The Zeno
A medium of exchange for digital assets
For a thing of value – an asset – to be traded, it needs a medium of exchange. In the blockchain space, the nature of ‘asset’ and ‘coin’ is often confused, since most cryptocurrencies treat coins as the assets themselves. With a real economy in the digital space, with distinct assets in the form of digital files, the coins become a medium that enables asset trade.
Implementing this approach avoids the paradox whereby the ‘token economics’ has no basis in the value of assets (and uses as a medium of exchange the ‘thing of value’ itself – the token (or coin) – creating something of a circular economic motivation). With proper blockchain governance of files and the cryptocurrency used as a medium of exchange, tokenomics can refer to the actual economics of a cryptocurrency; one that is used to pay for goods & services.
Zenotta’s tokenomic policy emphasises fairness and maximization of distribution, with long mining timelines (approx. 200 yrs), a large number of coins (10 billion) and a more inclusive mining algorithm (see Chapter 4). The desire or demand for assets rather than purely for coins creates a highly liquid market, and since the Zeno is the only currency traded for Smart Data, there is a strong incentive to use the currency rather than merely ‘hodl’ it. This increases distribution drastically over standard cryptocurrencies.

Issuance schedule

Zeno issuance follows a fixed supply cap mechanic according to the properties outlined in the following table:
The total number of Zeno coins reached will be 10 billion, with 2.5 billion reserved for a treasury, to be used for stakeholders, a development fund, and an economic activity fund. The remaining 7.5 billion is mined out via a smoothed issuance curve based on the emission approach employed by the CryptoNote protocol. The smoothed issuance is designed to minimize the volatility seen in standard halving mechanics whereby the reward drops suddenly by half on a particular date. The Bitcoin stock-to-flow model lends support to the idea that this sudden reduction in supply is at least partly responsible for the extreme bull market/bear market cycles.
The sub-unit of the Zeno is the zent. A number with a large number (90) of divisors was chosen as the conversion factor between the zent and the Zeno:
This particular conversion factor is the 24th antiprime, or highly composite number, in the sequence of positive integers with a greater number of divisors than any smaller positive integer. This antiprime number has 90 divisors, and 9 prime factors. The use of a number with a large number of divisors facilitates the use of fractional payments without the need for rounding. At the same time we stay within the bounds of the u64 integer type employed in our codebase for the total cap in zenoshis of 10 billion x 25200 = 2.52e14.
The block reward in zenoshis is calculated using the total Zeno supply and the current Zeno supply in the market via the following formula:
The equation determining Zeno issuance, based on the CryptoNote protocol
In a practical network protocol, issuance must be implemented using bitwise operators, in order to ensure consistent performance across different hardware types. This allows operations to be performed on the bit level and therefore proceed at the maximum possible speed. Additionally, this approach ensures the consistency of floating point operations across different architecture types. In Bitcoin and bitcoin-like protocols this manifests requiring the block reward to drop by half (the ‘halving’) every n blocktimes. This is due to the bitshift operator being applied to the block reward (the left-hand side of the equation). We apply it to the recursive right-hand side of the issuance equation, which allows for a smoothed curve without the sudden halving jumps that likely have undesirable economic properties due to sudden supply shocks. Therefore, the block reward in zenoshis (for a 60 second blocktime) is given in practical terms by
reward=(total supply − current supply)>>25\text{reward} = (\text{total supply − current supply}) >> 25
The issuance curve is shown in graphical form in the figure below. The emission is divided into two parts, with the miners taking the majority and the compute and storage nodes being allocated a small percentage that varies over time.
The issuance schedule for the Zeno in terms of the block reward, divided into miners (blue line) and the compute & storage nodes (magenta line) with the total for the network (black line). The issuance is smooth, rather than proceeding via the standard halving mechanic, in order to minimize the chance of extreme bull/bear market cycles driven by supply/demand shocks.
The fraction of the issuance allocated to the compute and storage nodes follows a reverse logistic function, starting at 15% and varying smoothly to 5% over a period of approx. 100 years. This is to reward the compute and storage nodes for the larger role that they play in the initial years of the network, and to recoup large capital costs, and to incentivize miners to play a larger role in the network later on.
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Fraction of issuance allocated to the compute and storage nodes (magenta line in Figure 13) with time. The fraction allocation follows a reverse logistic function from an initial value of 15% and levelling out at 5%.
The form of this function is shown in the figure above. The total number of Zeno coins mined over time is shown in the figure below, along with the specific number mined by the mining, compute and storage nodes.
The total number of Zeno coins mined with time, showing the mining hard cap limit of 7.5 billion (the hard cap limit minus the treasury allocation; 10 billion - 2.5 billion). The black line shows the total earned by the network through mining, divided into two groups: the miners (blue line) and the compute & storage nodes (magenta line).

Economic policy

The economic policy of Zenotta is focused around the goals of (i) coin value as a function of real economic activity and (ii) maximization of distribution. The Zenotta data protocol that allows for the creation of Smart Data assets is intrinsically linked to the Zenotta network protocol and the miners via a Socratic approach to democracy – if you put the work in to help secure the ledger, you earn the right to create tradeable assets. This keeps incentives aligned and ensures a healthy level of informed participation.

