zcash · nuttycom · Aug 28, 2024 · Aug 28, 2023 · Sep 19, 2023 · Sep 19, 2023
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+    <title>Draft issuance: Smooth Out The Block Subsidy Issuance</title>
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+<pre><code>ZIP: 
+Title: Smooth Out The Block Subsidy Issuance
+Owners: Jason McGee &lt;jason@shieldedlabs.com&gt;
+        Mark Henderson &lt;mark@equilibrium.co&gt;
+        Tomek Piotrowski &lt;tomek@eiger.co&gt;
+        Mariusz Pilarek &lt;mariusz@eiger.co&gt;
+Original-Authors: Nathan Wilcox
+Credits: Nathan Wilcox
+         Mark Henderson
+         Jason McGee
+Status: Draft
+Category: Consensus
+Created: 2023-08-23
+License: BSD-2-Clause</code></pre>
+<h1 id="terminology">Terminology</h1>
+<p>The key words “MUST”, “SHOULD”, “SHOULD NOT”, “MAY”, “RECOMMENDED”,
+“OPTIONAL”, and “REQUIRED” in this document are to be interpreted as
+described in RFC 2119. [1]</p>
+<p>“Network upgrade” - to be interpreted as described in ZIP 200.
+[2]</p>
+<p>“Block Subsidy” - the algorithmic issuance of ZEC on block creation –
+part of the consensus rules. Split between the miner and the Dev Fund.
+Also known as Block Reward.</p>
+<p>“Issuance” - The method by which unmined or unissued ZEC is converted
+to ZEC available to users of the network</p>
+<p>“We” - the ZIP authors, owners listed in the above front matter</p>
+<p>“<code>AVAILABLE_SUBSIDIES(h)</code>” is the total ZEC available to
+pay out Block Subsidies from at block height <code>h</code>, ie. “not
+yet mined ZEC at h”.</p>
+<p>“<code>BLOCK_SUBSIDY_FRACTION</code>” = 41 / 100,000,000 or
+<code>0.00000041</code></p>
+<h1 id="abstract">Abstract</h1>
+<p>This ZIP proposes a change to how nodes calculate the block
+subsidy.</p>
+<p>Instead of following a step function around the four-year halving
+cycle inherited from Bitcoin, we propose a slow exponential “smoothing”
+of the curve. The new issuance scheme would approximate the current 4
+year cycle, and results in the last zatoshi being spent in around 113
+years.</p>
+<h1 id="motivation">Motivation</h1>
+<p>Zcash’s economic model is inherited from Bitcoin and includes the
+concept of a halving mechanism to regulate the issuance of new coins.
+This approach, though foundational, invites a reevaluation amid Zcash’s
+ongoing evolution. As the network matures, the need to address potential
+future challenges and ensure a sustained and stable economic ecosystem
+becomes apparent. The transition to a smoothed emissions curve offers an
+opportunity to adjust the network’s issuance dynamics while maintaining
+the supply cap of 21,000,000 coins. By doing so, Zcash endeavors to
+optimize its economic framework, accommodating changing circumstances
+while maintaining predictability and stability in rewards
+distribution.</p>
+<p>This proposal outlines a solution to address challenges associated
+with the existing block subsidy issuance mechanism in the Zcash network.
+The primary goal of this proposal is to introduce a more predictable and
+stable issuance of ZEC by smoothing out the issuance curve while
+preserving the supply cap. It’s important to note that this proposal
+does not seek to alter the fundamental aspects of Zcash’s issuance
+policy. The average block subsidy size over time will remain the same
+and the funds for block subsidies will last a similar amount of time.
