Incentives
In Owy's economy, there are 2 primary groups of participants: savers and spenders.
Last updated
In Owy's economy, there are 2 primary groups of participants: savers and spenders.
Last updated
This mechanism provides a strong incentive for saving. When an OWY transaction takes place, a portion is collected as tax and then burned, permanently reducing the circulating supply. As the total supply decreases, the base price of each remaining token increases, making them more valuable over time.
The competition for this incentive lies among savers who must resist spending before others do. When someone spends, it increases the value of all remaining tokens. However, these savers must endure price volatility over time, with the intrinsic value of OWY peaking at the Final Phase.
This drives the saving competition. As detailed in Supply Contraction, the taxation formula includes a time-based discount to reward those who hold their tokens longer.
When someone acquires OWY tokens, each token is marked with the current Ethereum block number (BlockIn). As more tokens are added to the account, the system recalculates the average time accumulation (average BlockIn) based on the updated balance.
When the discount is applied, the value is depleted. The OWY token that previously held this value will then update to record the current Ethereum block number, calculated using a weighted average method.
For example, a person for the first time obtains 100 OWY at the block number of 450,000. On the next day, he/she purchases 30 more OWY at block number 455600, making his/her new average π΅πππππΌπ be [ 100(450000) + 30(455600) ] / (100+30)= 451,292
The longer an individual saves, the greater their discount, which increases exponentially with a power of three. This creates a substantial disparity in the final value between holders during transactions.
A unique feature of time accumulation is that the discount value regenerates over time, even after being used or extracted. As time progresses, the global average of time accumulation (VWAB) generally increases with spending activity, allowing the discount to recover to its previous level or even surpass it.
When a spender pays tax through a transaction, they receive a tax accumulation value in return. This value can be used for tax discounts, similar to time accumulation, but it is earned exclusively through paying taxes. The scarcity of this value is directly related to the amount of tax collected, which also helps reduce the OWY supply.
The discount from tax payments is unique and can surpass those from savings because it doesnβt require time to accumulate. Instead, it is based on the total existing tax accumulation value, offering a quicker path to tax discounts on future transactions. Moreover, individuals with both time and tax accumulation discounts can maximize benefits, as these values complement each other to enhance. the overall discount effect.
As shown in the diagram above, tax accumulation is stored in the OWY account rather than within the OWY tokens. This offers a distinct advantage: unlike time-based discounts, tax accumulation discounts do not regenerate but are reusable. Once used, the discount value remains in the account and can be utilized repeatedly. However, accumulating more discounts results in diminishing returns on new tax accumulation. This dynamic requires careful planning and strategic arbitrage to optimize value.
One strategy is to transfer their funds to the zero address, effectively burning the OWY tokens. This action signals to the system that the individual has paid 100% in tax, earning a tax accumulation value equal to 100% of their fund. This technique is known as reward farming.
For example, if OWY is priced at $0.50, a user could farm rewards with $3,000 worth of OWY to secure a 30% transaction discount. If the price then rises to $2.00, the transaction discount might decrease to 20% due to tax accumulation inflation. However, this 20% discount, now potentially worth more than $3,000, can be used repeatedly. As OWYβs value increases, the inflation rate of the discount slows, raising the entry barrier and making it more scarce. If the user does not use the discount, they can sell or lend it for profit. Since the discount is proportionally calculated, itβs particularly effective for large transactions, and the value can be extracted, as detailed in the Value Token section.
Due to the reusability of tax accumulation value, its increasing scarcity of production, and the proportionally calculated discount effects, a unit of tax accumulation value could become more expensive than a unit of OWY token at some periods.