An economy based on (distributed) goods & services

Boom-bust cycles in the mainstream global economy are largely due to a form of money creation that is funnelled into financial speculation rather than the creation of goods & services or productive innovation. Financial crashes – the ‘popping of the bubble’ – harm everyone, even those who were the architects of the bubble, unless they are among the lucky few to see it coming and get out at the right time. The trend of the ‘too big to fail’ banks creating money for risky, speculative investments that do not increase GDP has eroded the function of banks from helping the economy to harming it.
“More than 70% of all lending – actually way more than that – is money creation for financial transactions; for asset transactions; for purchasing ownership rights. Now, then you have a problem. Why? Because you are creating new money, but you are not creating new goods & services. You are simply giving somebody new purchasing power over existing assets, and therefore you must push up asset prices [...] and that also creates the inequality – when the banking sector has focused too much on unproductive lending."
– Prof. Richard Werner, episode of RT UK.
The crypto economy is still new and largely untested; however, it is thriving. The problem, though, is that money creation in the crypto economy has similar problems to those described above – when new tokens are created, usually as part of the block reward, there is no corresponding increase in goods services, beyond the function of the relevant blockchain network as an effective, fair, and efficient money transmitter. Ethereum’s world computer (and subsequent variants that have emerged) can arguably be said to funnel money creation into innovation (although most of that innovation to date has been to develop more ways to create money or increase speculative activity).
In the Smart Data economy provided by Zenotta, the creation of new money through mining can quickly and easily feed into the creation of Smart Data goods and services. Smart Data is itself created through the process of either mining or verifying the ledger, through a system of create credits whereby miners or those running a full verifying node are awarded the right to create Smart Data assets of their choosing (in other words, they are awarded with the ability to convert files into Smart Data files that can be traded on the Zenotta blockchain). In order to facilitate trade of Smart Data assets (goods & services) the Zenotta blockchain ledger is a new design of ledger that incorporates a dual double entry accounting of both the payment and the asset, such that the trade proceeds two-way, with both halves notarized by the blockchain. This makes the Zenotta blockchain a blockchain for trade rather than merely for payments.
The nature of data assets; namely, files, as the digital good being traded for in the blockchain ledger ensures a real and considerable level of a priori distribution and de- centralization. Everyone with a computer has a substantial number of files, and through the create credits system of validating or mining a small part of the network, coupled with the balanced mining approach outlined in the next section that reduces the vast inequality in mining power to acceptable limits, access to the ‘thing of value’ – the file – is far more distributed than any other type of good or service in any other economy (crypto or otherwise). Therefore, the economy provided by the Zenotta Digital System contains within it the ideal of equality of opportunity from the very start.
The value of an asset in any economy (for example a coin, or a token) can be expressed by the well-known formula below:
token value=economic activitycirculating token supply×consumer token velocity\text{token value} = \frac{\text{economic activity}}{\substack{{\text{circulating}}\ {\text{token supply}}} \times \substack{{\text{consumer}}\ {\text{token velocity}}}}
In the crypto space, the numerator of this equation is something of a problem. Since there is no (or very little) economic activity by the usual definition, assigning value to a crypto coin is difficult. Ultimately it is set by the market, but this is a price-based definition of value rather than a fundamental one. In the Zenotta digital economy, Zeno coins are used to purchase Smart Data and to provide the ‘gas’ for Smart Data contracts. With the Zeno coin, the economic activity is real, and therefore the value of the Zeno has a direct link to the value of the Smart Data being traded. The total value in the Zeno currency is therefore more akin to that of GDP, namely the GDP of the Smart Data economy.

A distributed mint

For a blockchain-based economy the ‘mint’ is not a central body. Coins are created through the Proof-of-Work (PoW) consensus protocol and awarded to the miners upon winning the block. In this way we have a distributed mint, and so coin distribution begins in an already distributed state (relative to a central bank driven economy). We further optimise this distribution at the mint level by employing a thermodynamic-like protocol that brings the mining power of the entities in the network closer to balance, via a peer-to-peer algorithm. This approach increases the decentralization and distribution of mining power, which increases the security and the efficiency of the network, as well as the decentralization and distribution of the mining reward.
The full technical description of the balancing protocol is the subject of a separate paper, but briefly, the block processing power of the network (the ‘node temperature’) is moved towards a homogeneous distribution by decreasing the effective hashrate of the ‘hot’ nodes (e.g., the ASICs) and increasing it for the ‘cold’ nodes (e.g., the CPUs). This is done smoothly, allowing our node temperature quantity η to change between nodes pairwise using a simple differential equation, which for miner A takes the form:
dηAdt=αΔη\frac{d\eta_A}{dt} = -\alpha \Delta \eta
where ∆η ≡ηA−ηB, and α is a normalisation constant. As a result, the algorithm avoids a centralised controller and operates autonomously.
The desired end-state of the network is not one where the effective hashrate is completely balanced (which would bring its own undesirable economic properties and increase the attack surface for Sybil attacks on the network) but rather in-between the two extremes of the proportional model (where the probability of finding a block is proportional to hashrate) and the homogeneous model (where the probability of finding a block is equal for all participants) at a point where distribution is maximised and excess energy usage is minimised without increasing the net attack surface.
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