Discussion about the Session Token Swap Program

[Wil-E-Coyote3]

The OXEN team published a plan for the Session Token Swap Program. This program creates significant value for the development team at the expense of lowering value for OXEN holders. This LIP proposes a discussion in an effort to discover the needs of the OXEN development team and to try to find a way forward without significantly diluting the value of the project for OXEN holders, operators and stakers.

Link to plan: https://oxen.io/blog/session-token-swap-program

The plan states:

It’s token time: Session Token Swap Program

Learn about the Session Token Swap Program which will be offered and other details about the transition to Session Token

01 December 2023 —Chris McCabe

Session is an end-to-end encrypted messaging application that minimises sensitive metadata, designed and built for people who want absolute privacy and freedom from any form of surveillance.

We are currently developing a new utility token — Session Token. Session Token will be utilised both by the Session Network which operates the messaging application, as well as for in-app purposes.

More specifically, we plan for Session Token to be used to:

Transact and pay for premium features in Session; Participate in certain governance functions of the Session Network; Participate in a rewards program through active staking; and Undertake other functions which are beneficial for the operation and security of the Session Network.

In other words, owners of the Session Token will participate in and contribute to Session’s ecosystem.

While we are continuing to develop the brand, technicals, and logistics of Session Token — we want to share our plans for transitioning the community from Oxen to Session Token. There’s a lot of information contained below, but Session Tokens will be awarded to the community in two different ways: for swapping Oxen tokens from the old network, and for contributing to a Service Node(s) via node operation or active staking of Oxen.

A total of 60,000,000 Session Tokens are reserved in the Session Token Swap Program through Oxen Token Claims and Service Node Bonus, with each group receiving half of the amount. This represents 25% of the maximum supply.

Register for the Service Node Bonus before 1 January 2024 to have your Staking Points backdated to 25 September 2023!

We are excited to bring the community—especially our node network—along with us. You are a vital part of something special, and we want you to be recognised and rewarded throughout the journey towards Session Token.

Service Node Bonus

The Service Node Bonus will total 30,000,000 tokens to exclusively reward the work and contribution of node operators who render services to the network. This bonus is intended both as an acknowledgement of the loyalty and work of nodes as well as an incentive to continue operation and supporting transition to the new Session Network.

Note that Service Nodes which register for the Service Node Bonus and swap their staked Oxen will have enough Session Tokens to re-stake on the new network.

Service Node operators or contributors can register for the program using this portal.

Snapshots of the Oxen blockchain will be taken hourly during the snapshot period, with registered and active nodes accruing 1,000 points each day. Where multiple people are contributing to a node, the points each contributor receives is proportional to their stake. For example, contributing 10% of a Service Node would mean you receive 100 points each day.

At the conclusion of the snapshot period, registered participants will receive a portion of the 30,000,000 Session Tokens equal to their portion of the total points accrued by all participants during the snapshot period.

Any stakers who register before 1 January 2024 will be credited points starting from 25 September 2023. Stakers who register after this date will begin accruing points from the date they register. Stakers can unlock at any time during the snapshot period and still be awarded any points they have earnt.

Registered stakers commit to have their Oxen burnt if they are still staking at the Oxen blockheight when Session Token is issued on the new network. This is to facilitate the automatic swapping of staked Oxen tokens (through the Oxen Token Claims) without disrupting the Service Node network. Stakers who have not registered will not have their Oxen burnt, but the staked Oxen will be temporarily locked while the network upgrades. Therefore, by participating in the Service Node Bonus, registered stakers actively support the operation and transition to the new Session Network.

Note that while Session Tokens earnt through the Service Node Bonus will be immediately available for use in a rewards program (i.e. active staking to secure and operate the Session Network), they will be otherwise unspendable for 12 months following token genesis.

If you want to set up a node to start earning Staking Points, you can follow this guide.

Oxen Token Claims

Holders may use their Oxen to claim new Session Tokens. The amount of Session Tokens claimed is proportional to the total Oxen circulating supply at the time of the claim. For example, if a holder burnt 1% of the circulating supply of Oxen, they would receive 1% of the Session Tokens allocated to Oxen Token Claims (300,000).

The claims will be executed using a centralised bridge, similar to the wOXEN bridge, run by a third party. This bridge will oversee the burning of Oxen tokens and subsequently perform the required calculations to allocate Session Tokens to a corresponding wallet.

Although this program will run indefinitely, after 6 months the swapping multiplier will decrease to 0.7. Using the above example, the user would receive (300,000 * 0.7) = 210,000 Session Tokens.

We highly recommend that Oxen holders make their claim within the first 6 months of the period to ensure the best swap rate. The portion of the 30,000,000 Session Tokens which are unclaimable after the multiplier decreases will be automatically reserved for future node rewards.

Your slice of pie

Wondering how all of this fits into the bigger picture? Here’s a breakdown of the Session Token supply.

The total supply for Session Token will be 240,000,000. This supply is fixed — so there aren’t constant emissions.

60,000,000 Session Tokens (25%) are reserved exclusively for the community via the Oxen Token Claims and Service Node Token Bonus programs.

40,000,000 (16.67%) Session Tokens will be locked in the Service Node Reward Pool. These tokens will be awarded over time to service node operators and contributors who continue to support and operate the network.

43,920,000 (18.33%) Session Tokens are reserved for the Session Ecosystem and Community Fund.

In total, 60% of the supply is directly reserved for the community and community initiatives via the combined allocations of the Ecosystem and Community Fund, the Service Node Reward Pool, and the Swap Program.

60,000,000 (25%) will be kept for the project’s treasury. These tokens will be used for recruiting, development, marketing, and in other ways which steward the project and the network.

36,000,000 Session Tokens will be sold in a strategic sale of the token prior to the Token Generation Event. This sale may include buyers who are able to help the project scale and succeed. We will accept the sale of these tokens only when it is strategic and to parties that are able to benefit the overall project. Over USD $2,000,000 of Session Tokens have been sold at a price of $0.20. We don’t intend to sell more of this allocation until closer to token generation, when we will look to bring on parties that can help ensure the success of our launch.

Quick-fire Questions

How long is the snapshot period? Snapshots started being taken as of 25 September 2023 to ensure that our loyal stakers are rewarded. Snapshots will continue being taken hourly until the Session Token genesis event. This date is to be determined, but is aimed for Q2 2024.

What happens to my earnt points if my node is deregistered? Any points you have earnt will be credited to the EVM address you specified when you registered. If you are not actively staking when the hardfork occurs, you will be able to swap your OXEN using the bridge.

How can I re-stake my tokens on the EVM chain? While the designs are still being developed, it is likely that staking will now be via a web portal using a wallet such as Metamask.

Do I need to update my Service Node? You don’t need to do anything right now. There will be a hardfork and mandatory upgrade prior to the migration; we will make further announcements as required.

Will the foundation participate in the program? No. This program is for the community, and so the foundation will not participate in either the Oxen Token Claims or the Service Node Bonus programs.

Can I participate in both the Service Node Bonus and the Oxen Token Claims? Yes, stakers will receive Session Tokens through both the Service Node Bonus and Oxen Token Claims programs. If you registered for the Service Node Bonus and remain staking up until the Session Token TGE, your staked OXEN will be automatically swapped through the Oxen Token Claims and requisite Session Tokens credited to your EVM compatible address.

END

My Understanding

There is presently a circulation of 65,726,848 OXEN. This circulation is expanding at the rate of 16.5 OXEN per block or 11,880 OXEN per day.

The assumption is that the Oxen Development team and OPTF own 20% of total supply of OXEN.

There will be a fixed supply of Session Token of 240,000,000

OXEN Token Claims

The team is offering to trade your present OXEN coin into the Session Token with a swap mechanism where your percentage of holding of the 65,726,848 OXEN will be swapped for the equal percentage of 30,000,000 Session-tokens.

Therefore if you own 1% of the OXEN coin, (650,000 OXEN) you will receive 1% of the 30,000,000 Session Tokens. (300,000 Tokens)

This means that if you owned 1% of the value of the OXEN coin, you will now own 0.125% of the Session-tokens. Your overall holdings of the project has been diluted by 87.5%

The OXEN team has stated that they are not going to claim their tokens and this is an opt-in procedure. So only those that opt-in will receive their new tokens. Therefore the return will be more than a direct percentage. We are going to assume that 20% of the present OXEN coins do not get swapped for the Session-token. Therefore you will receive 1.25% of the 30MIL token pool or 375,000 tokens. This is 0.156% of the Session Token supply.

All Holders of the OXEN project get their value immediately diluted by 84.4%.

Service Node Token Bonus program

The team will give you the emissions of 30,000,000 Session Tokens to those that operate and stake service nodes. The Operators and Stakers will receive these rewards at the present rates following the present OXEN SN system and these rewards will be available to trade when received.

If everything goes well you will approximately double your holdings of Session Tokens during the lock down period.

Now you have your original 375,000 tokens + 375,000 tokens as rewards for operators and staking = 750,000 Session Tokens and you own 0.3125% of the Session Token network.

All operators and stakers of the OXEN project get their value diluted by approximately 68.75% at the end of the lock down period.

40,000,000 (16.67%) Session Tokens will be locked in the Service Node Reward Pool.

This is the reward pool that will support the Session Token network after the lock down period. This will not be distributed until the Lock down period has completed and will be distributed in a manner similar to the present rewards system. (Details have not been disclosed)

This 40,000,000 tokens are generated and will dilute the value of present OXEN holders. This is probably necessary to some degree because the OXEN network has infinite emissions and the SN operators and stakers have to be paid from something.

So if we remove the 40,000,000 tokens in the reward pool, All operators and stakers of the OXEN project after the lock down period will get their value diluted by approximately 62.5%

43,920,000 (18.33%) Session Tokens are reserved for the Session Ecosystem and Community Fund.

There is no information disclosed about the need or purpose of this fund. It will not be used for building partnerships. These tokens are in the control of the Development team. This fund represents a significant part of the dilution for the Oxen holder.

60,000,000 (25%) will be kept for the project’s treasury. These tokens will be used for recruiting, development, marketing, and in other ways which steward the project and the network.

I Assume that the Development team presently holds 20% of all OXEN coins. Therefore the development team in gaining 20% of value of the Session Token project by keeping these tokens in their wallets.

The Development Team is gaining 20% of ownership of the Session Token ecosystem while the OXEN operator and staker is losing 62.5% of value.

36,000,000 Session Tokens will be sold in a strategic sale of the token prior to the Token Generation Event.

I recognize that it is important to build partnerships and grow as a project. This is in the control of the Development team and represents a significant part of the dilution for the Oxen holder.

Summary

Today, the OXEN Holder owns approximately 80% of the value of the OXEN network. The Development team and OPTF own approximately 20%. If we remove the 40,000,000 Session Tokens to pay for SN, after the lock down period, the OXEN operator and staker will own 25% of the Session Token network and the Development team will own or control 75%.

The OXEN operator and staker will lose 62.5% of their previous value of the project.

**The Development team will own or gain control of 375% of their previous value of the project.**

WIN WIN solution.

The Session Token Swap Program is not a WIN-WIN solution. The Development team is reducing the value of the Oxen operator and staker significantly to enrich their own wallet and control a significant amount of the value of their Session Token.

What is a better way forward?

Honest Opinion

There is still a significant amount of this plan which is unknown and there may be significant errors in my understanding. I will update this lip as new information becomes clear.

I actually think that the Development Team has already decided on this plan and have already made financial agreements with other parties. I think that the Development Team has no real intention of working toward a better solution and will only hope to pacify anyone that feels like the team has stolen value from them. Most importantly, I hope that I am wrong and I hope we can find a better way to move forward.

[Wil-E-Coyote3]

Another plan:

I recognize the development team may need increased funds to ensure the success of this program. The plan that is presently offered is a bit one sided and destroys value for the OXEN Holder. So lets develop a plan where the present OXEN holder keeps more value.

Idea:

Create 1.2 Billion Session Tokens. Give the OXEN Holder a 1 to 10 swap. This will account for 650,000,000 tokens. Take out the 200,000,000 for future rewards. Give 10% to operators and stakers over the freeze period. Keep the rest. You get all your own OXEN coins at 1:10. and will more than double your supply. You will also receive staking rewards until the freeze is over and ensure the stability of the network.

Development team will gain 100% of value and OXEN operators and stakers will lose approx 33% of value.

WIN WIN!!!

....Well at least not a 62.5% loss.

