PIVX See-saw mechanism

3 months ago
52 in cryptocurrency

The PIVX see-saw mechanism was designed to help avoid the masternode centralisation and vote hoarding that plagues other coins which use masternodes, its a simple yet revolutionary implementation, and here is the detailed whitepaper for it.

PIVX takes immutability seriously, and so has decided to upload all its technical documents to Steemit BLockchain to keep them intact on the blockchain forever.

please check here for PDF version --

TECHNICAL NOTES

Seesaw Reward Balance System

Whitepaper

Revision 0.7c

January 24 2017

pivx.org

These technical notes are intended to formally document and describe the features
and concepts of the Private Instant Verified Transaction cryptocurrency. This specific
document will thoroughly explain in detail the technical details of the Seesaw Reward
Balance System along with its intended benefits.

INTRODUCTION

The majority of crypto currencies that make use of masternodes, split their block
reward per block equally between the mining and masternode distribution
mechanisms. The intended fairness of this reward distribution can be subverted by the
growth of masternodes held by large investors without limits leading to potential
centralization of the budgeting system much like having a majority shareholder in a
company. The additional benefits of masternodes can lead to less number of users
conducting Proof of Stake (PoS) mining activities and thus lowering the security of the
PoS network.
Masternodes do provide a valuable service and should be rewarded for that service,
but our aim here is not to reward them way beyond the extra value they provide. For
we believe that doing so disproportionately benefits masternode owners above and
beyond other users of the system and ultimately leads to a greater degree of
centralization.
To overcome this problem, the feature outlined in this paper was developed and
implemented with the sole intention of ensuring the security of the PoS network. This
is achieved by creating an incentive to stake, which subsequently promotes liquidity in
exchanges and controls the growth rate and count of the masternode network.

PIVX OVERVIEW

Private Instant Verified Transaction, PIVX, is a privacy focused decentralized open
source cryptocurrency launched in Feb 1 2016 under the name of Darknet (DNET)
before it was professionally re-branded to PIVX. Initial Proof of Work (PoW) distribution
phase ended August 2016 when DNET transitioned to the current Proof of Stake (PoS)
phase.

PIVX runs on Blackcoin PoS 2.0

[1] protocol and is based on Bitcoin core 0.10.x code
base. It utilizes a network of masternodes

[2] for an openly visible decentralized
governance and increased transaction privacy.
The main goal of PIVX is to achieve near instant private transactions and a governance
that helps sustain the network for the benefit of all of the users involved. While we are
well on our way to achieving this, some of the features are under development and
should appear in the near future.

PIVX has an open task and development environment and a highly accessible
development team utilizing multiple social networking channels, including social
media. The development team is welcoming of anyone and everyone to join its cause,
regardless of technical expertise. We encourage people to just go ahead and do things
rather than having lots of gatekeepers or a hierarchical structure where permissions
are required to move forward.

For more specific details on PIVX, please visit pivx.org.

PROOF OF STAKE 2.0 OVERVIEW

To achieve consensus; Proof of Stake 2.0 (PoS) requires nodes running a wallet
software proving that it has coins in the blockchain in order to verify a block of
transactions. The participating nodes receive an amount of blocks proportional to
their stake per set period as a form of reward.
This means that with lots of participating nodes (with roughly even amounts of coins)
the network becomes very secure due to the increased difficulty of owning a majority
of coins in the network.

MASTERNODES OVERVIEW

Masternodes are nodes running the same wallet software on the same blockchain to
provide extra services to the network. These services include coin mixing for increased
privacy of transactions, instant transactions and a decentralized governance that
provides a decentralized budgeting system with immutable proposal and voting
systems.
For providing such services, masternodes are also paid a certain portion of reward for
each block. This can serve as a passive income to the masternode owners minus their
running cost.

MAIN FEATURE OVERVIEW

To promote an even ratio between staking nodes and masternodes in the network,
the PIVX team has developed a variable Seesaw Reward Balance System that
dynamically adjusts its block reward size between masternodes and staking nodes.
Each PIVX PoS block reward is split with 10% dedicated to the budgeting system and
90% dedicated to both the masternodes and stake mining reward. The reward
portion is further split dynamically via the Seesaw Reward Balance System between
masternodes and staking nodes.
The logic is simple in its roots. The higher the masternode count, the smaller the
reward portion of each PoS block that will be paid out to the masternodes and the
larger the reward portion for staking nodes. Conversely, when the masternode count
falls, the masternode reward portion is increased and the staking node reward portion
decreased.
The PoS block reward starts with a ratio of 9 to 1 towards masternodes when the
amount of coins locked to masternodes is lower than 1% of the total coin supply.
But as the number of coins locked to masternodes go above 41.5% of the total PIVX
coin supply, the block reward amount will shift with more than 50% of the block
reward going to staking nodes. This has the effect of making it less attractive to
provision more masternodes as it has the potential to significantly lower its
profitability compared to staking that has less upkeep cost.
This threshold was selected as it would allow a strong network of profitable
masternodes while creating incentive for approx. 60% of the total coin supply to be
available for staking to secure the network and to maintain liquidity.
Another intended benefit and goal of the Seesaw Reward Balance System is to ensure
that it is more profitable for users running masternodes than it would be to stake the
equal number of coins, under the normal circumstances of being below the
equilibrium threshold. The reason behind this is due to the extra cost, risk and time
associated with maintaining the masternodes are greater than staking alone.

