The Zilliqa whitepaper is stating block rewards shall decrease over a period of 10 years. Almost three years after mainnet launch, the block reward is still a fixed number, i.e. 204,000 ZIL. This proposal suggests implementing decreasing block rewards starting at 31 Jan 2022 - the 3rd anniversary of Zilliqa mainnet launch.
The current DS Block reward is 204,000 ZIL ( Zilliqa Block #1610500 | ViewBlock ) and a DS epoch is about 57 minutes ( Zilliqa Block #1610600 | ViewBlock ). This results in an issuance rate of 60 ZIL per second or 1.89B ZIL per year. The current ZIL supply is ~15.3B ZIL. The maximum supply is 21B ZIL.
With the current issuance rate, the remaining tokens will be fully distributed within the next three years. The proposal assumes that three years will not be enough for Zilliqa to mature in a way that rewards can be paid only by transaction fees. This is why we have to lengthen the reward distribution by reducing the issuance rate.
The proposal suggests a simple approach that results in an issuance rate of 0.5B ZIL per year starting at the 5th year. The 3rd and 4th years shall be used to linearly decrease the issuance rate from 1.89B ZIL to 0.5B ZIL.
Figure 1: Proposed ZIL Issuance Rate
The motivation has been stated clearly in Chapter VIII of the Zilliqa Whitepaper :
ZILLIQA has a finite supply of 21 billion ZILs. The smallest
unit being 10−12 part of a ZIL. Each final TX-Block comes
with a block reward that generates new tokens. The block
reward will be spread over a period of 10 years decreasing
over time. We aim to mine roughly 80% of the tokens in the
first 4 years and the remaining 20% in the next 6 years. The
token emission will be “smooth” in the sense that the block
reward does not reduce drastically after a certain number of
blocks. The smooth reduction in the block reward means that
the network hashrate can be expected to be stable as the reward
reduces over gradually over time.
After 10 years, we expect to have reached significant scale
both in terms of the number of nodes in the network and users
executing transactions. By then, we expect the market to have
stabilized upon certain rates of transaction fees to fully sustain
the running of the network without a need for new tokens
entering the system as rewards.
- Starting from January 31, 2022
- Reduce DS Block reward by 7.5 ZIL each DS epoch for the next 20,000 DS epochs.
- After 20,000 DS epochs, the new DS block reward will be 54,000 ZIL
The new issuance rate will be ~0.498B ZIL per year.
- Lengthen the reward distribution allows the Zilliqa ecosystem to further grow in the meantime
- Smooth decline in reward issuance avoids any non-linearity effects
- Reduces sell pressure on the market ( Bitcoin halving effect )
- Increasing ZIL price due to reduced sell pressure potentially compensates miner reward reduction
- Less mining rewards could result in reduced miner interest, potentially compromising the security of the network
- Reduced block rewards affect both, miner rewards AND staking rewards