[venezuela01]

Quote from announcement:

36,000,000 Session Tokens will be sold in a strategic sale of the token prior to the Token Generation Event. This sale may include buyers who are able to help the project scale and succeed. We will accept the sale of these tokens only when it is strategic and to parties that are able to benefit the overall project. Over USD $2,000,000 of Session Tokens have been sold at a price of $0.20. We don’t intend to sell more of this allocation until closer to token generation, when we will look to bring on parties that can help ensure the success of our launch.

Quote from @Wil-E-Coyote3

I actually think that the Development Team has already decided on this plan and have already made financial agreements with other parties. I think that the Development Team has no real intention of working toward a better solution and will only hope to pacify anyone that feels like the team has stolen value from them. Most importantly, I hope that I am wrong and I hope we can find a better way to move forward.

It's important to note that even accepting funds from a third party is not irreversible.

While researching the Token Migration Case Studies, I discovered that the y00t project had received a 3 million dollar grant from Polygon in early 2023 and migrated from Solana to Polygon in March 2023. However, in August, they returned the entire 3 million USD to Polygon and decided to remigrate from Polygon to Ethereum but the timeline of the remigration is not determined yet.

Y00ts NFT Collection is Migrating to Ethereum After Accepting $3M Grant From Polygon

This demonstrates that fundraising is not irreversible. What we need is to calmly analyze the costs and benefits of migration, respectfully debate the pros and cons, and rationally evaluate game theory, tokenomics, and token distribution. If the community and the team are aligned and reach a consensus, we can adjust some migration parameters if necessary and move on. Otherwise, we should consider returning the funding and fallback to Plan B, which is the original Oxen plan.

[venezuela01]

Quote from @Josh: https://t.me/Oxen_Community/399713

For more clarity here is a simplified example scenario.

Let's say I am a Service Node operator or contributor with 15,000 Oxen that i’ve had staked to a node since September 25th. I am planning to continue staking until TGE. To keep things simple imagine there are 2000 other nodes in the same boat.

Assuming each node has earned 200,000 points in the Service Node Bonus program, here is how I would break down my portion:

Service Node Bonus

To calculate my share I take my points and divide by the total points awarded in the program. So that’s 200,000 divided by 400,000,000 (since all nodes earned the same). This puts my share at 0.0005.

I then multiply my share (0.0005) by the total number of tokens available in the bonus program (30,000,000). This nets me 15,000 Session Tokens.

So from the Service Node Bonus alone I'm looking at 15,000 Session Tokens. This isn’t even taking into account the Oxen swap.

Oxen Swap

Now for the swap as mentioned previously I’ve staked all the way until TGE, so my tokens will automatically be used in the swap program. Here I calculate my percentage of the total Oxen supply. That’s my 15,000 OXEN divided by the estimated total of 66,000,000 Oxen. This puts my portion at 0.0002272.

Again I multiply my share (0.0002272) by the total amount of tokens available in the swap program (30,000,000). This nets me 6,816 Session Tokens from the swap.

Total

Adding it all together, the total number of Session tokens I get is 15,000 from the bonus + 6,816 from the swap. I ultimately end up with 21,816 Session Tokens.

So I started with 15,000 Oxen Tokens and ended up with 21,816 Session Tokens.

Another thing to take into account is that the last price Session Tokens were sold at was 20c. The current price of Oxen is around 14c

Obviously this scenario is a simplified hypothetical, its hard to determine exactly how many nodes will participate in the bonus program, and exactly when the TGE will occur, but I’m hoping this helps make things a little more clear.

Following Josh's calculation, I think the game theory behind it is oversimplified.

According to oxen block explorer, we have about 14 million Oxen owned by operators, excluding OPTF, and 10 million Oxen owned by contributors.

Of these 10 million Oxen owned by contributors, about 5 million belong to approximately 50 hybrid operators who also run their own node at the same time. The remaining 5 million Oxen belong to 300+ pure contributors who are not running any nodes of their own.

Assuming every Oxen operator is selfish and rational, the best strategy to obtain the largest possible portion of the Session staking points would be to kick out contributors from their nodes. This would result in fewer people sharing the staking reward pool of 30 million Session tokens.

Consequently, 14+5=19 million Oxen from operators would be running roughly 19 million/15,000 = 1,266 nodes, and the 300+ pure contributors would be excluded from the network. This increases the reward for operators but eliminates the opportunity for pure contributors.

This creates a terrible game that fosters unhealthy incentives and forces the community to face a moral dilemma.

240 nodes will be unlocking in the next 14 days. Some of these operators is probably going to merge their Oxen into solo nodes instead of shared nodes.

I don't think the team is intentionally disadvantaging the community. Instead, they are just incredibly naive and ignorant about game theory and investor psychology. They have significant blind spots in their knowledge and experience, which leads to fundamental design flaw like this. It might be helpful if you study Austrian School of Economics to unlearn some of your misconception.

Edit: To encourage service node operators to act inclusively and retain their stakers, rather than incentivizing them to kick stakers out of boat and diminish the number of people sharing the cake, one approach could be to take snapshots of not only the staked amount but also the operation fee. The bonus points could then be calculated based on both the amount and the operation fee, allowing a portion of the stakers' bonus points to contribute to the operator's earnings. This would enable operators to more easily decide whether to onboard contributors and determine an acceptable fee. Ultimately, the market will adjust accordingly.

(I'm still banned from the telegram group please @KeeJef @@msgmaxim kindly forward my comment to Telegram)

[seoeunju1]

It's hard to participate in the discussion because it's not my native language, but I support you. Protect the community!

[venezuela01]

15,000 Oxen -> 6,816 from the swap. Another thing to take into account is that the last price Session Tokens were sold at was 20c. The current price of Oxen is around 14c.

Q2:

Following the calculation presented by @ josh, if an inactive early holder spent $2,100 to buy 15,000 Oxen at the lowest point 5 years ago on 2018-08-14 with $0.14 each token, without staking activities involved in the past 5 years, his Oxen would still be worth $2,100 today.

However, if he were unnoticed and missed the migration staking points reward, after the Session Token Generation, his 15,000 Oxen could only be swapped for 6,816 Session Tokens, valued at $1,363 using the same price ($0.2) demonstrated by Josh. How is it fair that their initial investment of $2,100 loses 35% of its value after migration?

Moreover, if he is still unnoticed and misses the initial 6-month window for migration, there will be a 70% swapping multiplier, meaning his 15,000 Oxen can only be swapped for 4,771 Session Tokens, valued at $954.2. This results in a 54.6% loss from his initial $2,100 investment. How can this be justified?

The above example uses price data from the lowest point 5 years ago. If an inactive holder who bought at that lowest point experiences a significant loss, how much more would other inactive holders lose?

Note: In the context above, the term 'inactive holder' refers exclusively to Oxen owners who did not participate in node operation or staking and faced the risk of missing the migration window.

[venezuela01]

Q3.1

@jagerman, @keejef, @ Chris M, could you please disclose the current holdings of Oxen tokens by OPTF? It's not necessary to provide an exact number like an accountant; a range with +/- 10% error, like 4 to 5 million Oxen, would suffice.

Edit: according to @jagerman, the OPTF Oxen holding is 7.9 million $Oxen, 12% of circulating supply

Edit: Q3.2~Q3.4 are no longer needed.

Q3.2 According to the [2021 Annual Report](https://optf.ngo/assets/pdfs/Annual_Report_2021.pdf), as of 30 June 2021, OPTF held AUD 2,061,569 worth of Oxen tokens. Based on the [AUD to USD Historical Conversion rate](https://www.xe.com/currencycharts/?from=AUD&to=USD&view=5Y), 1 AUD was worth 0.75 USD on 30 June 2021, so OPTF's Oxen holdings were worth 2,061,569 * 0.75 = 1,546,177 USD at the time. According to [Oxen Historical Price](https://coinmarketcap.com/currencies/oxen/), the spot price of an Oxen was 0.9151 USD. Thus, as of 30 June 2021, OPTF should be holding roughly 1,546,177 / 0.9151 = 1,689,626 Oxen according to `(b) Fair value measurement` Are there any mistakes in the above understanding and calculations? Q3.3 According to [Oxen Token Economics](https://docs.oxen.io/oxen-docs/about-the-oxen-blockchain/oxen-token-economics), OPTF operates 10% of the nodes, therefore receiving 10% of the staking rewards per day, which is 11,880/10 = 1,188 Oxen. Simultaneously, OPTF receives a governance reward of 9,240 $OXEN every 7 days, which is 9,240/7 = 1,320 Oxen per day. In total, OPTF receives 1,188 + 1,320 = 2,508 Oxen per day. Are there any mistakes in the above understanding and calculations? Q3.4 In Q3.2, we estimated that OPTF held approximately 1,689,626 Oxen as of 30 June 2021. If it accumulates 2,508 Oxen per day, then by 30 June 2024, OPTF will have a maximum of 2,508 * 365 * 3 + 1,689,626 = 4,435,886 Oxen, if Session Token Generation isn’t started yet at the time. In other words, the maximum OPTF Oxen holding should be roughly 4.5 million Oxen by 30 June 2024. Are there any mistakes in the above understanding and calculations? Is it consistant to your disclosure, if you answer Q3.1?

Edit: Q3.5~Q3.8 will be updated and restated in a different way once OPTF publish more detailed numbers in the following days.

Q3.5 Assume there is an theoretical Oxen whale from the community, with no association with OPTF, holding 4.5 million Oxen. Following the calculation demonstrated by Josh, if this whale stakes in the transition period to collect bonus points, then swaps his Oxen automatically after Session Token Generation, he will receive approximately 4,500,000 / 15,000 * 21,816, or 6,544,800 Session Tokens, ignoring the potential margin of error caused by uncertain number of running nodes. Are there any mistakes in the above understanding and calculations? Q3.6 According to the [Session Token Swap Program](https://oxen.io/blog/session-token-swap-program), the foundation will not participate in the bonus program or token swap. Instead, the foundation is allocated a fixed number of 60,000,000 Session Tokens after migration. Is this correct? Can you clarify, that after migration, is OPTF still operating 10% of the nodes? Are those nodes receiving rewards or not? Q3.7 For the theoretical community whale in Q3.5 who holds 4.5 million Oxen before migration, he will receive about 6.6 million Session Tokens after migration. However, OPTF will receive 60 million Session Tokens after the migration, which is 9 times that of the theoretical whale, despite having a similar Oxen holding size before migration, if the estimation in Q3.4 is correct. Can you explain how OPTF's allocation of 60 million Session Token was decided? How a similar size of OPTF's Oxen holding versus community Oxen result in a drasmatic different migration return? Isn't Oxen a fungible token? Q3.8 A theoretical community whale holding ~60 million Oxen and participating in the bonus program is expected to receive 60 million Session tokens after the migration, including 30 million stake bonuses and 30 million Session token swap. Now, assume there is no Session token migration, and we precalculate the following 63 years (since 2021) of OPTF's Oxen rewards. Then, at June 2084, OPTF will hold 2,508 * 365 * 63 + 1,689,626 = 59,361,086 Oxen, equal in size to the theoretical whale who deserves 60 million Session Tokens. Are you possibly mistakenly pre-allocating the next 63 years of OPTF theoretical Oxen rewards when deciding the size of OPTF's Session Token allocation (60M Session tokens)? Instead of pre-allocating 63 year, have you considered pre-allocate 5 or 10 years?

Q3.9

When are you going to publish the financial report covering period between 2021-06-30 to 2022-06-30, as the same format in https://optf.ngo/annual-reports? Is it legal to delay the report?

Q3.10

When are you planning to publish the financial report covering period between 2022-06-30 to 2023-06-30, as the same format in https://optf.ngo/annual-reports?

Please clarify and correct whatever calculations or understandings are wrong. Thank you.

[venezuela01]

15,000 Oxen -> 6,816 from the swap. Another thing to take into account is that the last price Session Tokens were sold at was 20c. The current price of Oxen is around 14c.

Q2:

Following the calculation presented by @ josh, if an inactive early holder spent $2,100 to buy 15,000 Oxen at the lowest point 5 years ago on 2018-08-14 with $0.14 each token, without staking activities involved in the past 5 years, his Oxen would still be worth $2,100 today.

However, if he were unnoticed and missed the migration staking points reward, after the Session Token Generation, his 15,000 Oxen could only be swapped for 6,816 Session Tokens, valued at $1,363 using the same price ($0.2) demonstrated by Josh. How is it fair that their initial investment of $2,100 loses 35% of its value after migration?

