Team started to work on complete analysis of current monetary policy by the end of 2020 and hired several experts to have them advise and prepare a new draft of monetary policy. As the process is complex, we wanted to share some main points of “new” monetary policy proposal we are currently preparing to receive more feedback from the community and communicate to you what is going on in this area.
Also, we are proud to confirm that Callisto Enterprise improved network stability by purchasing 11 servers and will be financing most activities regarding the core development of the Callisto Network. More about a budget for development and many more new announcements will be coming, including Callisto Enterprise Airdrop.
Everything is still work in progress as we will continue to work on monetary policy in the coming weeks to provide you with the final version.
Callisto Network’s current monetary policy model is based on a progressive decrease in the block reward and distribution between miners, cold stakers, and Callisto’s Treasury.
Callisto Network anticipates collecting a percentage of the off-chain transaction fees generated by its activity through its partnership with Callisto Enterprise. (And other partners like Callisto Enterprise) It is essential to revise our monetary policy to consider the network’s new revenues in this context.
Below is a proposed monetary policy model that includes the off-chain revenues from Callisto Enterprise activity, which have been set at 0.10% of the transaction amount to create a framework that will increase CLO demand (Callisto Network coin) over time.
Monetary Policy Rationale
As Callisto Network is an autonomous, self-sustaining, and self-funded ecosystem, the CLO price should ensure the sustainability and security of the network. Therefore, it is necessary to adopt and implement a monetary policy that is viable in the long term and that will attract and retain miners while providing attractive profitability for cold stakers.
Because of the essential roles of monetary policy, it is crucial to define and implement a new set of guidelines that would achieve the predefined objectives as identified below:
- Ensure the long-term viability of Callisto Network.
- Increase the value of CLO/USD pairs.
- Attract long-term investors.
- Provide incentives to miners, cold stakers, and hypernode operators.
Framework for Callisto Monetary Policies
Block Rewards and Block Reduction
At the network launch, the Callisto ecosystem block reward was set at 600 CLO per block, as per the white paper. In March 2019, we introduced the new monetary policy, which has resulted in containing the CLO inflation by gradually lowering the block reward from 600 to 129.6 CLO (a 78% drop). At the time of writing, the circulating supply represents about 44% of the total CLO (Callisto coins) offer, set at 6.5 Billion.
The monetary policy presented here will allow the issuance of the 56% remaining CLO supply over 116 years, which should exhaust the total CLO supply while ensuring favorable price development for CLO holders and network participants.
Although the existing monetary policy and its different components have proven to be effective, we want to strengthen the incentive for miners to participate in the network, meaning that we must ensure that they receive an adequate income.
Miners are an essential component of the Callisto Network ecosystem. They ensure the proper functioning, security, and decentralization of the network. As they are remunerated for their involvement and the resources they provide, it is crucial to maintain reasonable profitability for the miners and thus maintain their incentive to exploit CLO.
Thus, we propose maintaining the block reward reduction as established in the current monetary policy but with a restructuring of the block reward distribution to increase the miners’ reward.
Therefore, we favor a permanent block reward distribution, which will be effective for all stage until every block have been mined.
Flat reward distribution formula:
- Mining: 60%.
- Cold staking: 25
- The Treasury: 15%.
Figure 1: Block Rewards
The figure above shows the block reward evolution since the launch. Beyond 2040, the block rewards will fall drastically below 20 CLO per block, so it is necessary to introduce an alternative source of revenue to maintain the Callisto ecosystem’s efficient functioning.
On-chain / Off-chain transactions
- On-chain transactions
On-chain transactions are the transactions performed on the blockchain and recorded in the public ledger after being successfully confirmed by the miners.
- Off-chain transactions
Some users may need additional security and anonymity, in which case the transactions data are not published on the blockchain. Off-chain transactions are those that occur outside the chain and are not recorded in the ledger as such.
The accumulated off-chain revenues from the 0.1% off-chain transaction fee would be used to support CLO mining, cold staking, and Treasury.
For Hypernodes we will have separate “incentives” so they are separate from 0,1 percents that are allocated to callisto network.
- Off-chain revenue allocation
Off-chain revenues will ensure the CLO ecosystem remains self-sustaining and self-financing, even when the reward will be less than 20 CLO per block, as expected from the 2041 onwards deterministic model used in this monetary policy framework.
We propose the following formula to share off-chain revenue (we do simulations here we do believe this will be changed as we dont need in treasure that much so we will increase miners and cold stakers rewards.):
- Miners: 40%.
- Cold stakers: 30%.
- Treasury: 30%.
Off-chain revenues would maintain the CLO mining profitability for over 100 years, as CLO should reach its maximum supply by 2137. Therefore, revenues from off-chain transactions would allow the CLO ecosystem to attract more miners and sustain cold staking without external funding.
The incentives proposed in the above framework ensure that the network remains self-sufficient and self-financing.
Figure 2: CLO Additional Supply
This figure shows the additional supply of CLO issued each year. We can see the current monetary policy results and the stabilization of the emission as of 2021.
Cold Staking Improvements
Based on the proposed emission distribution, the Cold Staking contract receives 25% of the CLO emissions. This amount is distributed to the Cold Stakers in proportion to their deposit in the Cold Staking contract. Thus, Cold Stakers earn interest by holding their CLOs in the cold staking contract for a minimum of 27 days, which allows them to earn passive income.