SEESAW EFFECT

Following graph shows the block reward amount (Y axis) for the masternodes (RED)
and staking nodes (BLUE) against the percentage of total coin supply locked by
masternodes (X axis) starting from block 648,000 (mid-May 2017) where each block
rewards is fixed at 5 PIV.

fixed reward

Following graph shows the their theoretical annual percentage return starting from
block 648,000 where each block is fixed at 5 PIV with an interval of 60 seconds. (1440
blocks a day)

The RED line represents the return of masternodes when there is zero upkeep cost per
masternode and GREEN line is the logical masternode return curve on a hypothetical
scenario where there is an annual upkeep cost of $300 per masternode with the price
of each PIV at $1 USD.

The BLUE line represents the % return per year calculation of staking nodes is based
on the assumption that all remaining coins are being staked. So the actual return rate
for staking nodes may vary depending on how many are being staked at any given
point in time.

CODE LOGIC WALKTHROUGH

The logic is intended to be simple as possible while being effective. This is to ensure its
stability and to be able to easily determine its outcome and improve its logic if the
need arises.

if (mNodeCoins <= (nMoneySupply * .01) && mNodeCoins > 0) {
ret = blockValue * .90;
}

The blockValue is the total number of coins per block. This value is multiplied by the
variable ratio that is determined by the percentage of the masternode coins,
(mNodeCoins) in relation to the total coin supply (nMoneySupply). The result ret value
is the number of coins for the masternodes portion of the reward.
Above example shows the very first logic used to determine the highest masternode
portion payout. You can see that if mNodecoins is less than or equal to 1% of the coin
supply (nMoneySupply) and also greater than 0, the return block reward value for the
masternode will be 90% of the PoS block (ret = blockValue * .90).
This logic continues for each increase in set percentages all the way until mNodeCoins
is less than or equal to 99% of the coin supply.

else if (mNodeCoins <= (nMoneySupply * .99) && mNodeCoins > (nMoneySupply *
.987)) {
ret = blockValue * .05;
}

Any mNodeCoins value that is beyond 99% of the total coin supply will return a fixed
value equal to 1% of the blockValue. The expectation is that it should never come to
this point but the logic is complete to cover all possible outcome.

else{
ret = blockValue * .01;
}

This Seesaw Reward Balance System algorithm initially started out with only 16
percentage steps; it has since been improved and now implements a total of 105
percentage steps to the variable seesaw algorithm that allows for a far more granular
step amount.

SUMMARY

The Seesaw Reward Balance System that PIVX utilizes, provides numerous benefits
over reward split methods used by the majority of masternode featuring Proof of
Stake crypto-currencies.

  1. It can indirectly affect the total count of masternodes in the network by varying
    its reward size to alter its profitability versus staking.

  2. Promotes staking by increasing its reward payment portion when masternode
    count is high and thus maintaining a high level of network security.

  3. Profitability of masternode is kept higher than staking as long as the
    masternode count remains below the equilibrium threshold. (Approx. 40% of
    coin supply)

  4. Allows all coins owners to get rewarded for holding coins rather than just the
    masternode owners, hence resulting in a fairer and less centralized system

FUTURE PLANS

As the Seesaw Reward Balance System is still relatively new (only 5 months old at the
time of writing this document); fine tuning may be required as the network grows and
if better thresholds are deemed more effective.
But even within the first 5 months of PoS with over 1400 masternodes that make up
over 30% of the current coin supply; the algorithm has been proven to work
seamlessly as designed.

##SOURCE CODE
###GITHUB
https://github.com/PIVX-Project/PIVX/blob/6700079eed972831bd55179c029f0a2481e255f1/src/
main.cpp#L1741

LINKS
BCT ANNOUNCE THREAD
https://bitcointalk.org/index.php?topic=1262920.0
Official Website
https://pivx.org

Masternode Payment Information
http://178.254.23.111/~pub/DN/DN_masternode_payments_stats.html

REFERENCE
[1] PoS 2.0 Whitepaper
http://blackcoin.co/blackcoin-pos-protocol-v2-whitepaper-cn.pdf
[2] DASH Masternodes
https://dashpay.atlassian.net/wiki/display/DOC/Masternode

AUTHOR
Written by: jakiman
Edited by: werwortmann, spock

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25
  ·  3 months ago

for those who didn't catch up with the dash it's good chance with pivx now I guess

·
52
  ·  3 months ago

yes, not only that, but PIVX has algorithms to help keep Masternodes affordable, and If you cannot afford one, you could always stake the coin, as it's PoS.

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60
  ·  3 months ago

GENIUS! :p

11
  ·  3 months ago

I wish you success in your development!

60
  ·  3 months ago

Keep these up! very informational stuff you've got here, and theres alot more to explain too.. all the way down to the roadmap and vision even...