Moreover, if he is still unnoticed and misses the initial 6-month window for migration, there will be a 70% swapping multiplier, meaning his 15,000 Oxen can only be swapped for 4,771 Session Tokens, valued at $954.2. This results in a 54.6% loss from his initial $2,100 investment. How can this be justified?

The above example uses price data from the lowest point 5 years ago. If an inactive holder who bought at that lowest point experiences a significant loss, how much more would other inactive holders lose?

Note: In the context above, the term 'inactive holder' refers exclusively to Oxen owners who did not participate in node operation or staking and faced the risk of missing the migration window.

The recent AMA did not address my question, so I'm updating it here and requesting @KeeJef to review it before making a final decision.

What we are seeing here is a classic example of the Prisoner's Dilemma, wherein holders who are either unaware of or refuse to stake their tokens are penalized, while those who do stake benefit more as more holders opt out of staking. This approach is not only unethical but also a gross misapplication of game theory.

Far better designs exist which can shift those “being punished” to “being less rewarded.” This can be seen in many business cases when designing commission mechanisms for sales or stock incentives for employees.

One common mechanism is "Tiered Commission" or "Graduated Commission," which creates a nonlinear increasing commission to encourage sales agents to maximize the transaction value, profit, or any target KPI.

Have you considered implementing a "Group Incentive Plan" with "Tiered Commission" for the Oxen migration?

Consider this:

• If 50% of Oxen is staked during migration, then all stakers collectively receive an additional performance bonus of 25 units. (According to my analytics, 49.9% of Oxen was staked in the Chainflip Airdrop in June 2021)
• If 60% of Oxen is staked, the bonus increases to 36 units.
• For 70% staked, it's 49 units.
• At 80% staked, the bonus is 64 units.
• And so on.

This strategy encourages every Oxen staker to reach out to as many inactive Oxen holders as possible, through social media or personal connections. The original reward design incentivizes holders to keep this migration event as a secret in order to claim a larger piece of the reward, which was a zero-sum game, promoting competition rather than collaboration. In contrast, the Tiered or Graduated design fosters a positive-sum game, encouraging spreading and collaboration.

Please consider this approach to avoid creating a zero-sum game and instead, foster a positive-sum and healthier environment. If this plan is implemented, we no longer need the swapping multiplier of 0.7 after 6 months of TGE.

Reference: Chapter 10: Incentives - Motivating The Right Behavior Good Profit: How Creating Value for Others Built One of the World's Most Successful Companies https://annas-archive.org/md5/ca52d925afd8ed143815fce34f1bd90f

[venezuela01]

@KeeJef

It is essential for OPTF to take responsibility for ensuring that all stakeholders, including inactive holders, are properly informed about the token migration process. However, due to long tail distribution of user activities, OPTF has no chance to reach out to 100% of holders in a limited time. One can refer to historical data, such as the quantity of Oxen staked in the Chainflip airdrop (about 49.9%), to estimate the maximum quantity of stakeholders that could be notified about the upcoming Session swap. It's clear that this number is far from 100%. Penalizing users due to OPTF's failure to notify all holders is not only unethical and ineffective, but also not a standard practice in the industry.

The current approach, offering a reduced swapping multiplier of 0.7 for late migrations, does not provide a long-term incentive. This one-time offer fails to effectively encourage timely participation, as it does not make a distinction between a delay of one year or ten. While converting to Session Tokens might present future staking opportunities, this does not address the main reasons for holder inactivity. Inactive holders have missed available staking slots previously because they are not constantly monitoring staking opportunities, this is an issue that simply swapping tokens cannot solve.

Token-Based Lending from Inactive Holders

A more beneficial approach than penalizing inactive holders would be to introduce a long-term "Token-Based Lending Program" for inactive Session Token holders. This program aims to motivate inactive Oxen holders who missed the initial swapping period to later convert their holdings to Session Tokens, attracted by the unconditional lending opportunities of the new token. By upgrading the Oxen wallet to display news about the unconditional lending opportunity, all returning Oxen holders will eventually be notified. Once being notified, the earlier they enter the lending program, the more interest they receive, thus creating a positive incentive to encourage them to swap.

Key Features:

1. Token Lending: Inactive Oxen holders can swap their tokens for Session Tokens and then deposit these into an OPTF-managed account. They will receive a steady 2% interest rate, serving as an alternative when no service node slots are available for staking.

2. Releasing of Liquidity: Instead of using OPTF’s own Session tokens for running 10% of service nodes, OPTF can now use the borrowed Session tokens to stake in official nodes. This releases extra liquidity of Session tokens for OPTF, ensuring that in case they find a third-party buyer in an over-the-counter (OTC) trade, they will not be short of Session tokens.

This strategy encourages inactive holders to become more engaged with their assets and simultaneously helps address OPTF's need for liquidity when seeking external partnerships. It creates a mutually beneficial situation, offering inactive holders a low-risk investment option while enabling OPTF to establish important partnerships with key industry players.

[venezuela01]

Another thing you could consider is, after six months following the Session Token Generation Event, you can initiate an Oxen hard fork to reduce the block generation frequency from 2 minutes per block to one hour per block. Currently, there are about 2.5 regular transfer transactions per hour, excluding special transactions like staking. Reducing the block frequency will increase the privacy and anonymity set for regular transfer transactions, encourage Oxen holders to migrate to Session token, also slow down future storages growth. A few years later, you could even decrease it to 1 day per block. This approach, combined with other suggestions above, would gradually retire the Oxen chain without compromising the value of tokens held by inactive investors.

All I'm illustrating is that there are many ways to migrate without harming your investors. If the team shares their concerns, the community might have suggestions. However, if there is no communication, then the community can neither help nor express objections. This isn't to say that I'm in favor of a transparent token; I still prefer a privacy coin. What I mean is, even if you decide to migrate, there are still ways to do far better than what we are currently seeing.

A swapping multiplier of 0.7 for late migrations is unacceptable, regardless of any good reasons you might have.

[venezuela01]

15,000 Oxen -> 6,816 from the swap. Another thing to take into account is that the last price Session Tokens were sold at was 20c. The current price of Oxen is around 14c.

Q2:

Following the calculation presented by @ josh, if an inactive early holder spent $2,100 to buy 15,000 Oxen at the lowest point 5 years ago on 2018-08-14 with $0.14 each token, without staking activities involved in the past 5 years, his Oxen would still be worth $2,100 today.

However, if he were unnoticed and missed the migration staking points reward, after the Session Token Generation, his 15,000 Oxen could only be swapped for 6,816 Session Tokens, valued at $1,363 using the same price ($0.2) demonstrated by Josh. How is it fair that their initial investment of $2,100 loses 35% of its value after migration?

Moreover, if he is still unnoticed and misses the initial 6-month window for migration, there will be a 70% swapping multiplier, meaning his 15,000 Oxen can only be swapped for 4,771 Session Tokens, valued at $954.2. This results in a 54.6% loss from his initial $2,100 investment. How can this be justified?

The above example uses price data from the lowest point 5 years ago. If an inactive holder who bought at that lowest point experiences a significant loss, how much more would other inactive holders lose?

Note: In the context above, the term 'inactive holder' refers exclusively to Oxen owners who did not participate in node operation or staking and faced the risk of missing the migration window.

The N-Month volume-weighted average price (VWAP) post-Chainflip airdrop 2021-07-01 until today is 0.368 USD, calculated using data from CoinGecko Oxen historical data.

I attached the raw data oxen-usd-max.csv for anyone who want to independently verify the result.

This indicates that comparing the 0.14 USD per Oxen with 0.2 USD per Session Token is not a fair comparison, as the average cost of Oxen tokens among current holders is significantly higher than 0.14 USD.

Note that holders who obtained Oxen after 2021-07-01 did not receive any Chainflip airdrops. That's why I calculated the VWAP post-2021-07-01.

I hope the team can take these number into consideration and adjust the token allocation accordingly.

[venezuela01]

To understand why the current incentive mechanism is problematic, please refer to this chart, which plots the estimated Session token staking bonus reward plus token swap per full node against the number of total nodes participating in the token migration.

The current mechanism creates a negative incentive; rather than encouraging the community to stake more nodes, it encourages them to stake fewer. For instance, if only 500 nodes participate, then 15,000 Oxen can be swapped for approximately 66,000 Session tokens. However, if 4,000 nodes participate, then 15,000 Oxen can only be swapped for about 13,600 Session tokens. The fewer nodes that participate in the migration program, the greater the reward each participant receives.

This not only encourages selfish behavior but also, more worryingly, promotes malicious tactics. For example, to maximize rewards, one unsavory strategy might involve using DDoS attacks on other nodes so that only one's own nodes can receive rewards. It's worth to mention that the investment return ratio of DDoS attacks during the migration period is disproportionately higher than the reward for DDoS attacks during regular daily PoS.

We were fortunate that this theoretical tragedy did not occur during the ChainFlip airdrop two years ago, but the risk remains. Oxen/Session/Lokinet is a product with stringent security requirements and a potential threat that should not be underestimated. Anyone working on this project needs a high level of awareness and experience in risk management and daily operations. This awareness must be an integral part of your very being, as vital as your blood and breath, given the vast and extensive attack vectors and the unseen risks that can arise from anywhere.

Had the team been more open to consulting the community, we would not have approved this incentive design.

[venezuela01]

A migration plan should not be executed without the prior agreement and support of the majority of the community. In cases of uncertainty, a public vote should be held.

Additionally, if the OPTF has the power to promote a migration by implementing an incentive mechanism that compels community compliance even when they don’t sincerely agree with the plan, it raises a security concern for the network itself. If a government agent were to take control of the OPTF someday, could they create an incentive mechanism forcing the operator community to upgrade to a new protocol that grants the agent special access to the network? This concern is exacerbated if a centralized party holds the private key for deploying smart contract version upgrades.

If the majority of community members sincerely support the migration, then there is no need for a heavy penalty for holders who do not opt into the migration, unlike what we see today. Instead, a two-phase upgrade with a light penalty would be sufficient.

• In the first stage, every service node is required to upgrade to a new Oxen hardfork version, and every staker is required to register their ETH wallets.
• Once the majority of service nodes are on the latest version, an intermediate Oxen reward algorithm will be activated automatically. In this intermediate reward algorithm, an Oxen service node validator queries an external oracle for ETH wallet registration, validates the signature locally, and only distributes the 3.5-daily Oxen rewards to those stakers with a valid ETH record. This means that stakers who do not register their ETH wallet will not receive the 3.5-daily Oxen rewards, which constitutes a light penalty rather than a heavy one.
• Once the new Session Token Event is nearing, we can upgrade or switch to the new EVM token reward mechanism, starting to 3.5-daily reward in Session tokens directly rather than in Oxen, marking the final stage.

With this two-phase upgrade design, service nodes that do not upgrade their Oxen protocol version or do not register their ETH wallet will not receive Oxen rewards even before the Session TGE. As a result, they will not have an incentive to continue running their nodes, ensuring that the network will not risk running legacy protocol versions after the Session TGE.

It might be too late to propose this, but it's still worth discussing as a theoretical study case. An incentive program is like software; there are counterintuitive edge cases and bugs, and it's easy to fall into over-design. It often takes more effort to find a simpler but more effective solution.

[venezuela01]

One excellent example of edge cases / bugs in the current incentive design:

Quote from Pierre: https://t.me/Oxen_Community/403101

If I start operating a full node the day before TGE and OXEN:SENT is 2:1 for non stakers... Remember I have NO POINTS and won't get additional SENT. I will only get the SENT from the staked OXEN. It is as good as being a holder.

If it takes 15000 SENT to stake a node I won;t have enough SENT to keep operating...

How will that work?

[venezuela01]

Request for Comment: Fairer Distribution in Session Token Swap

Edit: This proposal has been superseded by proposal v2024-02-20, which is currently under discussion.

The Session token migration program has raised discussion about fair distribution and concerns of over dilution.

The official response suggest that diluting old shareholders and selling new tokens to strategic parties could bring extra benefits to the project and ultimately result in a win-win for everyone.

I hear you. However, although a win-win situation is possible, there's a distinction between a win-win outcome and a fair distribution, as they are two different concepts in game theory, and there exists a wide range of combinations within these two dimensions. Also there is a gap between fair dilution and over dilution.

1. The Cake-cutting Problem as a Model of Fairness

Perceptions of fairness can indeed be subjective. Community members may have performed their calculations one way, while the team might have performed in a different way, leading to disagreements.

