Reduction in RUNE Total Supply

2019-10-16 — 6 min read

484 million RUNE (50% of the total supply) is being burnt.

Distribution of RUNE

THORChain is a Proof-of-Stake network, and the RUNE token provides security and liquidity to the system. Unlike a Proof-of-Work network that uses mining to provide security and distribute the token, RUNE must be distributed via other means. As such the team, at the launch of the token, set about with five key methods of distribution that will take place continuously and transparently until the launch of the network:

Sales (seed, private, IDO)

Community distribution (Airdrops, RUNEVault and more)

Security Emission (Block rewards on launch of Mainnet)

Operational Reserves (staff, third-parties, exchanges)

Core team (team, advisors)

This have been discussed a few times already:

The goal of the distribution is simply:

To distribute the RUNE token to as many people as possible who are aligned with the ecosystem.

By doing this, when the mainnet is released, it will be very difficult for a malicious person to get their hands on 67% of the circulating supply in order to attack the network.

This is a major concern for the project, since THORChain will be one of the first networks that will be managing assets *external* to the chain. This means the incentives to attack THORChain is much higher than other chains.

Current Distribution

After 3 months of distribution, the RUNE token is now in the hands of 1875 addresses and the Top 100* own 73m rune, or roughly 73% of the current circulating supply.

*Excludes known exchange addresses.

The token model for main-net is still being finalised, but it is likely to be a minimum of 21 Service Nodes, with the target of 100 being worked to. At current distribution, a bond of 1–4m RUNE will likely be the required amount to become a Service Node. Taking the lower figure of 1m RUNE, we can begin to see how the network will be established. Currently only 20 addresses have enough RUNE to become a Service Node, with some having enough to run multiple nodes.

Even if main-net was launched with 15 of 21 of 32 signing set, and there was collusion in the Top 20, it would take 8 separate entities working together to overcome the network. This is just the start, and the team will keep closely monitoring the distribution and working with the community to balance the needs of the network.

Note: this currently excludes the distribution to Team, Advisors and Seed investors (of which there are roughly 40 individuals) which is yet to be unlocked. These members are likely to run Service Nodes, which is desirable since they are most aligned with the network, and least likely to attack it.

Project Surtr: Burn Unused Tokens

When Project Surtr was announced, the purpose was to ensure that the token distribution was publicly adhered to, and that unused tokens were burnt instead of being stock-piled. This aligns to the expectation that the tokens are to be distributed for the purpose of wide public ownership.

With this all considered, the team with close feedback from the community, have revisited the need for the current size of reserves and have decided that they can be safely reduced. By reducing the size of reserves, the following can be achieved:

Less tokens to be distributed to the public markets, which reduces the size of emission.
A stronger public market in proportion to those still locked.
Reduction in Total Supply imparts more value to the token.
Inferred value of public token price of 1.6c, (down from 3.2c) which is much closer to the original Seed token price of 1c, and matches the current market price of 1.6c. This means that all public investors have now preserved full value in the RUNE token since launch.

Burn and Delay of Vested Tokens

To prevent the Team, Advisors and Seed investor ownership of the network increasing from the burn (which is still locked), the team was able to get agreement to also burn all Team, Advisors and Seed tokens at the same time by the same amount.

Additionally, all Seed, Team and Advisor tokens will be re-locked until the launch of BEPSwap main-net, to further reinforce the incentives for the core team to ship the platform. BEPSwap main-net launch is targeted for Q4 2019.

Summary

The final outcome is the following:

484,552,528 RUNE will be burnt, to reduce the Total Supply to 500m.

279, 552,528 RUNE will be burnt from the Service Node Allocation, to reduce it to 220,447,472 RUNE.
65m RUNE will be burnt from the Operational Reserves to reduce it to 52m locked.
60m RUNE will be burnt from the Community Reserves to reduce it to 60m locked.
50m RUNE will be burnt from Team/Advisor allocation to reduce it to 50m locked.
30m RUNE will be burnt from Seed investors to reduce it to 30m locked.

This has a current market value of $8,000,000.

Format of Burn

The burn will take place in the next 24 hours. The following will be the format:

Tokens to be burnt will be unlocked from the current addresses.

They will then be sent to the original issuing address.

484m RUNE will then be burnt in one transaction.

Since these transactions are quite sizeable, the community should expect that they will be picked up by numerous twitter and telegram monitoring services, such as https://twitter.com/BinanceChainBot

Once the transactions are done, they will be posted here.

Ongoing Emission

The current rates of emission will be maintained to support the RUNEVault staking program (2m a month) and upcoming liquidity needs, as explained here. Since the reserves have been reduced, the timelines for reserve exhaustion will be accelerated from 5 years down to 2.5 years. This may be re-visited in future, with community input to reduce reserve emission. Monthly unused tokens will still be burnt in accordance with Project Surtr.