An Eye on the Economics of SDX
In the following article, we will take a deeper look at the economics behind the incoming SDX coin. We’re going to have some fun nerding out with some tables to help illustrate the expected mining returns and we will walk you through what it all means for you in regards to the supply for the coin as well as some considerations about economic factors that are likely to impact the price of SDX.
Please refer to our last article for the specifics, but for a quick recap, the new SwapDEX Smart Chain (SSC) will be supported by masternodes being run by the community. You will need to stake exactly 10,000 SDX per node and the masternodes will be rewarded with 51% of the mining returns (for the other 49%, those simply staking their SDX will receive 9% and the remaining 40% will go to the Community Treasury). There will be 220 new SDX minted every minute in the first year, with this amount halving year-on-year. This means the total supply will increase over time, though the increase will be most noticeable in the first three years, after which the yearly halving will make the year-on-year increase relatively negligible.
The following table illustrates the increasing supply and its allocation over the first 10 years of the platform.
As you can see, the total supply ramps up relatively quickly in the first year, increasing from 200 million to 315.6 million, then to 373.5 million by the end of the second year and 402.4 million by the end of the third. After the first three years, the yearly halving well and truly kicks in to ensure inflation is not too extreme and by the end of the tenth year, total supply will be at 431 million.
The mining rewards have been structured in this manner to ensure that early adopters have access to the highest rewards and to ensure the SSC is fully supported by an army of masternodes right off the bat.
The impact of the mining rewards will increase the number of SDX in existence, however outside of respective 5.5% and 1.5% increases the first two years, there is only a negligible impact on the circulating supply relative to the total supply. The table below shows the increase in Holders along with the Community Fund and the SwapDEX reserve (which does not change as it does not receive mining rewards). The figures for Holders includes the rewards for both masternodes as well as those simply staking their SDX. The Community Fund and SwapDEX Reserve will not be in circulation and have not been factored into the circulating supply calculations, however it is important to acknowledge that it is likely that some of these funds, especially the Community Fund, will enter circulation. Given we cannot predict how many will enter supply, we have not factored them in to the calculations, though this is offset somewhat by using 90 million when it is likely to be a couple million less at launch.
Does Increased Supply = Lower Price?
Yes, usually it does if there are no other factors to consider. In the world of SDX, however, there are indeed many other factors that will positively impact the price. These include:
- The majority of the SDX owned by holders is likely to be staked as a masternodes making the available coins substantially lower than the circulating supply figures above. Once SDX is staked in a masternode, the majority are likely to remain staked in that masternode for the medium term.
- Many holders who run masternodes are likely to compound their mining rewards into more nodes rather than selling their SDX.
- Some of our more experienced holders are likely to use SDX as collateral for loans.
- While there is 0 gas for regular transactions, some transactions will still attract gas, such as contract deployments. In addition, if there is a substantial number of transactions going through, you will have the option to process your transactions with gas to reserve your position on the next block on the chain.
- We’ve saved what we see as the biggest impact for last. When projects start to launch on the SSC, they will pair their token with SDX, much like ERC-20 tokens pair with Ethereum. As more and more projects launch on SSC, the buy pressure for SDX will increase exponentially. So as marketing ramps up after launch and word gets out about 0 gas transactions on a truly decentralised chain, we anticipate the SSC being the place for DeFi projects, the price of SDX will keep on increasing as more and more projects need SDX for their liquidity. We are also considering implementing a liquidity lock for new projects to help mitigate against the chance of new projects rug pulling on our chain.
Show me the Money
With the above in mind, the most lucrative way to earn SDX will be through running a masternode (or 10!). We cannot give accurate estimates ahead of time about what the APY will be for running a masternode because it will be dependant on the number of people running nodes as well as the price of SDX.
In order to give some form of guidance, we can provide the following table to show the SDX that will be earnt per masternode in the first year of the platform based on a number of different total masternode possibilities. Even at the most extreme example of 8,000 masternodes being run, you will still earn over 70% over the course of the year.
The potential for a steady passive income is plain to see, if we do say so ourselves, especially when you consider that the price of SDX is likely to increase over time making the returns from running masternodes even more impressive.