Updated: Nov 5
Like most decentralised projects, tokenomics has always played a crucial role in Mysterium Network.
Our utility token MYST is the reserve currency of our peer-to-peer bandwidth marketplace. Designed to fight internet censorship, it powers various applications like the Mysterium VPN, enabling trustless and anonymous payments between nodes and users.
Now we’re working on a new tokenomics model that will help us scale the network, introducing the beneficial components of decentralised finance (DeFi). DeFi has been the reigning champion of blockchain technology, but we believe there’s a valuable opportunity to leverage P2P protocols beyond finance alone.
Our Tokenomics 2.0 model will create new opportunities for both node runners and token holders, who can put their funds to work through staking to earn rewards.
What is the IQ Protocol?
The IQ Protocol is a groundbreaking solution that brings Mysterium Tokenomics 2.0 to life.
It was developed by PARSIQ, a next-generation blockchain analytics platform that connects blockchain activity to off-chain applications and devices. The IQ Protocol is the world’s first “risk-free, collateral-less DeFi protocol to tokenize SaaS subscriptions”.
This innovation brings the power of DeFi to traditional services by facilitating a subscription model for blockchain projects. It also removes the requirement of upfront collateral, mitigating the typical risks associated with DeFi participation.
The IQ Protocol is the brainchild of Anatoly Ressin, PARSIQ’s Chief Architect, with creative backing from PARSIQ’s CTO Alan Durnev along with a dedicated team of developers and additional outside assistance.
Mysterium also contributed to the development of the Protocol, building its Golang Software Development Kit and by participating in early discussions on math models behind its core functionalities. Launching with the IQ Protocol is a monitoring solution, giving users the right to provide services through MYST ownership or delegation. It also allows the protocol to track the distribution of tokens among node runners using Mysterium’s Hermes payment protocol.
How are we using the IQ Protocol in Tokenomics 2.0?
By integrating the IQ Protocol into our existing tokenomics framework, we can create a circular economy model in which node runners and MYST token holders can reap the benefits of staking.
This will happen via the Mysterium Delegation Pool, where holders can simply deposit their funds to earn rewards.
The IQ Protocol is designed to provide a completely risk-free environment for Mysterium delegators and renters (more on these new roles below).
Our Hermes smart contracts will be updated to work directly with the IQ Protocol pool, guaranteeing a non-custodial fee redistribution. This limits the risk usually associated with a typical lending platform or liquidity pool, such as risk of liquidation or risk of impermanent loss.
Furthermore, the IQ Protocol enables the integration of stablecoin payments within the network, helping to maintain price stability for dVPN services.
Mysterium’s current tokenomics model
To realise the impact of the IQ Protocol on our new tokenomics system, it’s important to understand our current limitations as a network;
1. Price stability for dVPN services In our current iteration of tokenomics, dVPN consumers top up their accounts with a range of cryptocurrencies, including Bitcoin, Litecoin, Dai and Ether. These are converted into $MYST under the hood, and then paid out to node runners. While this crypto-agnostic option invites a range of blockchain communities to access the dVPN, it also leads to frequent price fluctuations. Users are therefore unable to accurately predict how much crypto they need in their accounts. Additionally, node runners who receive their earnings in MYST are also affected by price fluctuations.
2. Skin in the game Currently, MYST token holders are only able to earn rewards by contributing funds to liquidity pools on certain DEXes, such as Uniswap and QuickSwap. While these incentives both grow and reward our community, liquidity providers must own the risk of impermanent loss.
The new world of Tokenomics 2.0
What new benefits and opportunities will the IQ Protocol introduce?
1) DAI stablecoin as Payment To eliminate the negative effect of cryptocurrency fluctuations for both dVPN users and node runners, we are introducing the DAI stablecoin as a means of payment in the peer-to-peer network.
dVPN users can also continue to pay with a range of other cryptocurrencies, while node runners will only receive their earnings in DAI.
2) Node runners stake MYST to earn
All node runners will need to stake MYST in the network in order to provide dVPN services. The amount of DAI that can be earned depends on the amount of MYST at stake, which is proportional to the desired value of their daily rewards. The formula for this is 1 MYST = 0.01 DAI.
The more at stake, the higher a node runner’s earning potential. In this way, the MYST token becomes a life-time subscription to Mysterium Network.
Here’s an example of how this will work:
Alice would like to earn 10 DAI per day by running a Mysterium node. To do this, she will need to stake 1,000 MYST in the network. Alice’s earnings will be capped at 10 DAI / day. Once 10 DAI has been earned, Alice’s node will no longer be discoverable for that particular day. However, she can always stake additional MYST tokens to continue providing a service, and consequently increase her earning ability.
3. MYST yield for token holders
To support token holders, there will be an opportunity to earn rewards by having a stake in the network. These MYST tokens will be taken out of the market and “frozen” in the Mysterium Delegation Pool.
The Delegation Pool is particularly useful for node runners who can’t buy and stake MYST in the network, as they will be able to “rent” tokens from the Pool.
MYST holders can delegate (rent) their tokens for a predefined time to node runners – for a fee. This will function similarly to a daily or monthly subscription, and where the magic of the IQ Protocol really kicks in.
Here’s an example:
Alice does not have 1,000 MYST, but she’d still like to earn 10 DAI / day by running a Mysterium node. Instead of using an exchange like Bittrex or Uniswap, Alice can rent 1,000 MYST from the MYST delegation pool. To do this, Alice simply pays 0.3 DAI / day* to the MYST token holder. *This number is dynamic and subject to change depending on the size and duration of the delegation alongside the availability of liquidity in the delegation pool and other factors.
The introduction of the Mysterium Delegation Pool creates a new revenue stream for all MYST token holders. By depositing MYST into the pool, token holders will be able to earn passive income similarly to other DeFi protocols, such as Compound or Aave.
The rewards that each participant receives will fluctuate based on the size of the pool and network activity. The more users, the more rewards that can be earned by exit nodes and token delegators.
Interested in how the IQ Protocol is going to transform Mysterium Network? Check out our Tokenomics 2.0 explainer video.
We’re still some months away from the launch of Tokenomics 2.0. We’re deep in development mode, collaborating with PARSIQ to ensure a flawless integration and a new system that is as seamless and enjoyable as our latest dVPN app.
First we’ll be bringing mainnet to Mysterium, which also kicks off the expansion of our ecosystem as a breeding ground for Web 3.0 innovation.
Until then, our Pre-Mainnet network upgrade is kicking off in the next week, which introduces seven new features including free registrations, easy withdrawals and flexible bounty payouts.
We’ll be releasing more tokenomics news and updates in the coming months, so join your channel of choice to get the latest updates.