To increase cold staking ROI, 30% of non-chain revenue is allocated to the cold staking contract.
In addition to being a way to earn passive income, the cold staking contract should also be considered a monetary tool to limit price volatility and achieve long-term stability of the market price of CLO. The means to accomplish this are described below:
- Set a minimum amount for Cold Staking
The existing version of the Callisto “cold staking” contract allows any amount of CLO to be deposited into the “cold staking” contract. Setting the minimum amount of CLO coins to be placed in cold staking contracts at X CLO would further increase the efficiency of the system.
- Cold Staking variable ROI
Similarly, as an open market operations monetary tool where the monetary authorities use a risk-free interest rate to increase or decrease the money supply in circulation, the cold staking ROI can also be leveraged to increase or decrease the CLO circulating supply.
Greater ROI would induce investors to lock their CLO coins into the Cold Staking contract, which would reduce the CLO offer in circulation and thus increase the CLO/USD pair’s value. When the value of the CLO/USD pair is too low, a higher ROI can be introduced to stabilize the price in the market.
- Proportional interest rates for different time-period
To reach a greater range of investors and increase the demand for CLOs, we suggest implementing proportional interest rates for different periods.
This implies that the monthly return on investment should be lower than the annualized return.
Besides, to encourage long-term investments, it is necessary to offer a higher interest rate to long-term cold stakers than short-term cold stakers.
To meet Callito Network’s performance and security needs, we will implement a hybrid PoW / Hypernodes framework, strengthening the network’s decentralization.
This will in no way impact monetary incentives for current miners nor we plan to do it in future, as whole this area is financed from different pools of money.
We propose to set the total quantity of CLO coins that all hypernode operators can hold and lock at a given time to a maximum of 10% of the CLO circulating supply.
Therefore we have developed a deterministic hypernode model to determine the maximum number of hypernode the Callisto ecosystem may have at any given time, and this is specified as follows :
According to the above equation:
- Mmoc represents the maximum number of CLO coins that all Callisto master node operators can hold at any given time.
- ∑ CSc is the CLO circulating supply (including the coins placed in cold staking and Treasury).
- mn_cc is the collateral that an individual master node operator must hold.
Following the CLO circulating supply, which currently stands at 2,877,979,684 coins, it is recommended that an individual hypernode operator needs to lock X CLO coins in order to qualify as an operator.
The maximum CLO supply can therefore be specified as follows :
Once the hypernodes have reached the maximum amount of CLO coins, it will no longer be possible to run additional hypernodes. The hypernodes option will be closed until the CLO circulating supply increases or until someone abandons or terminates its hypernode service.
Hypernode’s ROI – this area will be reworked
Given the crucial role that hypernodes will play within the Callisto ecosystem, it is necessary to encourage hypernode operators to make hypernode exploitation an attractive option for existing and potential CLO holders.
The ROI of master nodes can therefore be specified as follows:
From the above:
- MN_roi represents the return on investment of the master node’s operator.
- P_clo is the period price of the CLO coins.
- mn_cc is the number of CLOs required to run a hypernode.
- r is the CLO reward rate.
- 1.1π is a 110% time-period CLO inflation rate.
It is crucial to note that the hypernodes performance is on a monthly basis whereas the average cost of operating the hypernodes is assumed to be approximately $100 per month per server. Therefore, the hypernode ROI must be higher than the annualized inflation rate and the cost of running hypernodes must be higher than the annualized inflation rate.
We, therefore, propose to set up a dynamic reward mechanism based on the CLO/USD price:
- In the case where the price of the CLO/USD is less than $0.01, the annual ROI should be X%.
- If the CLO/USD price is greater than $0.01 but less than $0.05, the annual reward rate should be X%.
- If the CLO/USD price is higher than $0.05 but lower than $0,5 the annual ROI should be X%.
- If the CLO/USD price is greater than $0.5; the annual reward rate should be X%.
- If the CLO/USD reward is greater than $2.00; the annual reward rate should be reconsidered.
The remuneration paid will come from Treasury funds to allow for the smooth and efficient operation of hypernode and for their reward to be paid every 30 days.
Smart-contract and Hypernode operations
As the value of the CLO/USD will continue to increase and the hypernode collateral value would also increase, at some point, the X coins may become unaffordable for an average person.
Smart Contract technology allows a group of people to pool their funds and share the monthly reward based on their investment after deducting the monthly cost for running and operating the hypernode.
Callisto Treasury: Ecosystem self-funding and self-sustainability
The Callisto Treasury collects funds to finance the network’s core operations, such as team members, smart contract auditors, hypernode operators, and a portion of these funds is also allocated to external development.
Based on agreement with Callisto Enterprise we do believe treasury will be used primarily to finance community projects, that will contribute for further Callisto Network ecosystem.
Version of new cold-stacking will be implemented soon and based on off-chain fees we will create a mechanism for cold stackers to receive bonuses from off-chain fees when locking as well callisto enterprise tokens.
Callisto: One Step Closer to Adoption.
1.172bn Passengers Ecosystem Considering to Implement Callisto Network.
Cold Staking, Passive Income With Cryptocurrency For Everyone.
Follow us on Twitter to get our latest news and updates!