While perceptions of fairness are subjective, they are extensively studied [3]. Various types of subjective fairness are defined, and practical solutions have been proposed to improve fairness in real-world scenarios.

A classic example in this field is the fair cake-cutting problem: when two people share a cake, the one who cuts it chooses their share last, allowing the one without the knife to pick first.

In contrast, with the Session token distribution, the OPTF is cutting the cake, but the existing Oxen holders was not consulted in advance, and do not have the option to choose which piece to receive. This leads to concern among community members, as the community holders are forced to accept the portion allocated by the OPTF. If a significant discrepancy between different calculation exists, it can lead to concerns of over-dilution.

2. Cost of Session Token from Different Perspective

To evaluate relative fairness, imagine the OPTF cutting a cake into three pieces: one for themselves, one for VCs, and one for community holders.

We can then compare:

• the cost of obtaining a Session token as a venture capitalist (VC), with
• the cost for a community Oxen holder,

thereby understanding the gap.

From the perspective of a community holder, which piece is more preferable? The devil is in the details; numbers matter.

The cost of a Session token for VC investors is 0.2 USD according to [5], with over 10M Session tokens sold at this price.

To understand the cost of Session token for a community holder, we first need to calculate the cost of the Oxen token.

Different holders purchased Oxen at different prices, however we can estimate the average.

According to [6], the N-Month volume-weighted average price (VWAP) post-Chainflip airdrop registration (from 2021-07-01 until 2023-12-01) is 0.37 USD, calculated using data from CoinGecko's Oxen historical data. This figure can be independently verified using public data by anyone, I’m glad to provide further clarification if required. In other words, on average, an Oxen token cost about 0.37 USD after the Chainflip airdrop registration.

If an average Oxen holder bought 15,000 Oxen at the price of 0.37 USD and participated in the staking bonus program, they would receive approximately 21,816 Session tokens. In this scenario, their cost of obtaining a Session token is 0.37 * 15,000 / 21,816 = 0.25 USD, which is 25% higher than the cost for a VC.

An 25% discrepancy in cost between VCs and Oxen stakers is significant for anyone serious about their investment. This might be negotiable though, consider VCs’ token are locked up, which increase their opportunity cost of holding.

However, from an inactive Oxen holder’s perspective, they only receives approximately 6,816 Session tokens, according to [5]. Their average cost of obtaining a Session token is 0.37 * 15,000 / 6,816 = 0.81 USD, which is 4 times the cost for VCs.

Role	Average Cost of a Session Token
VC	0.2 USD
Active Oxen Staker	0.25 USD
Inactive Oxen Holder	0.81 USD

Remember that inactive Oxen holders:

• do not hold any knife
• are the last to pick their piece
• cost 4 times higher to obtain a Session token
• don't even have a voice

This is really unfair, undeniable. This is not a win-win, clearly there is a loser, which is those inactive Oxen holders.

The current swap ratio effectively tells inactive Oxen holders that their past decision to purchase Oxen at 0.37 USD and support the project was unwise.

3. The Gap Between Current Oxen Price and Average Oxen Prices

There is a significant gap between the current Oxen price (<0.14 USD) and the average Oxen cost (0.37 USD). To understand this gap, we should note that the current price only reflects the marginal cost of acquiring a single Oxen. However, it does not represent the average cost of purchasing larger quantities, such as 1 million or 10 million Oxen.

The Oxen network's security is based on the assumption that acquiring a large amount of Oxen should significantly raise its price, thereby safeguarding the network against potential attackers. In other words, it's not possible for any investor to purchase multi-millions of Oxen tokens from the open market and subsequently convert them to multi-millions of Session tokens at an average cost as low as 0.2 USD per Session token. This is because the majority of current Oxen holders would not agree to sell their Oxen tokens for less than 0.37 USD, resulting in an insufficient supply for VCs. Otherwise, these VCs would prefer buying Oxen token from the open market rather than participate in a Session token VC sale.

By using the VC's cost of Session tokens as a benchmark and comparing it with the average cost for community holders, we can understand the perceived unfairness. If any Oxen investors were informed that there would be a cheaper way to obtain Session tokens, why would anyone choose to obtain and hold any Oxen in the first place?

4. Estimating the Fair Value of Oxen Tokens

Another perspective of the the token swap fairness is to estimate the inherent value of the project, which includes both tangible and intangible assets. This total value can then be divided by the number of circulating Oxen tokens to derive the fair value of an Oxen token.

According to [7], the OPTF balance sheet is around 20M USD. To estimate the intangible assets of the project, we can refer to the MAU metrics. As per [8], the market value per user (market cap vs. MAU ratio) varies across different industries, ranging from 13 USD to 1,100 USD. Given that Session is relatively immature, it is reasonable to choose a conservative estimate. Assuming the market value per user of Session matches the lowest industry benchmark, or 13 USD per user, then with 842k MAU, the intangible asset of Session is worth at least 11 million USD. Combined with the tangible assets, this amounts to 31M USD.

Consequently, the fair value per Oxen token is at least 31M USD divided by 66M Oxen, equating to 0.47 USD per Oxen.

The OPTF might hold a second opinion on the market value per user (market cap vs. MAU ratio) of Session, potentially valuing it significantly higher than 13 USD per user. In that case, the fair value of Oxen would be even higher, increasing concerns about the over-dilution of existing Oxen holders at the current swap rate.

5. Comparing Oxen Cost Estimation with Oxen Value Estimation

Considering that our cost estimation (0.37 USD) and value estimation (0.47 USD) fall within a relatively close range, it is reasonable to believe that our estimation is self-consistent. In contrast, it would be misleading to use the current market price (0.14 USD) as a benchmark for calculating the fair swap ratio of Oxen tokens to Session tokens. This is because the majority of Oxen holders prefer to hold and accept a temporarily undervalued token price rather than sell it at a loss.

Whether we estimate the average cost of obtaining a large amount of Oxen tokens, or the fair value of an Oxen token, both are significantly higher than the current marginal price of Oxen. If a public vote were held, the majority of Oxen holders would likely not agree with the current swap rate.

6. The Current Incentive Plan and Its Implications

The current incentive plan creates an excessive imbalance between inactive holders and stakers, adding extra complexity to determining a fair swap rate between Session and Oxen.

Inactive Oxen holders receive 0.45 Session tokens per Oxen, while Oxen stakers get roughly 1.45 Session tokens per Oxen. I understand there is good intent behind this imbalance; as Kee explained, the program was designed to reward the most active community members who contribute significantly to the project, includes running Service Nodes, building tools, creating software, and welcoming newcomers. I appreciate this recognition and compensation for active community members.

However, every active Oxen staker is also an inactive holder, as they typically don’t immediately sell their Oxen rewards. By creating a substantial imbalance in incentives between unstaked and staked Oxen, we are effectively signaling that holding Oxen without staking it is not worthwhile.

Let's say you run a full node with 15,000 Oxen and receive a reward of 6.43 OXEN the last day before the Session token generation event. Would you prefer to sell that 6.43 Oxen immediately, or would you prefer to hold it and swap it for Session tokens yourself? It all depends on the price - the devil is in the details. If the Oxen price is 0.14 USD and the Session token price is 0.2 USD, then selling those rewards yields 6.43 * 0.14 = 0.9 USD, while swapping those rewards only yields 6.43 * 0.45 * 0.2 = 0.58 USD. Obviously, it’s more beneficial to sell rather than swap. This scenario might encourage majority of small Oxen stakers to sell their rewards immediately, increasing selling pressure and negatively impacting the price.

Oxen stakers have already priced-in the regular protocol reward when they decided to support the network. The easiest and fairest way to reward Oxen stakers is to ensure that every single Oxen receives a fair swap rate for Session tokens, resulting in them receiving the appropriate amount of Session tokens, with no discrimination between stakers and non-stakers.

7. The Invisible Side of Inactive Holders

The contribution of inactive Oxen holders to the network is often overlooked. The visible aspect is, inactive holders help stabilize the price by not selling their holdings. The less visible side is that they initially raised the price by buying Oxen tokens. When they bought Oxen tokens, they have already factored in the opportunity cost of not staking, based on the expected annual reward coded in the protocol. Introducing significant dilution to inactive holders breaks the implicit contract established between the buyer and the Oxen protocol, leading them to regret their purchase. Had they known their tokens would be diluted, they might have refrained from buying Oxen, resulting in a much lower current price. Considering that over 50% of Oxen's market cap is inactive, denying their contribution is akin to overlooking the first four burgers when getting full from eating the fifth.

Moreover, some traders might implement bots to arbitrage between different exchanges and trading pairs. Bot traders contribute to the network by offering better liquidity for other investors, allowing regular retail investors to choose the trading pair or exchange most convenient for them. The tokens of these bot traders are not meant to be staked. If we excessively dilute inactive Oxen holders, we send a message to the community that bot traders are not welcome and that we don’t appreciate their contribution to improving liquidity and convenience for the community.

8. Toward a Fairer Session Token Distribution

If we agree that inactive Oxen holders should not be excessively diluted, we should consider adjusting the token distribution so that the cost of a Session token from an inactive holder's perspective is approximately USD 0.2.

If the average cost of an Oxen token is 0.37 USD, then swapping an inactive Oxen for 1.85 Session tokens would be much fairer, which maintains 0.37 USD after migration. Under this assumption, 66 million Oxen tokens would be worth 122 million Session tokens. Excluding the OPTF’s share of Oxen, the rest of 58 million Oxen tokens should be swapped into 107 million Session tokens.

Currently, only 60 million Session tokens are being swapped for 58 million Oxen tokens. To bridge this gap, an additional 47 million Session tokens need to be taken from other portions of the allocation.

9. Surgery on the Current Token Distribution

I understand the rationale behind reserving 33 million Session tokens of Project Treasury (Operational) for future partnerships, and I also see the benefit of having the 11 million team allocation as a long-term incentive. The OPTF might not think it's a good idea to take any Session tokens from these two allocations.

The 15 million service node treasury warrants reconsideration. If the OPTF agrees to run shared nodes instead of full nodes, then fewer than 5 million Session tokens might suffice, with minimal impact on the project. Could we reallocate 10 million Session tokens from the service node treasury to the Oxen coin claims?

The 44 million ecosystem and community fund should also be subject to discussion. Despite its designation as a community fund, the community was not consulted beforehand regarding its preference for such a fund, its preferred size, or the necessity of an on-chain voting mechanism. Rather than maintaining such a large size, could we consider reallocating 37 million from it to the Oxen coin claims? This would leave 7 million for the community fund. From a lean startup perspective, it is unnecessary to begin with a large fund. We can start with a smaller amount, trial and error, to gauge the effectiveness of the community funding program. Once on-chain governance is implemented in the future, the community could vote to redirect a portion of the annual rewards to the community fund.

10. Improving the Service Node Incentive Design

If it weren't too late to modify the token swap incentive, I would propose allocating 107 million Session tokens exclusively to the Oxen coin claim, without any allocation for the Service Node Bonus. The reasons for the current incentive being problematic are detailed in [10].

If the majority of community members genuinely support the migration, there is no need for a heavy penalty for holders who choose not to participate in the migration, contrary to the current approach.

Instead, a two-phase commit [12] style upgrade with a lighter penalty would be more appropriate.

• In the first stage, every service node is required to upgrade to a new Oxen hardfork version, and every staker is required to register their ETH wallets.
• Once the majority of service nodes have upgraded to the latest version, an intermediate Oxen reward algorithm will be automatically activated. In this algorithm, an Oxen service node validator will query an external oracle for ETH wallet registration, validate the signature locally, and distribute the 3.5-daily Oxen rewards exclusively to Oxen wallets belonging to stakers with a valid ETH record. This means that stakers who fail to register their ETH wallet will not receive the 3.5-daily Oxen rewards, which represents a light penalty rather than a severe one.
• Approaching the new Session Token Event, we can upgrade to the new EVM token reward mechanism, beginning to distribute the 3.5-daily reward in Session tokens to ETH wallets, stop rewarding in Oxen, marking the final phase.

With this two-phase commit upgrade strategy, service nodes that neither update their Oxen protocol version nor register their ETH wallets will not receive 3.5-daily Oxen rewards, even before the Session TGE. Consequently, they will lack the incentive to continue operating their nodes, ensuring that the network avoids the risk of running outdated protocol versions after the Session TGE. I'm happy to provide additional clarification if the above introduction is not clear, as it takes some time to understand the design.

