Network Incentive: Privacy (PRV) Mining & Distribution
Privacy (PRV) is the native coin of Incognito.
A strict limit of 100M Privacy (PRV) will be minted. This number will never increase.
The Core Development Team pooled together a collective $1M to fund the project. No ICO, private sale or VC funding. Potential users and investors should not be asked to pay prior to any code being written. As such, the founding team bears all risks.
The $1M was funded in May 2018 and primarily used for protocol development and user adoption.
This funding structure will reduce price speculation around the project, avoid public market pressure, and keep the team laser-focused on building and shipping a great platform for decentralized privacy tokens.
Proof-of-Stake networks often heavily pre-allocate tokens for the team, investors, and ICO. Incognito takes a different approach. Incognito is a Proof-of-Stake blockchain that designs its block rewards similarly to Proof-of-Work blockchains like Bitcoin.
95M of the 100M PRV total supply is mined through block rewards. The total block reward for the first year is 8,751,970 PRV. Block rewards are reduced by 9% for every subsequent year. PRV will be fully mined after 40 years.
Figure 1. PRV block rewards over time
5M PRV is pre-mined and purchased by the Core Development Team for the aforementioned $1M, and has been used to cover salaries, server costs, operational expenses, and marketing activities.
There is a chicken-and-egg problem with any Proof-of-Stake blockchain. How can validators start staking when they don’t have coins to stake?
Incognito solves this in 2 ways:
Testnet validators are rewarded with Testnet PRV, which can be converted 1:1 to Mainnet PRV at Mainnet launch.
Incognito has its own hardware, Node. If Node owners don’t have PRV to get started, they can borrow PRV from the Node Staking Fund, where anyone can lend out their PRV to Node owners.
Block Reward Split
95% of PRV total supply is minted through block rewards. Block rewards are split between the validators and Incognito DAO, a decentralized autonomous organization designed to fund protocol development and network growth. Incognito DAO collects a gradually reducing percentage of the block rewards, from 10% to 3%.
With this income, Incognito DAO will fuel the growth of the network, fund interesting projects, and give the project longevity.
Incognito DAO’s funds are initially managed by the Core Development Team. Management responsibilities will be gradually distributed to the community.
The smallest sub-denomination of Privacy is Nano. 1 Privacy is defined as 109 Nano. There exist other sub-denominations of Privacy.
In the future, we expect Privacy to be used for regular transactions, Milli for microtransactions, Micro for transaction fees, and Nano for technical discussions and implementations.
There are 3 types of tokens:
Privacy. Privacy (PRV) is Incognito’s native coin — a work token1. Users stake PRV to become validators. Validators earn block rewards in PRV and transaction fees in various cryptoassets (i.e. pBTC, pETH, etc). This model avoids speculators and only attracts people interested in growing the network. If the demand for private transactions grows, validators will earn more revenue, which naturally triggers an increase in the price of PRV.
Bridged Privacy Coins. Anyone can convert cryptocurrencies (or “public coins”) on other blockchains (i.e. BTC, ETH, USDT) to privacy coins on Incognito (i.e. pBTC, pETH, pDAI). Privacy coins maintain a 1:1 peg and are completely confidential. Because of this, anyone can store, send and receive any cryptoassets with total privacy. Private coins can also be used to pay for transaction fees.
Issue-Created Privacy Coins. Anyone can issue their own privacy coin on Incognito.
Users can pay transaction fees in their cryptocurrency of choice (PRV, pBTC, pETH, pDAI, etc).
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