The Economic Rationale for Reducing
The POW Miners' Reward in 2019

Stages of Reducing Rewards:

As you can read from the updated roadmap, in 2019 we have planned four phased reductions in the POW-miner rewards, which result in a reduction of 200 coins from the original block reward down to 100. The first decrease will occur in the region of block 500,000. It has been timed to the birthday of our developer, on January 28th, this date; the reward is reduced immediately to 200 coins. The following reductions will occur every quarter or every 500,000 blocks. For example, the 1,000,000th block reduced to 150 REOSC, 1,500,000th reduced to 120 REOSC, and 2,000,000th reduced to 100 REOSC per block found. A further decrease in the miners' reward in 2020 will be due to a general reduction in emissions by about 30% per year until 2024, in which the new issue of coins will almost completely cease. In this article, we consider the economic reasons that have guided us in making this decision.

Economic Reasons for the Decline:

One of the main reasons for miner reward reduction is the creation of an Investment Fund. Already, assigned coins are deposit rewards to masternode owners, since the masternodes are 100% filled. The Investment fund will begin on January 28, when the first decline in the miners' reward will occur. From this point, we redirect 100 coins from each block to the Investment Fund, as well as the remaining reductions within 2019. The fund's tasks will include major development spending (large listings or integration, etc.), as well as protecting the coin market from manipulation and stabilizing a smooth growth rate. Therefore, the main task of the fund is that it will be the main source of investment in commercial areas, from whose income bonuses then paid to holders of REOSC coins! In addition, the growing assets of these areas will be the foundation of the growing capitalization of the REOSC Ecosystem (for more information about the fund, see the White Paper). Without the organization of this fund, our innovative and progressive economic model simply could not work! Therefore, we have taken this step, which in parallel solves many more economic problems for our project in a positive way.

The second reason is to stimulate the growth and value of our coin! Today, when the miner's reward is 300 coins per block, our market receives 1.7 million coins every day as potential sell orders! Therefore, to preserve the value on the market, buyers must absorb this volume daily. Therefore, by reducing this figure by 100 coins per block, starting January 28, we will reduce the daily potential supply for sell orders by 567 thousand coins per day, or about 17 million coins per month! This is only the first of four stages of miner reward decline in 2019, by the end of which the miner reward will decrease to 1/3 compared to today.

To grow, it is especially difficult for us to absorb these sales volumes now, at the very beginning of the road, when there is still little recognition and limited exposure for the marketing of the project. That is why we made the annual dynamics of decline more rapidly in the early stages and smoother in the final stages of this year.

We also understand that not all miners, mining our coin, automatically become its sellers. Therefore, in our analysis, we conventionally single out "true miners" who are imbued with the ideas of the project, see it as a prospect, participate in proposals that stimulate the investment holdings, accumulating and multiplying. We also define such a category as "random miners" for whom mining is a business with simple mining and selling rules, and who have joined our network for reasons of our coin being frequently found in the top profitability list among other ETH based coins. We in no way negatively relate to the last category of miners, but we must evaluate the economic effect of their mode of action in the market in order to ensure the growth of the value of our project and give our investors the opportunity to earn.

Our economic calculations suggest that reducing the mining award will in no way affect the profitability of true miners, but will only take away from the market a group of random miners whose regular sell orders have a negative impact on the coins market value. For example, on January 28, the mining reward will drop to 200 coins from 300 per block. So, in turn, the profitability for miners of our coin will instantly drop and those miners who are guided by these current profitability indicators for today and who do not mine for the future, have not plunged into the mentality of our ecosystem of projects, will switch off. Disconnecting from the network, which we conditionally called random, would entail a decrease in the network complexity, approximately equal to the decrease in rewards in percentage. Therefore, the true miners will remain with similar rates of return and will not suffer in any way! Considering this fact, one can say that we are not just reducing the potential sales offer on the market by a significant figure, but we are reducing this volume in those hands that are most likely to be instant sell orders after production.

On the other hand, it may seem that we get a negative effect on the network as reducing its complexity. Nevertheless, the question of network complexity is the question of its protection, for example, against 51% attacks, which already been largely solved by other means. In addition, the issue of complexity is a matter of status and popularity. However, we prefer to be a growing coin, on which they earn, then status and popular, which does not give any financial results to investors! In addition, most importantly, we have a certain calculation, which levels the fall of the total network hash. It lies in the fact that we reduce the reign to miners in 2019 by two thirds, and plan to grow at a cost of at least 8-10 times to 80-100 satoshi per coin. This is a minimum plan, subject to the stagnation of the general market of crypto-currencies in 2019. In this way, the dynamic growth of the value of a coin several times overlaps the decline in the mining reward, which will leave the profitability index at the same level and higher. This will generally retain an increased interest in REOSC mining, which means that the total network hash and its complexity will grow!