11. Summary of Revised Token Allocation

The revised token allocation will be as follows:

Category	Session Tokens	Note
Oxen Coin Claims	107,000,000	A potential adjustment may be necessary if the OPTF participates in the token swap to mitigate the risk of future Oxen theft
Service Node Bonus	0	Refer to [10] for issues regarding the current bonus program
Project Treasury (Service Nodes)	5,000,000
Project Treasury (Team)	11,000,000
Project Treasury (Advisors)	1,000,000
Project Treasury (Operational)	33,000,000
Ecosystem and Community Fund	7,000,000
Strategic Token Sale	36,000,000
Staking Reward Pool	40,000,000

12. Conclusion and Looking Forward

Over the past five years, the Oxen team has worked diligently, delivering innovative products. Session has reached 842k monthly active users, or over 900k MAU according to the OPTF's announcement, which is a significant achievement. I have previously defended the team's efforts in my research [2]. Despite an estimated 6.5% discrepancy in MAU from various methodologies, this variation falls within an acceptable range.

It would be unfair to overlook the commitment and achievements of the Oxen team, just as it would be unfair to neglect the over-dilution of inactive Oxen holders.

A collaborative approach toward fairness would be more beneficial than allowing this dispute to harm the project's reputation and alienate its long-standing supporters. Inactive Oxen represent over 50% of the market cap; thus, the swap rate for inactive Oxen holders is a multi-million dollar decision and warrants serious discussion. Numerous "crypto hall of shame" websites exist [11], and failing to treat inactive holders fairly risks having our project listed on one of these when those inactive holder awaken and return with disappointment.

The OPTF might have different opinions on some figures, which I believe are negotiable. However, the proposed framework provides a good starting point for building consensus. Alternatively, the OPTF might wish to disclose their framework with actual numbers so that we can follow their calculations step by step.

Over the past few years, the tech community has invested considerable effort in ensuring the soundness and security of cryptocurrency technologies, such as implementing zero-knowledge range proofs. What has been done is simply to ensure that the numbers are always right. If we can easily overwrite the value of the token, what is the point of maintaining computational integrity and protocol security in the first place?

Please review the proposal and voice any concerns you may have.

[1] https://oxen.io/blog/genesis-distribution [2] https://github.com/oxen-io/oxen-improvement-proposals/issues/60 [3] https://en.wikipedia.org/wiki/Fair_division [4] https://www.investopedia.com/terms/p/paretoimprovement.asp [5] https://oxen.io/blog/session-token-swap-program [6] https://github.com/oxen-io/oxen-improvement-proposals/issues/65#issuecomment-1861601701 [7] https://oxen.io/blog/session-token-ama [8] https://www.fool.com/investing/general/2012/08/27/how-much-is-a-user-worth.aspx [9] https://github.com/oxen-io/oxen-improvement-proposals/issues/62 [10] https://github.com/oxen-io/oxen-improvement-proposals/issues/65 [11] https://dfpi.ca.gov/crypto-scams/ [12] https://en.wikipedia.org/wiki/Two-phase_commit_protocol

[venezuela01]

Quote Chris's response from the Oxen community:

Chris M:

Huge and thoughtful response, there. I don't think I can effectively respond to each point, as there are few that cross over, but I think the below should give further clarity.

Some key point that seem not to be factored in:

• The majority of the parties who purchased Session token at $0.20 have been supporting the project for a long time, and there is a 24 months lockup on those tokens.
• Discrepancies between Session token purchases and oxen price aren't something we can compare as simply as this, as it is a bit of an apples to oranges comparison. Noting the whole economic structure is different, there are different lockups, different token utility models, different node reward structure, moving from an infinite to capped supply. Fundamentally everything is to change.
• We can't get into current and future price discussions/ value estimates.
• If we opened the floor for voting from oxen holders, we would run into regulatory issues. So this was off the table and not possible unfortunately. + there are two other substantial variables that I think would have led the project to a catastrophic fail if we opened the floor to this. There is usually more to things than people assume.
• The OPTF won't run more than 10% of nodes so not ideal to participate in shared nodes, any left over tokens will be held aside and only releases with a public disclosure.
• We aren't going to change the TGE distribution. Although, if we don't sell tokens, we will allocate those tokens to the Service node rewards allocation.
• If someone hasn't paid attention to the token/ project over the last 2 years, and wakes up, how is this able to be factored in? This would become a burden for progress of the overall project, if you needed to wait on those who aren't paying attention to do so.

There are some things that are difficult to factor in, such as time constraints, preparing for things not to go well. In hindsight makes you look like a genius or a fool, but we don't have a crystal ball, and we need to plan and build with the information and resources we can gather to achieve the overarching missions.

So in summary, I do see the token distribution changing slightly, by TGE, based on the above sale point. Once the ball is rolling the cost of changing direction becomes increasingly higher. It is best to lock things in, so everyone can see, understand and act on the major changes ahead with as much advance notice as we can. As we have announced the token swap bonus, it wouldn't be wise to make changes to that. It is much more purposeful to reward those who are actively contributing to the project than to offer a higher participation allocation.

[venezuela01]

My following questions and comments have not received any response, so I'll copy and paste them here to prevent loss.

Thank you for your patience in reading my lengthy post. I genuinely appreciate your response and believe we need more conversations like this.

I have carefully read every words of your reply and come up with some follow-up questions and comments. My response consists of two parts: the first part focuses on concrete topics, while the second part focuses on methodology and principles. Here is part one.

The majority of the parties who purchased Session token at $0.20 have been supporting the project for a long time, and there is a 24 months lockup on those tokens.

• To clarify, I agree that the lockup is a factor to be considered. My original post states, “This might be negotiable though, consider VCs’ token are locked up, which increase their opportunity cost of holding.” I’m glad we are on the same page.

• However, having supported the project for a long time might not be a convincing reason for receiving a favored price on purchasing Session tokens, as it raises concerns about transparency and fairness. I don’t want to delve too deeply into legal discussion, as I generally believe in the good intention behind the decision.

Discrepancies between Session token purchases and oxen price aren't something we can compare as simply as this, as it is a bit of an apples to oranges comparison. Noting the whole economic structure is different, there are different lockups, different token utility models, different node reward structure, moving from an infinite to capped supply. Fundamentally everything is to change.

I hear you. I am well aware of the differences. I have thought more deeply about this than what I've posted and welcome anyone to point out any flaws in my calculations. If you think my methodology is completely nonsensical, rendering it impossible to address any miscalculations, I invite you to share your methodology for deriving your numbers.

I'm not convinced that the current level of dilution is fair to inactive holders, even considering everything you mentioned with a more complicated calculation model. I’m happy to delve into details if you would like.

We can't get into current and future price discussions/ value estimates.

I expect more insightful communication than just a general conclusion stating 'Fundamentally, everything is to change,' but 'We can't get into current and future price discussions or value estimates.'

One pratical way to test whether someone has conveyed their information clearly is to ask: Is there any audience A who can digest the original speakers’ theory and later explain it to audience B? By applying this criterion, we can judge the current quality of communication. Not only am I unconvinced that the current level of dilution is fair, but it also appears that no one else in the community understands how did you decide the numbers. Otherwise, could you find someone from the community to explain the numbers to me, someone who is not limited by any legal constraints?

I understand that there are legal constraints limiting the OPTF from publicly discussing sensitive numbers, but we can find a workaround for it. If the OPTF is willing to disclose their methodology for deriving the numbers, then placeholders like x, y, z can be used for sensitive data, and the community can figure them out ourselves, this would lead to a more productive and substantial conversation.

If we opened the floor for voting from oxen holders, we would run into regulatory issues. So this was off the table and not possible unfortunately. + there are two other substantial variables that I think would have led the project to a catastrophic fail if we opened the floor to this. There is usually more to things than people assume.

The regulatory issue is new to me; thanks for clarifying, this is useful information. Would you mind disclosing the other two substantial variables as well? As long as you are aware that there is usually more to things than people assume, there is always room for improving transparency.

Considering that the community has no voting rights, I would urge the OPTF to reduce the size of the community fund and reallocate those funds to the Oxen claim pool. This would reduce concerns about the centralization risk and improve fairness for inactive Oxen holders.

As a side note, although regulations restrict the feasibility of an official vote, it doesn’t mean that a third-party vote cannot be initiated. A community member can propose a proof-of-stake vote on any topic, and any stakers can participate in the vote. The voting result can later be seen as an unofficial and informal poll rather than an official vote, providing optional reference for the OPTF to consider when making decisions. This decouples the poll coordinator from OPTF and removes the mandatory causality, avoiding legal issues. Some of the services behind swap.oxen.io will be reusable for a third-party hosted POS poll if OPTF decides to open-source the code.

The OPTF won't run more than 10% of nodes so not ideal to participate in shared nodes, any left over tokens will be held aside and only releases with a public disclosure.

Sorry, there seems to be some significant miscommunication here, please allow me to clarify.

Let's say we previously assumed 15M Session tokens are required to run 10% of full nodes, then by running shared nodes, only 3.75M Session tokens are needed for the same number of nodes. The remaining 11.25M Session tokens could be reallocated to the Oxen claim pool.

Maybe that’s clearer now?

We aren't going to change the TGE distribution. Although, if we don't sell tokens, we will allocate those tokens to the Service node rewards allocation.

Again, I am not convinced that the current TGE distribution is fair to inactive Oxen holders, and I sincerely hope the OPTF will seriously reconsider without rushing to a conclusion. I understand that amending an announced plan would be a difficult decision, and I appreciate the leaders of the project for making hard decisions to avoid compromising fairness and integrity.

If someone hasn't paid attention to the token/ project over the last 2 years, and wakes up, how is this able to be factored in? This would become a burden for progress of the overall project, if you needed to wait on those who aren't paying attention to do so.

It's unclear to me what your concerns are. I would appreciate further clarification, as there may have been some miscommunication. From my perspective, the activity level of inactive holders will not significantly impact the token's migration; their lack of attention to the project is not detrimental.

Conversely, I find it very disrespectful to view inactive supporters as a burden. Generally, being an inactive holder is perceived as a sign of unconditional trust in a project within the broader crypto community culture.

One might assume that the opposite of an "inactive holder" is a good active staker. However, that's very optimistic; the opposite of an inactive holder could potentially be a detrimental active holder who constantly provides disruptive input to the project.

If inactive holders are treated poorly now and no one advocates for them, they might become disillusioned active holders when they eventually engage. It's naive to think that mistreating inactive holders is without consequences; though the impact might not be immediately apparent, it will become evident over time.

Treating inactive holders unfairly is akin to kicking away the ladder after climbing up. This approach can lead to a loss of respect and cause team members to worry that they might be similarly overlooked in the future, potentially risking completing their missions without receiving the expected rewards.

I apologize if I sound negative; I am eager for the project to succeed. However, these are practical issues, and evading discussion of these risks would be naive and irresponsible. If unmentioned now, they could be overlooked and later labeled as hindsight.

As we have announced the token swap bonus, it wouldn't be wise to make changes to that.

1. There are more potential issues or confusions in the current token swap bonus plan than I have raised. Here is one example:

If an Oxen staker starts a full node one day before the Token Generation Event (TGE) with 15,000 Oxen, how many Session Tokens will they receive on the first day of TGE if they have zero bonus points?

Maxim commented on Telegram, saying that the general idea is that if you could run a node in OXEN, it should be sufficient to run it after the swap, as the swap is automatic and will not lead to a recalculation of your share in the node. Is Maxim’s interpretation correct?

This raises a follow-up question: If a theoretical hidden whale starts 2,001 full nodes one day before TGE with 30,015,000 Oxen, how many Session Tokens will they receive on the first day of TGE if they have zero bonus points, considering that the entire Oxen claim pool is only 30 million Session Tokens? Do they still have enough Session Tokens to run 2,001 full nodes after TGE?

This question is deep; please let me know if I haven’t explained it clearly. If such an edge case is not clarified, it poses a significant risk of encountering security vulnerabilities when implementing a smart contract.

2. If you think changing the token swap bonus is too difficult, have you considered keeping the token swap bonus unchanged but increasing the Oxen claim pool for inactive Oxen holders? This might not solve all the issues, but it would still improve fairness for inactive holders. Additionally, if we allocate >=60M Session tokens to the Oxen claim pool, we wouldn't have to worry about the aforementioned edge case.

Thank you.

[venezuela01]

Again, thank you for your patience in reading my lengthy post. Here is part two of my response, focusing on methodologies and principles.