+Instead, it focuses solely on enhancing the predictability and
+consistency of the block subsidy issuance process.</p>
+<p>Smoothing the emissions curve helps ensure that the network remains
+economically viable and stable as it transitions from a traditional
+issuance mechanism to one that maintains a sustainable and predictable
+issuance of rewards over time. It prevents abrupt changes in the rate of
+newly issued coins, which could lead to disruptions in the network’s
+economic model and potentially impact its security and sustainability. A
+smoother emissions curve allows for a more gradual and controlled
+transition, providing ZEC stakeholders and participants with a clear
+understanding of how rewards will be distributed over time.</p>
+<h1 id="specification">Specification</h1>
+<p>Smoothing the issuance curve is possible using an exponential decay
+formula that satisfies the following requirements:</p>
+<h2 id="requirements">Requirements</h2>
+<ol type="1">
+<li>Block subsidies MUST be weakly decreasing</li>
+<li>Block subsidies SHOULD approximate a continuous function</li>
+<li>When <code>AVAILABLE_SUBSIDIES(h) &gt; 0</code> then block subsidies
+for block <code>h</code> MUST always be <code>&gt; 0</code>, preventing
+a final “unmined” zatoshi</li>
+<li>For any 4 year period, all paid out block subsidies MUST equal
+approximately half of <code>AVAILABLE_SUBSIDIES</code> at the beginning
+of that 4 year period</li>
+<li>This functionality MUST be introduced as part of a network
+upgrade</li>
+</ol>
+<p>The above requirements assume no deflationary action, i.e. that no
+ZEC is added to <code>AVAILABLE_SUBSIDIES</code>. They are referenced
+below as <strong>Rn</strong>.</p>
+<h2 id="solution">Solution</h2>
+<p>Given the block height <code>h</code> define a function
+<strong>S</strong>, such that:</p>
+<p><strong>S(h)</strong> = Block subsidy for a given <code>h</code>,
+that satisfies above requirements.</p>
+<p>Please note that</p>
+<p><code>AVAILABLE_SUBSIDIES(h+1) = AVAILABLE_SUBSIDIES(h) - S(h)</code>
+assuming no deflationary action.</p>
+<p>An exponential decay function <strong>S</strong> satisfies
+<strong>R1</strong> and <strong>R2</strong> above:</p>
+<p><code>S(h) = BLOCK_SUBSIDY_FRACTION * AVAILABLE_SUBSIDIES(h)</code></p>
+<p>Finally, to satisfy <strong>R3</strong> above we need to always round
+up to at least 1 Zatoshi if
+<code>AVAILABLE_SUBSIDIES(h) &gt; 0</code>:</p>
+<p><code>S(h) = ROUND_UP(BLOCK_SUBSIDY_FRACTION * AVAILABLE_SUBSIDIES(h))</code></p>
+<h1 id="rationale">Rationale</h1>
+<h2 id="block_subsidy_fraction"><code>BLOCK_SUBSIDY_FRACTION</code></h2>
+<p>That value of <code>41 / 100_000_000</code> was selected so that it
+satisfies the equation:</p>
+<p><code>(1 - BLOCK_SUBSIDY_FRACTION)^NUMBER_OF_BLOCKS_IN_4_YEARS ~ ½</code></p>
+<p>Meaning after a period of 4 years around half of
+<code>AVAILABLE_SUBSIDIES</code> will be paid out as block subsidies,
+thus satisfying <strong>R4</strong>.</p>
+<h2 id="other-notes">Other Notes</h2>
+<p>The suggested implementation avoids using float numbers. Rust and C++
+will both round the result of the final division up, satisfying
+<strong>R3</strong> above.</p>
+<h1 id="appendix-simulation">Appendix: Simulation</h1>
+<p>We encourage readers to run the following Rust code, which simulates
+block subsidies. According to this simulation, assuming no deflationary
+action, block subsidies would last for approximately 113 years:</p>
+<h2 id="rust-code">Rust Code</h2>
+<div class="sourceCode" id="cb2"><pre
+class="sourceCode rust"><code class="sourceCode rust"><span id="cb2-1"><a href="#cb2-1" aria-hidden="true" tabindex="-1"></a><span class="kw">fn</span> main() <span class="op">{</span></span>