Another positive effect from the decrease in reward to miners, which we calculate, is an increase in the cost of production per each coin, which will also additionally contribute to the growth of the rate. It is no secret that miners have mining costs in the form of purchase, repair, and maintenance of equipment, as well as the electricity cost. Therefore, at the initial stage for development of projects there is a clear dependence of the potential value of a coin, on the time of its block and total reward of the block (we must consider the initial stage when all projects are in approximately equal conditions and the difference in marketing or decision making has not violated this balance). We can observe other ether-like coins on the market, which, with an equal time spent for a block, have a reward for a block 50-100 times less than REOSC, and a value 50-100 times more, that the ecosystem considered as a value. Within High volume coins, you can get 1 million coins, which cost 10 satoshi per unit or get 1,000 coins worth 1000 satoshi per unit (with a smaller total coin release in the project, respectively), which is equivalent in terms of money. From this point of view, our plan to reduce the reward gives another additional reason for the growth of the course, smoothly transferring the coin to a completely different category of production / cost ratios and economically fixing the coin at an ever-growing price level. Therefore, this is another great reason to invest in the coin for a long period!

Results of the Analysis:

As you can see, we conducted a comprehensive study in our decision and revealed a large number of positive effects from reducing the miners' reward, which, in fact, will last 5 years, together with a decrease in total emissions from 2020. Moreover, all possible negative economic effects overlap completely and surpassed by other growing interdependent indicators. Therefore, in conjunction with other factors of coin growth that we have laid down, such as increasing awareness, stimulating savings for the period of emission, directing part of the income to payments to coin owners, etc., you can see that there are many strong reasons for Stable growth in the value of the coin REOSC!

Reward to Miners as Part of the Total Ecosystem Budget:

In conclusion, I would like to consider the issue of rewards to miners from the point of view of project budgeting and its further successful economic development. No secret that at the initial development stage of almost all projects, their revenue side is the issue of new coins, regular or one-time. Therefore, building a coherent economic development system, we must consider the release issuing of new coins as the total budget of the entire projects ecosystem. Having today 300 coins from the block as a reward to miners, with a total reward of 480 coins from the block, we get the distribution of 62.5% of the entire issue only to the miners of the network! The remaining 31.25% of issue coins goes to payout masternode owners, which encourage participants of the REOSC ecosystem to hold and accumulate deposits and 6.25% of the issue goes to the team's development fund. Such a distribution of the rewards can be expedient only at the initial stage in order to attract and retain the largest audience of the crypto market, in addition to ordinary investors. However, in the future, the direction of 62% of the total issue of coins to miners is detrimental to the economy of the project and for the miners themselves, especially if they want to increase their income by keeping the coins for the future. There is a catastrophic saturation of the sell orders on the market from issued coins, while simultaneously, almost completely, the absence of real economic value of the project and the security of its capitalization of real assets. Moreover, if we also take into account the youth of the cryptosphere technology itself, and its weak incorporation into the general economy, such distribution models within the project are extremely destructive. After all, there is no stable money influx in the form of using any technological need in the real world, and investor interest is purely speculative with inflating a bubble of value.

Therefore, in our project, after conducting a global economic analysis of the functioning cryptospheric ecosystem, we decided in a strategic reduction to the miners rewards in the total issue of new coins!
In addition to this, given the youth of cryptotechnologies and the immaturity (instability) of the crypto-industry market, we will create an investment development fund by redirecting the reduced miner rewards. In the future, with the help of the fund, we will create commercial areas with real incomes that will be the foundation of the growing capitalization for the market in our ecosystem! Thus, during 2019 we will redirect a significant part of the release of new coins to the creation of real value assets. This will ensure the growing market of our ecosystem and will enable the miners and investors of the project to earn at any stage of joining the project!

We consider our economic model, as progressive for today's
stagnant cryptocurrency market, and the results of an economic analysis in the distribution of emissions, we consider it innovative for the cryptosphere. We hope that many projects will heed our conclusion and will create a more reliable economic model within their projects. Indeed, from the economic development of the entire cryptoindustry, its investment attractiveness, and success, our possibility of additional growth is indirectly dependent!

Maxim Sadovnik,
Crypto enthusist,
Member of the
REOSC Ecosystem team

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