Decision making with Imperfect Information

There are some things that are difficult to factor in, such as time constraints, preparing for things not to go well. In hindsight makes you look like a genius or a fool, but we don't have a crystal ball, and we need to plan and build with the information and resources we can gather to achieve the overarching missions.

I understand receiving criticism can be uncomfortable. I've given tough and sometimes aggressive feedback, possibly leading to silence or defensive reactions. I apologize to Kee, Jason, Chris, Alex, Maxim, Josh, or anyone else affected by any disrespectful public comments I've made. My intense frustration led to some inappropriate and ineffective way of expressing my disappointment in some early posts. I apologize, and I wish my feedback had been more constructive and less critical. On the other hand, I hope the leaders of the project can be less defensive and more inclusive of taking feedback.

I'm still very disappointed, though, so please forgive my directness in upcoming conversations:

If you don't have a crystal ball, how did you anticipate that Session MAU would near 1 million by the end of 2023?

If you don't have a crystal ball, how can you foresee that Session MAU might reach 10 million by the end of 2024? [1]

Though not an exact prediction, the first prediction was relatively close, considering the number reached approximately 900K in December 2023. The second one might be very optimistic though.

Sure, no one has a crystal ball, and making decisions with imperfect information is challenging. However, decision-making with imperfect information has been extensively studied. Texas Hold 'Em is a famous example of imperfect information game. If information imperfection is an excuse, then why do we see a range of bad players, mediocre players, and exceptionally skilled players? Similarly, every entrepreneur makes decisions with imperfect information. What then accounts for the existence of failed, mediocre, and extremely successful entrepreneurs?

If we attribute bad decisions to imperfect information, there is no opportunity for growth, as the presence of imperfect information is an unchangeable objective reality. However, if we attribute bad decisions to subconscious oversights, overconfidence in estimation, avoidable execution errors, or flaws in methodology, then there is a lot to learn and significant potential to improve in future decision-making.

Implicit Assumptions in Decision Making

When you view criticism of past decisions as hindsight, you're implicitly assuming that there was no room to develop a more effective decision-making process.

When you believe time constraints have limited the ability to make more well-considered decisions, you're implicitly assuming that the negative consequence of implementing a flawed plan is less significant compared to the benefit of moving faster.

When you decide to announce a plan before consulting with the community on a draft, you're implicitly assuming that a decision-making style which gathers less feedback is more effective than one that is more interactive with the community and collects a broader range of feedback.

When you choose to keep the OPTF Oxen treasury idle, you're implicitly assuming that the risk of the idle Oxen being hacked is less significant than the cost of altering the token distribution to convert OPTF Oxen into Session tokens.

When you state that changing the announced token swap bonus isn't wise, you're implicitly assuming that the negative outcomes from the buggy incentive program is less significant compared to the cost of altering a publicized plan.

When you mention rewarding active contributors as more purposeful than offering a higher participation allocation to inactive holders, you assume that the negative impact of diluting inactive Oxen holders is less significant compared to the benefits of shifting their expected share of tokens to other parts of the ecosystem.

If you don't have a crystal ball, how can you be certain these implicit assumptions are true?

Questioning the Assumptions

Many of these assumptions are not as obvious as they seem. Some might be true, some might be so wrong that we cannot afford the negative outcomes they could cause.

For example, think about the potential adversarial actions of diluted inactive Oxen holders. Over 50% of Oxen are unstaked, and some inactive holders might be hidden whales. Anyone owning large holdings but not checking them for a considerable time might indicate significant wealth, as Oxen may only represent a small part of their portfolio. Session's failure may not concern them, but its success might lead them to realize their shares were unfairly diluted, potentially prompting legal action. A famous experiment showed monkeys rejecting unfair payments [2], humans, like monkeys in experiments, react strongly to perceived unfairness. Excessively unfair distributions might be seen as insulting, leading some to prefer adversarial actions over an unfair, trivial reward.

It doesn't matter whether OPTF wins or loses a lawsuit; the real impact lies in the participation of legal action. Once legal proceedings start, the management team will be compelled to engage. At that time, the amount of paperwork you have to read is probably a hundred times longer than this post. It's the involvement in legal proceedings itself that can damage productivity and morale, not necessarily the legal outcome. Furthermore, if legal action is initiated by a disappointed Oxen holder, it's a common practice to include all related parties like VCs as defendants to compel the disclosure of critical information previously protected by NDAs. Has this risk been adequately considered?

Again, I apologize if I sound negative; I am eager for the project to succeed. I prefer to highlight these unseen factors in advance rather than have them overlooked and later labeled as hindsight should adverse events occur.

Quantifying and Calibrating the Confidence Intervals of Assertions

Acknowledging no one has a crystal ball is a meaningful step towards reevaluating one's implicit assumptions. These assumptions are often unconsciously accepted as certainties and are among the most frequent factors leading to bad decisions.

Research shows that the majority of people are overconfident most of the time, including domain experts. Most people tend to be overconfident in their implicit assumptions, predictions, estimations, and so on. We often don't know what we don't know, lacking self-awareness of our overconfidence.

In "How to Measure Anything: Finding the Value of Intangibles in Business" [3], Douglas introduces the concept of Confidence Interval. He invites readers to participate in a calibration exercise, allowing them to test and observe their own cognitive processes. It's realized that most participants are overconfident, while a few are underconfident, with only a very few being "just confident enough" in their predictions. After following the training suggested by Douglas, everyone can improve the quality of their predictions so that their subjective confidence level aligns much better with what they actually know.

I sincerely hope every leader can benefit from a few hours of reading and practicing Douglas' methodology (Chapter 5, Calibrated Estimates: How Much Do You Know Now?). It is a practical step to improve self-awareness in decision-making. I even believe that Douglas' exercise should be transformed into interview questions whenever OPTF hires any external advisor. This is crucial because you don't want to hire someone who masquerades as an expert but is actually overconfident in their abilities and misleads the company with their exaggerations.

Potential Improvement to the Decision-Making Process

When things go unwell, it's an excellent opportunity to question one's assumptions and diagnose the decision-making process. As an outsider, the internal decision-making process appears as a black box, where only the outcomes of decisions are visible. However, based on the communication style, it seems there is room for improvement. Some areas might require minimal changes, others might demand more costly practices, and some may need a fundamental shift in mindset.

There are two repeatedly observed patterns in OPTF's decision-making and communication style.

1. The current process lacks inclusivity. The community isn't consulted beforehand, has no voting rights afterward, and the OPTF appears resistant to modifying plans once announced, potentially leading to avoidable errors.

2. The official announcements often highlight only the positive aspects of plans, neglecting potential negatives. A one-sided proposal often appears defensive and invites criticism.

Towards a Pros and Cons Style Approach

There is a common solution that can effectively address the above two issues, hitting two birds with one stone: always explicitly include both pros and cons in any proposals.

This enhances the perception of inclusiveness and objectivity, even without explicit community consultation. In cases where OPTF is receptive to feedback, the community could help identify blind spots on both sides, rather than always challenging OPTF's position. A Pros and Cons communication style reflects the internal decision-making process more transparently, as there are sometimes even intensive arguments internally. Why not fairly present both sides of the views when sharing the conclusion? This leads to increased trust and respect for the decision-makers.

Towards a Cost and Benefit Style Approach

The Pros and Cons approach is qualitative and often requires intuition for the final, comprehensive decision, aggregating all the pros and cons. Sometimes this is straightforward, but other times it is not. Generally, the Pros and Cons method can be somewhat ambiguous. One can always identify numerous pros and cons simultaneously, which might lead to endless bureaucratic debate.

To address the weaknesses of the Pros and Cons decision-making process, the next step is to shift to a Cost and Benefit approach. Unlike Pros and Cons, the Cost and Benefit approach is quantitative; we rely on numerical analysis to reach the final grand decision. This might involve using accurate numbers or making rough estimations, but overall, it is significantly less ambiguous than the Pros and Cons approach.

The Cost and Benefit approach is not only challenging, but sometimes sound impossible, as quantifying costs and benefits can be very very difficult for many people. However, sometimes it is crucial for making critical decisions, and it is achievable with sufficient practice. There is extensive research and numerous successful case studies supporting this method. Once again, "How to Measure Anything: Finding the Value of Intangibles in Business" by Douglas Hubbard is a great resource on this subject. I sincerely hope every team leader finds Douglas insightful and inspiring.

Towards Composability and Reusability

Adopting a Pros & Cons or even Cost & Benefit approach in decision-making and strategy communication might initially seem burdensome. However, it's a long-term investment that requires a shift in mindset, particularly when considering a 10-year timescale.

A crucial step in making big and hard decisions is to decompose them into smaller assumptions [3]. Adopting a compositional view to decision-making allows one to conveying tough decisions more effectively. This is because many issues, although seemingly different at first glance, often rely on a similar set of smaller, recurring assumptions, as long as they originate from a consistent, long-term vision.

Using software development as an analogy for decision-making, a foundational library like libsession, utilized across various platforms to expedite development, can be compared to reusing lower-level assumptions in more complicated decisions and communications. Investing in foundational elements like libsession is costly but pays off in the long term. Similarly, viewing decision-making and communication as composable offers long-term benefits in onboarding new employees, cultivating next generation team leads, or communicating tough decisions.

When external conditions change, we can review and adjust our assumptions, communicating new strategies efficiently with maximum trust. If a decision leads to unexpected outcomes, we can pinpoint and correct the specific erroneous assumption, avoiding repetition of the same mistake and not just relying on luck for future decisions.

Towards Principle-Based Management

If we consistently practice composability and reusability, learn from our mistakes, and review our assumptions, we might discover that the 1,000 most important decisions often rely on the top 20 fundamental assumptions. This degree of reusability will eventually lead to the adoption of first principles. [4] [5] [6]

For example, 'proportionality' is a common topic that is repeatedly raised in various contexts such as risk management, incentive program design, business model design, and resource allocation.

Another example is 'integrity,' emphasized as the primary guiding principle in 'Principle-Based Management' [4][5][6]. Charles Koch, in 'The Science of Success,' regards ‘integrity’ as one of the most fundamental factors for success, learned through costly lessons.

Lesson One of Principle-Based Management: A Call for Integrity

The boundaries of integrity might not initially be obvious, but they warrant definition, discussion, and clarification. It's tolerable if these boundaries are unclear at first, leading to occasional wrong decisions, but it's intolerable to avoid discussing them.

I firmly believe that unfairly diluting the shares of inactive holders is wrong; it conflicts with many investors' expectations of integrity. I can tolerate many things, be they suboptimal decisions, missed deadlines, or undervalued token prices. However, there are things I cannot tolerate: a deliberate compromise of fairness is unacceptable. My concern is that what I perceive as intolerable may be seen as purposeful by some decision-maker in the project, which led to my previously furious and aggressive comments. If the project decides to treat inactive holders unfairly, I must seriously consider withdrawing my support.

I sincerely hope the team is open and honest in addressing the fairness issue rather than evading difficult questions. This issue has already damaged community morale, and the long-term consequences could be even more severe than anticipated. Once an irreversible process is executed, it will be too late for regret when the consequences finally manifest, potentially becoming a long-term stain and burden on the project, come back to us repeatedly over the next decade. I still believe it is not too late to adjust the token allocation and enhance fairness for inactive holders, as outlined in my previous proposal in part one of the response.

Thank you.

[1] https://oxen.io/blog/session-token-ama [2] https://pubmed.ncbi.nlm.nih.gov/13679918/ [3] https://annas-archive.org/md5/976b5d9a0639a13e05d8b532b446e4fd [4] https://www.principlebasedmanagement.com/ [5] https://annas-archive.org/md5/d8c4f9a2c0fce09fa5004c6428567f0d [6] https://annas-archive.org/md5/ca52d925afd8ed143815fce34f1bd90f

[venezuela01]

Dear Oxen Holders,

I would like to propose a change to the tokenomics for the Oxen team. Before doing so, I seek your feedback to determine if you find it agreeable.

Background:

The Oxen to Session token migration, as detailed in the genesis distribution, is particularly unfair to inactive holders. Inactive Oxen holders are supposed to receive approximately 0.44 Session token per Oxen, which significantly reduces the value of their holdings without justified reasons. Additionally, there is another 0.7x late multiplier as a penalty for inactive holders who can't swap in the first 6 months after TGE, result in only 0.31 Session token per Oxen.