+<span id="cb2-2"><a href="#cb2-2" aria-hidden="true" tabindex="-1"></a>    <span class="co">// approximate available subsidies in August of 2023</span></span>
+<span id="cb2-3"><a href="#cb2-3" aria-hidden="true" tabindex="-1"></a>    <span class="kw">let</span> <span class="kw">mut</span> available_subsidies<span class="op">:</span> <span class="dt">i64</span> <span class="op">=</span> <span class="dv">4671731</span> <span class="op">*</span> <span class="dv">100_000_000</span><span class="op">;</span></span>
+<span id="cb2-4"><a href="#cb2-4" aria-hidden="true" tabindex="-1"></a>    <span class="kw">let</span> <span class="kw">mut</span> block<span class="op">:</span> <span class="dt">u32</span> <span class="op">=</span> <span class="dv">0</span><span class="op">;</span></span>
+<span id="cb2-5"><a href="#cb2-5" aria-hidden="true" tabindex="-1"></a></span>
+<span id="cb2-6"><a href="#cb2-6" aria-hidden="true" tabindex="-1"></a>    <span class="cf">while</span> available_subsidies <span class="op">&gt;</span> <span class="dv">0</span> <span class="op">{</span> </span>
+<span id="cb2-7"><a href="#cb2-7" aria-hidden="true" tabindex="-1"></a>        <span class="kw">let</span> block_subsidy <span class="op">=</span> (available_subsidies <span class="op">*</span> <span class="dv">41</span> <span class="op">+</span> <span class="dv">99_999_999</span>) <span class="op">/</span> <span class="dv">100_000_000</span><span class="op">;</span></span>
+<span id="cb2-8"><a href="#cb2-8" aria-hidden="true" tabindex="-1"></a>        available_subsidies <span class="op">-=</span> block_subsidy<span class="op">;</span></span>
+<span id="cb2-9"><a href="#cb2-9" aria-hidden="true" tabindex="-1"></a></span>
+<span id="cb2-10"><a href="#cb2-10" aria-hidden="true" tabindex="-1"></a>        <span class="pp">println!</span>(</span>
+<span id="cb2-11"><a href="#cb2-11" aria-hidden="true" tabindex="-1"></a>            <span class="st">&quot;{} ({} years): {}({} ZEC) {}({} ZEC)&quot;</span><span class="op">,</span></span>
+<span id="cb2-12"><a href="#cb2-12" aria-hidden="true" tabindex="-1"></a>            block<span class="op">,</span>                             <span class="co">// current block</span></span>
+<span id="cb2-13"><a href="#cb2-13" aria-hidden="true" tabindex="-1"></a>            block <span class="op">/</span> <span class="dv">420_768</span><span class="op">,</span>                   <span class="co">// ~ current year</span></span>
+<span id="cb2-14"><a href="#cb2-14" aria-hidden="true" tabindex="-1"></a>            block_subsidy<span class="op">,</span>                     <span class="co">// block subsidy in zatoshis</span></span>
+<span id="cb2-15"><a href="#cb2-15" aria-hidden="true" tabindex="-1"></a>            block_subsidy <span class="op">/</span> <span class="dv">100_000_000</span><span class="op">,</span>       <span class="co">// block subsidy in ZEC</span></span>
+<span id="cb2-16"><a href="#cb2-16" aria-hidden="true" tabindex="-1"></a>            available_subsidies<span class="op">,</span>               <span class="co">// available subsidies in zatoshis</span></span>
+<span id="cb2-17"><a href="#cb2-17" aria-hidden="true" tabindex="-1"></a>            available_subsidies <span class="op">/</span> <span class="dv">100_000_000</span>  <span class="co">// available subsidies in ZEC</span></span>
+<span id="cb2-18"><a href="#cb2-18" aria-hidden="true" tabindex="-1"></a>        )<span class="op">;</span></span>
+<span id="cb2-19"><a href="#cb2-19" aria-hidden="true" tabindex="-1"></a></span>
