote on them — either through their own validator candidate nodes or by staking DMDv4 on a validator candidate, thus increasing their voting power. If the candidate doesn’t vote according to their delegators’ preferences, they can always switch to a different one at the end of the voting round.

The four-pot system is one of the cornerstones of the DMDv4 architecture. It will help distribute the coins in a sustainable and fair manner and ensure that the ecosystem doesn’t suffer from a constant loss of coins, as it happens with Bitcoin and Ethereum. Moreover, thanks to the Governance Pot, the DAO will not only be able to make decisions but will also have funds at its disposal to put those plans into action.

If you’d like to learn more about DMDv4, check out the White Paper or ask your question in the official Telegram chat — we will be happy to explain all the intricacies!