Overview of Oxen Token Distribution:

• Total Oxen supply before TGE: around 68M.
  • Approximately 31M Oxen staked, including around 2.5M staked by OPTF nodes and around 28.5M staked by non-OPTF nodes.
  • Approximately 37M Oxen unstaked, including around 5.5M owned by OPTF and around 31.5M owned by other inactive holders, some of whom might have lost access.
  • OPTF holds about 8M Oxen, including 2.5M in stake and 5.5M not staked, which will not be burned or swapped post-Session TGE.

Owner	Staked (Oxen)	Not Staked (Oxen)	Total (Oxen)
OPTF	2.5M	5.5M	8M
Non-OPTF	28.5M	31.5M	60M
Total	31M	37M	68M

Brief Overview of Current Plan:

• Total Session token supply after TGE: 240M.
  • 30M Session Tokens in the service node bonus shared by around 1900 nodes (including operators and contributors, excluding OPTF nodes).
  • 30M Session Tokens in the swapping pool shared by around 68M Oxen, equating to 0.44 Session Token per Oxen for inactive holders.
  • 15M Session Tokens allocated for OPTF service nodes.
  • 36M Session Tokens designated for VC sales, with around 13M sold at $0.2 USD, leaving 23M remaining.
  • VCs who purchased 13M Session Tokens will be subject to a lock-up period of either type A, B, or TBD, ranging from 12 to 24 months.
  • The remaining 23M Session tokens not yet sold are planned to be added to a future reward pool.
  • The sum of (1), (2), (3), and (4) amounts to 111M; the rest, 129M, are detailed in Oxen.io Blog: Genesis Distribution and are omitted here because the proposed new plan will not change their distribution.

Allocation	Amount (Session Tokens)	Details
Service Node Bonus	30M	Shared by around 1900 nodes (including operators and contributors, excluding OPTF nodes).
Oxen Coin Claim (swapping pool)	30M	Shared by around 68M Oxen, equating to 0.44 Session Token per Oxen for inactive holders.
OPTF Service Nodes	15M	Allocated for OPTF service nodes.
VC Sales - Unsold	23M	Unsold tokens, planned for redirect to reward pool.
VC Sales - Sold	13M	Sold at $0.2 USD, subject to a lock-up period up to 24 months.
Others	129M	Including 11M for team allocation, 1M for advisors, 33M for the OPTF operational fund for future partnerships, 44M for ecosystem and community fund, 40M for the future staking reward pool.
Total Session Token Supply	240M

Major Issues with the Current Plan:

1. The arrangement is unfair to inactive holders.
2. The 8M Oxen held by OPTF after TGE pose a significant risk in the event of theft.
3. A new operator running a full node with 15,000 Oxen one day before the TGE will only have about 6,750 Session Tokens post-TGE and might be deregistered. This is an unfortunate result of not having accumulated sufficient bonus points. This is not inclusive for new operators.

Proposed Changes v2024-02-20:

• The 30M Session Tokens in the service node bonus pool will remain unchanged.
• The pools for the 30M swapping, 15M OPTF service nodes, and 23M remaining tokens from VC sales should be merged into a consolidated 68M Session token pool for Oxen Coin Claim (new swapping pool).
  • Adjust the swapping rule for all holders so that 1 Oxen can be swapped for 1 Session token from the 68M swapping pool.
  • Modify the rules so the 8M Oxen previously held by OPTF are swapped for 8M Session tokens, also deducted from the 68M swapping pool, with 60M remaining.
  • With approximately 28.5M Oxen staked by non-OPTF nodes, this will swap for 28.5M Session tokens from the pool, leaving 31.5M Session tokens for 31.5M inactive Oxen to swap.
  • No late penalty factor (0.7x) will be applied anymore.
  • OPTF will manage its own 8M Session tokens and the remaining 31.5M Session tokens, holding them in two separate wallets but will be permitted to use both of them for staking in foundation service nodes and earn rewards.
  • Assuming that in 5 years, 60% of inactive Oxen holders wake up to swap their tokens, they will consume around 18.9M Session tokens out of 31.5M. Afterwards, OPTF will control the remaining 12.6M, in addition to its own 8M swapped tokens, totaling 20.6M Session tokens for foundation service nodes—more than the previous plan of 15M Session tokens.

Proposal v2024-02-20	Amount (Session Tokens)	Details
Service Node Bonus (Unchanged)	30M	-
Oxen Coin Claim (Consolidated Swapping Pool)	68M	Merging the previous pools for the 30M swapping, 15M OPTF service nodes, and 23M remaining tokens from VC sales into a consolidated 68M Session token pool for 1:1 swapping. Including OPTF's own 8M Oxen for swapping. Including active stakers' Oxen for swapping as well, this part hasn't changed. OPTF is allowed to use unswapped Session Tokens for service node staking, can sell the staking rewards but cannot sell the principal. * No 0.7x late penalty anymore.
VC Sales - Sold (Unchanged)	13M	VCs will be allowed to unlock earlier as compensation because everyone else is benefiting in some way.
Others (Unchanged)	129M	-
Total Session Token Supply	240M

Benefits:

• Inactive holders who haven't lost their keys will receive a fairer swapping rate, reducing potential complaints and risks for OPTF.
• Inactive Oxen holders who have lost their keys will no longer occupy a significant amount of Session tokens; technically, their portion of Session tokens are held by OPTF, which gives OPTF extra flexibility to stake nodes.
• Active stakers gain access to their Session tokens sooner, as the 23M unsold VC tokens originally proposed to be directed to the reward pool are now reallocated to the consolidated swapping pool, allowing immediate availability post-TGE.
• OPTF's potential stake in service nodes will increase from the previous 15M Session tokens to a total of 20.6M, calculated by adding 8M to 12.6M. This 12.6M assumes that 40% of inactive Oxen are permanently lost, the more Oxen are lost, the larger the number of Session Tokens OPTF retains.
• Since active stakers receive a benefit in the new plan, we could also reduce the VC lock-up period, offering them more flexibility.

Addressed Previous Issues:

• The risk of stolen of OPTF's 8M Oxen post-TGE is eliminated.
• The baseline swapping rate of 1:1 for Oxen ensures that new operators will not risking being deregistered due to insufficient staking bonus, fostering inclusivity and simplifying smart contract design.
• The elimination of the 0.7 multiplication ratio for late swappers removes a significant penalty.

This proposal enhances fairness, ensuring that no one is worse off; instead, everyone ends up happier. This is a Pareto Improvement.

[DDOXEN]

Support this revised proposal, which is very fair to every investor and the oxen team!

[seoeunju1]

Nice work

[Paul1804]

Great !

[SomethingGettingWrong]

I support this change

[venezuela01]

I have received feedback from 10+ community members, and it seems many people appreciate the effort and like the proposal at https://github.com/oxen-io/oxen-improvement-proposals/issues/65#issuecomment-1953789479, with no one complains so far.

@KeeJef, could you please kindly review this proposal v2024-02-20? It makes a Pareto Improvement that benefits everyone, including OPTF itself, without causing harm to anyone. I take it very seriously and would greatly appreciate it if you could take a look. Thank you.

Quote from Telegram: https://t.me/Oxen_Community/405233

@Chohdry: I had some tokens in the Oxen wallet that I completely forgot about for two years. Is there anything to be done for upcoming events? @YarkiK: Just so you know, @venezuela01 advocates for people like you!

[KeeJef]

Thank you for submitting this proposal @venezuela01 . I've found it to be one of the most detailed and thoughtful proposals we've received regarding economic changes. However, there are some areas that I would like to discuss.

My principal concern with your proposal lies in its financial strategy.

I understand the desire to increase the allocation of Session Tokens given to existing Oxen holders, however I think the potential benefits to the network, ecosystem, and participants which may come about through the sale of Session Tokens has been overlooked; that removing the Strategic Token Sale would require us to consider not only what can then be gained but also what may be lost.

Specifically:

1. Moving 23 million Session tokens which are planned to be sold into the swapping program

To date, the sale of Session Tokens has to date successfully generated $2.4 million USD. These funds will be crucial for launching and sustaining the network. Similarly, it has helped us to establish relationships and participation in the project with multiple strategic partners who will be able to contribute to Session and Session Token’s success through their experience and expertise.

Prior to the TGE, our goal is to secure additional funds to establish strategic partnerships and enhance our capability to deliver new features, including those required for Session Pro, in the Session application.

Redirecting all unsold tokens to Oxen Swaps at the current stage would significantly limit our flexibility to undertake subsequent rounds of funding should advantageous opportunities beckon.

Our current intention is to allocate any unsold tokens post TGE to the Session Active Staker Reward Pool, ensuring robust initial rewards for early stakers and supporting a strong start for the network. I believe this remains the strongest plan, as it a) provides stronger incentives to the network, and b) affords us additional flexibility in the lead-up to TGE.

2. Fixing the Exchange rate for Oxen swappers at a 1:1 ratio

The goal when designing the swap program has always been to provide the most favorable outcomes for the players who are most active in the network. In the Oxen/Session token ecosystem, this is Service Node operators and contributors. They do the work to run the network, and without them, Lokinet and Session wouldn't continue to exist.

Setting the ratio at 1:1 would mean that the Service Node proportion of the swap would become far less in proportion to the Oxen Swap, thus minimizing the proportion of tokens flowing directly to Session Node operators and contributors. This seems to be a less meritocratic approach to distributing tokens, as those who do the most work to benefit the network by purchasing and staking tokens, as opposed to just purchasing, receive only a slightly greater amount of rewards than those who merely swap.

[venezuela01]

2. Fixing the Exchange rate for Oxen swappers at a 1:1 ratio

The goal when designing the swap program has always been to provide the most favorable outcomes for the players who are most active in the network. In the Oxen/Session token ecosystem, this is Service Node operators and contributors. They do the work to run the network, and without them, Lokinet and Session wouldn't continue to exist.

Setting the ratio at 1:1 would mean that the Service Node proportion of the swap would become far less in proportion to the Oxen Swap, thus minimizing the proportion of tokens flowing directly to Session Node operators and contributors. This seems to be a less meritocratic approach to distributing tokens, as those who do the most work to benefit the network by purchasing and staking tokens, as opposed to just purchasing, receive only a slightly greater amount of rewards than those who merely swap.

@KeeJef I appreciate your response. However, I'm not sure if you have tried to work on the numbers in detail. My proposal won't decrease the tokens of active stakers; actually, they will receive almost the same or even slightly more with the new proposal. The magic of this proposal is that fewer Session tokens will be 'wasted' due to non-active holders losing their private keys. (Actually no Session token will be wasted at all with this proposal). This is very important. If you can't see the subtle number magic, maybe I can write a short essay to explain it?

I'll respond to your other points later. I hope we can focus on the math part first, if you don't mind? Because that part should be objective with very few controversies.

[KeeJef]

@KeeJef I appreciate your response. However, I'm not sure if you have tried to work on the numbers in detail. My proposal won't decrease the tokens of active stakers; actually, they will receive almost the same or even slightly more with the new proposal. The magic of this proposal is that fewer Session tokens will be 'wasted' due to non-active holders losing their private keys. This is very important. If you can't see the subtle number magic, maybe I can write a short essay to explain it?

Ah i see, my initial interpretation of your proposal led me to believe that the Oxen Coin Claim pool was intended solely for users engaging in direct coin swaps, thereby excluding Service Nodes from claiming these funds. However, i see now that Service Nodes are also eligible to participate in claiming funds from both the 30 million allocated for the bonus program and the 68 million in the Oxen Coin Claim pool. This clarification effectively addresses the concerns highlighted in my second point, since active registered Service Nodes would receive the bonus + the 1:1 swap. However my first point regarding additional token sales stands.

[venezuela01]

Ah i see, my initial interpretation of your proposal led me to believe that the Oxen Coin Claim pool was intended solely for users engaging in direct coin swaps, thereby excluding Service Nodes from claiming these funds. However, i see now that Service Nodes are also eligible to participate in claiming funds from both the 30 million allocated for the bonus program and the 68 million in the Oxen Coin Claim pool. This clarification effectively addresses the concerns highlighted in my second point, since active registered Service Nodes would receive the bonus + the 1:1 swap.

That's exactly what I meant; I'm glad we are on the same page now. I edited the table to make it clearer.

However my first point regarding additional token sales stands.

I can see your concern, and I appreciate the communication. I'll see what can be adjusted to alleviate your concerns and comment later.

[venezuela01]

Thank you for submitting this proposal @venezuela01 . I've found it to be one of the most detailed and thoughtful proposals we've received regarding economic changes.