+<span id="cb2-20"><a href="#cb2-20" aria-hidden="true" tabindex="-1"></a>        block <span class="op">+=</span> <span class="dv">1</span><span class="op">;</span></span>
+<span id="cb2-21"><a href="#cb2-21" aria-hidden="true" tabindex="-1"></a>    <span class="op">}</span>   </span>
+<span id="cb2-22"><a href="#cb2-22" aria-hidden="true" tabindex="-1"></a><span class="op">}</span></span></code></pre></div>
+<p>Last line of output of the above program is:</p>
+<p><code>47699804 (113 years): 1(0 ZEC) 0(0 ZEC)</code></p>
+<p>Note the addition of 99,999,999 before division to force rounding up
+of non-zero values.</p>
+</body>
+</html>
diff --git a/draft-issuance.md b/draft-issuance.md
@@ -0,0 +1,169 @@
+```
+ZIP: 
+Title: Smooth Out The Block Subsidy Issuance
+Owners: Jason McGee <jason@shieldedlabs.com>
+        Mark Henderson <mark@equilibrium.co>
+        Tomek Piotrowski <tomek@eiger.co>
+        Mariusz Pilarek <mariusz@eiger.co>
+Original-Authors: Nathan Wilcox
+Credits: Nathan Wilcox
+         Mark Henderson
+         Jason McGee
+Status: Draft
+Category: Consensus
+Created: 2023-08-23
+License: BSD-2-Clause
+```
+
+# Terminology
+
+The key words “MUST”, “SHOULD”, “SHOULD NOT”, “MAY”, “RECOMMENDED”, “OPTIONAL”,
+and “REQUIRED” in this document are to be interpreted as described in RFC 2119. [1]
+
+"Network upgrade" - to be interpreted as described in ZIP 200. [2]
+
+“Block Subsidy” - the algorithmic issuance of ZEC on block creation – part of
+the consensus rules. Split between the miner and the Dev Fund. Also known as Block Reward.
+
+“Issuance” - The method by which unmined or unissued ZEC is converted to ZEC available
+to users of the network
+
+“We” - the ZIP authors, owners listed in the above front matter
+
+“`AVAILABLE_SUBSIDIES(h)`” is the total ZEC available to pay out Block Subsidies from at
+block height `h`, ie. “not yet mined ZEC at h”.
+
+“`BLOCK_SUBSIDY_FRACTION`” = 41 / 100,000,000 or `0.00000041`
+
+# Abstract
+
+This ZIP proposes a change to how nodes calculate the block subsidy.
+
+Instead of following a step function around the four-year halving cycle inherited
+from Bitcoin, we propose a slow exponential “smoothing” of the curve. The new issuance
+scheme would approximate the current 4 year cycle, and results in the last
+zatoshi being spent in around 113 years.
+
+# Motivation
+
+Zcash’s economic model is inherited from Bitcoin and includes the concept of a halving
+mechanism to regulate the issuance of new coins. This approach, though foundational, invites
+a reevaluation amid Zcash’s ongoing evolution. As the network matures, the need to address
+potential future challenges and ensure a sustained and stable economic ecosystem becomes
+apparent. The transition to a smoothed emissions curve offers an opportunity to adjust the network's
+issuance dynamics while maintaining the supply cap of 21,000,000 coins. By doing so, Zcash
+endeavors to optimize its economic framework, accommodating changing circumstances while
+maintaining predictability and stability in rewards distribution.
+
+This proposal outlines a solution to address challenges associated with the existing block
+subsidy issuance mechanism in the Zcash network. The primary goal of this proposal is to
+introduce a more predictable and stable issuance of ZEC by smoothing out the issuance
+curve while preserving the supply cap. It's important to note that this proposal does
+not seek to alter the fundamental aspects of Zcash's issuance policy. The average block
+subsidy size over time will remain the same and the funds for block subsidies will last
+a similar amount of time. Instead, it focuses solely on enhancing the predictability
+and consistency of the block subsidy issuance process.
