Moonlight protocol

“Moonlight” protocol.

Ethereum Commonwealth

[email protected]

[email protected]

Abstract

Moonlight protocol is a modification of Ethereum CLassic consensus protocol that aims (1) to increase ETC price, and thus boost network effect and the adoption of the underlying technology and (2) to rebalance the interest and influence in the network between miners and coin holders.

Economics

Gym market theory

Based on “gym market theory” originally posted by Parabolic Trav at this thread.

1/ This is the Gym Theory of Markets. It is a diagram to help identify and explain the groups that act on price in markets (especially BTC). Imagine this as an actual gym, with a line down the middle and 2 doors (both on the sell/cash side of the gym). Imagine the dots are people.

2/ People enter the gym first by being in cash (entering through the door and sitting on the sell/cash side). When they move to the buy side, price increases. When those on the buy/hold side move to the sell side, price decreases.

3/ How fast they come through the door and go to the buy side defines the long-term trend of the asset. As we can see, Bitcoin has one of the greatest trend velocities in all assets, maybe in history. As well, the buyers have one of the highest "demand to hold" and don't sell.

4/ When a dip happens, a small amount of short-term traders (low "demand to hold") move to the sell side. But if you could visual this group you'd be able to see it's very small. Getting scared during these events is unwise, because trend velocity and Total Demand to Hold is extreme.

5/ Actual trend velocity those interested in the utility from payments is low, it's not a big need in developed society. This is why payment oriented cryptos don't have parabolic trends. They have pump and dump behavior. The interest outside the gym just isn't there.

6/ In summary, BTC has likely the highest trend velocity and potential velocity as almost all of society is a potential buyer (especially w/ low interest rate environment and its negative returns/profits when inflation adjusted). With HODL it means almost vertical price pressure.

7/ This theory can be used as context for technical analysis. It helps clarify quality of trends, volume reversals, whipsaws, etc. You just imagine what the people are doing, and match technical patterns to their behaviour.

One thing that was not covered by the original “Gym Market theory” is that there are POS protocols that create an additional “Staking” room.

The easier it is to become a staker, the faster people can move from BUY/HOLD room to the STAKING room. 

Note: STAKING is likely a graveyard but not a room. Once you become a staker, you have even greater demand to hold forever and never sell. When staking is taking place, the total amount of circulating supply decreases, which raises the price. As soon as the price goes up, the stakers will have even more demand to hold, because the price increase also increases their incomes and so on ad infinitum.

Cold staking specification

The Moonlight protocol is a modification of Ethereum CLassic protocol that allows addresses to participate in cold staking. Cold staking is the process of earning income by coin holders, which requires them to lock their coins at the "stake pool" smart-contract for a considerable period of time.

Cold staking do not require stakers to install, run and keep an online node. Which renders it much more simple for customer compared to traditional Proof of Stake protocols. As a result, the Cold Staking is a more effective mechanism for creating a scarcity of coins in the market, raising prices, attracting investors and increasing the network effect.

Cold stakers are not verifying transactions, blocks and smart-contract executions. It should not be considered a Proof of Stake consensus mechanism since it do not grant any consensus-related rights to wealth holders but increases their interest in the network. As the result, the network consensus mechanism can remain POW but receive the advantages of POS protocols as well.

The protocol implementation relies on "stake pool" smart-contract that receives 10% of the total coin emission and distributes it between cold stakers in proportion to their stake weight. 

Each address that holds more than staking threshold amount of coins can lock this coins at the stake pool contract for 175000 blocks (1 month) to become a cold staker and earn interest of stake pool balance. Cold staker will receive weight depending on the amount of coins locked and a total amount of coins participating in cold staking. Once month passes, cold staker can earn his reward and decide whether he wants to lock his coins for one more month or to get out of cold staking.

For the implementation of the protocol, it is necessary to charge 10% fee from each mined block and each processed transaction included in the block.

Implementation

The live implementation discussion of the Cold Staking at Callisto Network can be found here: https://github.com/EthereumCommonwealth/Roadmap/issues/51

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