Thank you for your review; that means a lot to me. It restores my trust in the project and increases my respect for the team.

1. Moving 23 million Session tokens which are planned to be sold into the swapping program

To date, the sale of Session Tokens has to date successfully generated $2.4 million USD. These funds will be crucial for launching and sustaining the network. Similarly, it has helped us to establish relationships and participation in the project with multiple strategic partners who will be able to contribute to Session and Session Token’s success through their experience and expertise.

Prior to the TGE, our goal is to secure additional funds to establish strategic partnerships and enhance our capability to deliver new features, including those required for Session Pro, in the Session application.

Redirecting all unsold tokens to Oxen Swaps at the current stage would significantly limit our flexibility to undertake subsequent rounds of funding should advantageous opportunities beckon.

@KeeJef

I understand your concern and trust that you recognize the necessity of further fundraising better than others. Generally, I agree that having more flexibility is better than having less.

As you pointed out, the main issue with proposal v2024-02-02 is the lack of flexibility for OPTF to decide whether to sell the remaining 23M tokens from the pre-TGE strategy selling allocation.

After reviewing the existing proposals, I identified another hidden constraint:

The original official plan requires OPTF not to sell the 15M Session tokens dedicated to OPTF node staking.

In my opinion, this decision is suboptimal, primarily made due to pressure from the community, where many were unhappy that OPTF holding a disproportionately large share of the new tokens could increase potential sell pressure on the market. As a compromise, OPTF promised not to sell their 15M Session token allocation for OPTF node staking, resulting in some tokens potentially being wasted with no usage.

In fact, if we assume one Session full node requires 15,000 Session tokens, then 170 nodes would only need 2.55M Session tokens. If the number of OPTF nodes increased 4x, only 10.2M Session tokens would be required. Thus, there could be around 4.8M to 12.45M Session tokens being wasted, sitting unused.

Interestingly, by further removing constraints like this and taking advantage of the flexibility, we can effectively restore the option of potentially selling 23M tokens from the pre-TGE strategy allocation when necessary, without sacrificing other benefits.

Here’s an improved proposal (v2024-03-06) for discussion:

1. Merge 30M from the Oxen Coin Claim and 15M from OPTF Service Nodes into a 45M Consolidated Oxen Coin Claim pool. The balance of this pool is dynamic; it starts with 45M, decreases when investors start to swap tokens, but might also require recharge in the future when necessary. (Different from v2024-02-20)
2. Maintain a fixed 1:1 swapping rate in the Oxen Coin Claim pool. (Same as v2024-02-20)
3. No late penalty factor (0.7x). (Same as v2024-02-20)
4. Include OPTF’s own 8M Oxen for swapping. (Same as v2024-02-20)
5. Include both inactive holders and active stakers for swapping. (Same as v2024-02-20)
6. Allow OPTF to sell as much as needed from the 23M remaining Pre-TGE pool, even after TGE. (Different from v2024-02-20)
7. Require OPTF to constantly monitor the 45M Oxen Coin Claim pool and dynamically recharge to ensure there is always a sufficient buffer for further swapping, with the following specifics:
   • 7.1 Whenever the Oxen Coin Claim pool balance drops below 0.5M, OPTF needs to refill it to 1M, ensuring the balance never reaches 0 while also minimizing waste.
   • 7.2 OPTF is permitted to select any source they own for refilling the Oxen Coin Claim pool, for example, using unsold pre-TGE tokens, the 33M Operation Project Treasury, or even their 8M Session tokens swapped from Oxen.
   • 7.3 The primary objective is to always ensure there is a sufficient buffer for swapping. Since OPTF continuously monitors the pool and only refills up to 1M when the swapping pool starts to deplete, the maximum amount of waste will always be less than 1M. This is even more efficient than v2024-02-20.

The advantages of proposal v2024-03-06 compared with v2024-02-20 include:

• OPTF restores the flexibility to sell (or not sell) the 23M pre-TGE strategy allocation.
• OPTF reduces constraints on selling any holdings, with the bottom line obligation being to always monitor the swapping pool and dynamically refill it when necessary.
• Since OPTF refills only a small amount at a time rather than pre-allocating 68M at once, we end up with a more precise allocation for necessary swapping and less waste. Inactive Oxen holders who have lost their keys will not occupy more than 1M Session tokens in total, despite there potentially being tens millions of Oxen tokens lost.
• This dynamic swap and refill process will last 5 years or longer, giving OPTF sufficient time to refine their internal token budget plan over time rather than making big decisions in a rush.

Do you think the high-level idea of proposal v2024-03-06 is clear to you?

I have done sufficient calculations to ensure that OPTF is not going to face a shortage of tokens in v2024-03-06, but that would be a long essay. If you think the high-level idea is already clear to you, I can start a separate comment to address any further concerns you have with detailed numbers. Otherwise, I’d like to focus on clarifying the high-level ideas first. Does that make sense?

My original claim that proposal v2024-02-20 was a Pareto improvement over the official plan was not accurate because I overlooked the need for flexibility regarding further Pre-TGE token sales from OPTF's perspective. However, I believe proposal v2024-03-06 is an almost strict Pareto improvement compared to the official plan, taking every known requirement into consideration.

I maintain a large table internally, with columns representing different requirements and rows representing different parties. When I propose a Pareto improvement, I exhaustively review every cell to ensure no one is disadvantaged. I don't want to publish the table here because that would overly extend the discussion. However, if you have any further concerns, I can always expand my table to include more conditions, then find more hidden constraints and potentially optimize the solution.

[venezuela01]

Hi @KeeJef, would you like to make a comment, or would you prefer extra time to review and consider proposal v2024-03-06?

[KeeJef]

I believe I understand the essence of the proposal, so let me paraphrase to make sure were on the same page:

The proposal aims to establish a new pool of 45 million tokens by consolidating the current Oxen coin claims pool with the Project Treasury (specifically the Session Node allocation).

Assuming full participation in the migration by all 2000 Service Nodes (which includes both OPTF nodes) and the migration of OPTF idle treasury then, 30 + ~5.5 million tokens will be claimed from this new 45 million token pool at the time of migration. Out of this ~35.5 million, ~8 million will be claimed by the OPTF, leaving a balance of 9.5 million tokens in the pool for other participants interested in swapping.

With the 9.5 million Session tokens that remain, the foundation will be able to support the conversion of 67% of users from Oxen to Session tokens total before the pool is depleted. Should the need arise for more tokens beyond this point, the foundation can draw from additional reserves, such as the 8 million it received in the swap, treasury holdings, or any unsold tokens from a token sale. While it would be necessary for the OPTF to maintain a minimal level of liquidity from the 9.5 million tokens for swap facilitation, excess tokens may be allocated for staking purposes.

[venezuela01]

Thanks for the response.

I believe I understand the essence of the proposal, so let me paraphrase to make sure were on the same page:

The proposal aims to establish a new pool of 45 million tokens by consolidating the current Oxen coin claims pool with the Project Treasury (specifically the Session Node allocation).

Exactly what I mean.

Assuming full participation in the migration by all 2000 Service Nodes (which includes both OPTF nodes) and the migration of OPTF idle treasury then, 30 + ~5.5 million tokens will be claimed from this new 45 million token pool at the time of migration. Out of this ~35.5 million, ~8 million will be claimed by the OPTF, leaving a balance of 9.5 million tokens in the pool for other participants interested in swapping.

Exactly what I mean.

With the 9.5 million Session tokens that remain, the foundation will be able to support the conversion of 67% of users from Oxen to Session tokens total before the pool is depleted. Should the need arise for more tokens beyond this point, the foundation can draw from additional reserves, such as the 8 million it received in the swap, treasury holdings, or any unsold tokens from a token sale.

Exactly what I mean.

While it would be necessary for the OPTF to maintain a minimal level of liquidity from the 9.5 million tokens for swap facilitation, excess tokens may be allocated for staking purposes.

I was initially a bit confused by the word 'from', after reading again I guess I understand what you mean.

I might modify it as: "While it might be necessary for the OPTF to maintain a minimal level of liquidity slightly beyond the 9.5 million tokens for swap facilitation, excess tokens may be allocated for staking purposes." My rephrasing emphasizes that we are still unsure how many tokens will be swapped, so we should be prepared for a slightly uncertain future.

Also, not only for staking purposes but also, if after 5 years we are confident that old Oxen holders have lost their keys and are not going to swap, I wouldn't object to OPTF selling excess tokens a bit more aggressively at that time. Just don't sell too early.

[KeeJef]

Okay, i will speak with some other stakeholders about this proposal next week and get back to you with feedback.

[venezuela01]

Okay, i will speak with some other stakeholders about this proposal next week and get back to you with feedback.

Thank you very much, I really appreciate it.

[venezuela01]

Okay, i will speak with some other stakeholders about this proposal next week and get back to you with feedback.

Hi @KeeJef, would you like to share any updates, or would you prefer to have extra time for internal discussion?

[venezuela01]

Okay, i will speak with some other stakeholders about this proposal next week and get back to you with feedback.

Hi @KeeJef, it's been one month since your last comment. Would you like to share any updates, or would you prefer to have extra time for internal discussion, or would you like to remain quiet for now?

[venezuela01]

Hi @KeeJef, it's been two months since your last comment. Are there any updates? I take this very seriously and expect you to take it more seriously too. Thank you.

[KeeJef]

Hey @venezuela01 , sorry for the slow response, been trying to coordinate a few parties to get a meaningful response which makes sense to the Foundation and stakeholders.

[KeeJef]

Thanks for your detailed proposal @venezuela01 . Over the past few weeks, I've discussed it with some team members and the foundation, and I'd like to share both their insights and my own thoughts on the proposal.

1. This proposal carries significant risk and overheads from the project's perspective. Changing the token economics now would necessitate voiding strategic agreements, which could be very detrimental to the overall project and the launch of Session Token. This process would be complex and time-consuming, potentially harming relationships with existing partners, delaying both a second round of sales and the token launch. We are heavily prioritising the token launch and consider any delays to TGE to be extremely costly. It's crucial that the Session Token be launched in a timely manner and that we are able to take advantage of the current market conditions (which are much stronger than the previous 2-3 years).

2. Personally, regarding the proposed removal of the late penalty multiplier, I strongly believe that late penalties and possibly early incentives are effective ways to encourage users to migrate coins, especially in the absence of a hard cutoff date for the migration. Without these measures, the uptake of the migration could be quite anemic (potentially leading to decreased security of the overall network). This is to say I think any design will need to include either a cutoff date or a combination of incentives and disincentives around the time that the migration occurs.

3. Personally, I also have reservations about the fundamental concept proposed here, which involves reallocating tokens designated for the project, strategic sales, or node operation to regular, non-staking Oxen holders, especially if those holders have been inactive for extended periods. We have always held the belief that allocating tokens to active participants in the network is a more effective strategy to expand the Service Node network, promote the protocol, and build community than allocating to inactive network participants.

[venezuela01]

Thanks for your detailed proposal @venezuela01 . Over the past few weeks, I've discussed it with some team members and the foundation, and I'd like to share both their insights and my own thoughts on the proposal.

1. This proposal carries significant risk and overheads from the project's perspective. Changing the token economics now would necessitate voiding strategic agreements, which could be very detrimental to the overall project and the launch of Session Token. This process would be complex and time-consuming, potentially harming relationships with existing partners, delaying both a second round of sales and the token launch. We are heavily prioritising the token launch and consider any delays to TGE to be extremely costly. It's crucial that the Session Token be launched in a timely manner and that we are able to take advantage of the current market conditions (which are much stronger than the previous 2-3 years).
2. Personally, regarding the proposed removal of the late penalty multiplier, I strongly believe that late penalties and possibly early incentives are effective ways to encourage users to migrate coins, especially in the absence of a hard cutoff date for the migration. Without these measures, the uptake of the migration could be quite anemic (potentially leading to decreased security of the overall network). This is to say I think any design will need to include either a cutoff date or a combination of incentives and disincentives around the time that the migration occurs.
3. Personally, I also have reservations about the fundamental concept proposed here, which involves reallocating tokens designated for the project, strategic sales, or node operation to regular, non-staking Oxen holders, especially if those holders have been inactive for extended periods. We have always held the belief that allocating tokens to active participants in the network is a more effective strategy to expand the Service Node network, promote the protocol, and build community than allocating to inactive network participants.

Thanks for the response and the work. I agree with (1) (because it has been delayed for too long), disagree with (2) and (3). I'm not going to comment on this issue further. Let's move on.