+
+Smoothing the emissions curve helps ensure that the network remains economically
+viable and stable as it transitions from a traditional issuance mechanism to one
+that maintains a sustainable and predictable issuance of rewards over time. It
+prevents abrupt changes in the rate of newly issued coins, which could lead to
+disruptions in the network's economic model and potentially impact its security
+and sustainability. A smoother emissions curve allows for a more gradual and controlled
+transition, providing ZEC stakeholders and participants with a clear understanding of
+how rewards will be distributed over time.
+
+
+
+# Specification
+
+Smoothing the issuance curve is possible using an exponential decay formula that
+satisfies the following requirements:
+
+## Requirements
+
+1. Block subsidies MUST be weakly decreasing
+2. Block subsidies SHOULD approximate a continuous function
+3. When `AVAILABLE_SUBSIDIES(h) > 0` then block subsidies for block `h`
+MUST always be `> 0`, preventing a final “unmined” zatoshi
+4. For any 4 year period, all paid out block subsidies MUST equal approximately
+half of `AVAILABLE_SUBSIDIES` at the beginning of that 4 year period
+5. This functionality MUST be introduced as part of a network upgrade
+
+The above requirements assume no deflationary action, i.e. that no ZEC is added
+to `AVAILABLE_SUBSIDIES`. They are referenced below as **Rn**.
+
+## Solution
+
+Given the block height `h` define a function **S**, such that:
+
+**S(h)** = Block subsidy for a given `h`, that satisfies above requirements.
+
+Please note that
+
+`AVAILABLE_SUBSIDIES(h+1) = AVAILABLE_SUBSIDIES(h) - S(h)` assuming no deflationary action.
+
+An exponential decay function **S** satisfies **R1** and **R2** above:
+
+`S(h) = BLOCK_SUBSIDY_FRACTION * AVAILABLE_SUBSIDIES(h)`
+
+Finally, to satisfy **R3** above we need to always round up to at least 1 Zatoshi
+if `AVAILABLE_SUBSIDIES(h) > 0`:
+
+`S(h) = ROUND_UP(BLOCK_SUBSIDY_FRACTION * AVAILABLE_SUBSIDIES(h))`
+
+# Rationale
+
+## `BLOCK_SUBSIDY_FRACTION`
+
+That value of `41 / 100_000_000` was selected so that it satisfies the equation:
+
+`(1 - BLOCK_SUBSIDY_FRACTION)^NUMBER_OF_BLOCKS_IN_4_YEARS ~ ½`
+
+Meaning after a period of 4 years around half of `AVAILABLE_SUBSIDIES` will be paid out
+as block subsidies, thus satisfying **R4**.
+
+
+## Other Notes
+
+The suggested implementation avoids using float numbers. Rust and C++ will both round
+the result of the final division up, satisfying **R3** above.
+
+# Appendix: Simulation
+
+We encourage readers to run the following Rust code, which simulates block subsidies.
+According to this simulation, assuming no deflationary action, block subsidies would
+last for approximately 113 years:
+
+## Rust Code
+
+```rust
+fn main() {
+    // approximate available subsidies in August of 2023
+    let mut available_subsidies: i64 = 4671731 * 100_000_000;
+    let mut block: u32 = 0;
+
+    while available_subsidies > 0 { 
+        let block_subsidy = (available_subsidies * 41 + 99_999_999) / 100_000_000;
+        available_subsidies -= block_subsidy;
+
+        println!(
+            "{} ({} years): {}({} ZEC) {}({} ZEC)",
+            block,                             // current block
+            block / 420_768,                   // ~ current year
+            block_subsidy,                     // block subsidy in zatoshis
+            block_subsidy / 100_000_000,       // block subsidy in ZEC
+            available_subsidies,               // available subsidies in zatoshis
+            available_subsidies / 100_000_000  // available subsidies in ZEC
+        );
+
+        block += 1;
+    }   
+}
+```
+
+Last line of output of the above program is:
+
+`47699804 (113 years): 1(0 ZEC) 0(0 ZEC)`
+
+Note the addition of 99,999,999 before division to force rounding up of non-zero values.