Protocol Tokenomics

The process shown in the Workflow section explains the mechanisms for scenario pool creation and resolution, covering the movement of funds within these steps and the roles played by protocol participants across both user types.

However, without additional measures, such a process would be vulnerable to manipulation. Depending on the number of confirmer-joiners required, Sybil attacks would be easily carried out, allowing users to collude in creating confirmations, or for one actor to act as both the confirmer-maker and all confirmer-joiners. This would make it too easy to incorrectly mark a scenario as ‘resolved,’ sending out false notifications, while gaining access to all of that scenario pool’s bounty.

To protect against this, SCENARIO will make use of its own token to serve a range of crypto-economic functions and underpin a more robust protocol.

The SNR Token

In addition to representing an abbreviation of the protocol’s name, the acronym SNR also stands for signal-to-noise ratio. SCENARIO will be a protocol that helps to separate signal from noise.

The SNR token will be crucial to the effective functioning of the protocol once fully deployed.

It will not function as a governance token, and will not be used to vote on protocol changes or upgrades. Instead, SNR will perform a set of roles that help to protect against Sybil attacks, facilitate dispute resolution, and allow for the protocol’s revenues to be distributed to its users over time.

In order to support a safe, staged protocol roll-out (during which the V1 scenario pool contracts will be used to test and monitor user behaviour and incentive balancing), the SNR token will not be generated at protocol launch (see Staged Roll-out).

Token's Primary functions

1 - Revenue Distribution

15% of all funds in each scenario pool, once resolved, will be returned to ‘the protocol’ as revenue.

Of this proportion, 10% will be sent to SNR stakers and the remaining 5% will be sent to the protocol’s arbiter fund (3%) and growth pool (2%) (see Protocol Revenues).

SNR will be staked and/or used to provide liquidity, with these actions giving users a ‘staking weight’ which will then determine their proportional claim on the 10% of all protocol revenues directed to stakers.

A total protocol fee cut of 15% from resolved pools is expected to be viable as long as resolving scenario pools is profitable for those involved in correctly confirming them. Engaged, rational actors should be expected to choose to contribute to that process because they will profit from doing so, with this likely to be true even if the protocol’s cut was much larger than 15%.

At scale, SCENARIO will be populated with many thousands of scenario pools, and thousands of active confirmers. Competitor products would first need to compete on factors such as network size, overall bounty pool size and speed of scenario confirmation, before being able to compete by bettering SCENARIO’s 15% take-rate.

If the underlying protocol is bootstrapped successfully, other builders or competitors will be incentivized to rely collectively on the powerful SCENARIO protocol and its smart contracts, and instead compete at the user-interface level by adding additional services and take-rates of their own at that layer.

(See Protocol Revenues)

2 - Collateral: Sybil Resistance and Slashing

Whilst the majority of users who hold SNR will wish to stake it in order to benefit from protocol revenue distributions, staking is not required for all users. Only users who wish to act as confirmer-makers, confirmer-joiners or arbiters will be required to stake and lock some of their SNR tokens. This requirement will minimise the risk of Sybil attacks, as it will ensure 'skin in the game' and introduce a cost for each new address that wishes to act as a confirmer (whilst also putting those funds at risk should the confirmations be dishonest). A key role of the SNR token will therefore be to act as collateral, allowing slashing to occur in cases of Sybil attacks or dishonest behaviour by confirmer-makers or confirmer-joiners.*

3 - Arbitration

Following the resolution of a scenario pool, notifications will be triggered and sent to its askers immediately. The pool will then enter a 72-hour cool down period, after which that pool’s funds will be paid out.

During this time, if more than 20%** ('asker dispute threshold') of that pool’s askers flag the pool as having been incorrectly resolved, the following will occur:

1. The scenario pool will switch to 'RESOLVE-DISPUTED'
2. The planned pay-out to that pool’s confirmers will be paused
3. The scenario will be flagged for dispute resolution
4. 10%** of all addresses staking SNR at the time of dispute will be randomly selected to act as arbiters for that pool
5. The scenario pool’s ‘cool-down’ period will end and a new ‘arbitration period’ lasting 72 hours will begin
6. Eligible addresses will vote on-chain to answer ‘yes’ or ‘no’ to the question: was this scenario disputed correctly?

1. The pool’s confirmer-maker will have 10% of their staked SNR slashed**
2. The pool’s confirmer-joiners will have 5% of their staked SNR slashed**
3. The pool will re-open to additional asker-joiners or for fund removal
4. Slashed SNR will be sent to the builder bounty fund (50%) and the growth pool (50%)
5. Voting arbiters will receive their share of the arbitration payment (irrespective of the result of the dispute resolution)

1. The scenario pool will switch from 'RESOLVE-DISPUTED' to 'RESOLVED'
2. The pool’s funds will be paid out to users according to protocol revenue share rules
3. Voting arbiters will receive their share of the arbitration payment (irrespective of the result of the dispute resolution)

See Arbiter Fund for more information.

The protocol will seek to strike a balance between Sybil resistance and fairness, such that anyone who wishes to participate as a confirmer is able to do so.

The protocol’s early advisors will play a key role in assisting to refine the protocol’s planned tokenomics and adjusting the balance between incentives and penalties.

SNR Token Supply and Distribution

The SNR token will be a standard ERC-20 token with a maximum supply of 1 billion (1,000,000,000). It will not be minted immediately, instead being introduced as part of a token generation event (TGE) which will follow an initial period of more limited-functionality protocol testing and user reputation scoring. (See Staged Roll-out). There will be no tail emissions or ongoing inflation of the token supply; 4 years after the TGE, the supply will be fully distributed (note: fully vesting the supply will take one additional year).

The SNR token, once minted, will exist in a combination of escrowed and liquid form. The majority will begin as escrowed SNR and will be subject to vesting periods of up to 3 years (linear). Some SNR will be liquid at TGE in order to support the use of these tokens for user, builder and partner incentives. More detail on these breakdowns is shown below.

SNR token allocation:

• 50% will be allocated to users of the protocol across its first 4 years (with 1-year linear vesting), distributed across 2 separate token distribution events: one which will follow a period of protocol testing and use by the community in year 1, and a second which will run over years 2-4 and be related to protocol use. The first testing phase (and distribution 1) will be based partly on whitelisted addresses.
• 15% will be allocated to a builder bounty fund
• 15% will be allocated to a early backers
• 13% will be allocated to the founding team
• 5% will be allocated to a community marketing and partnering fund
• 2% will be allocated to advisors