Long before DeVault’s inception a group of free thinkers got together and started brainstorming ideas around what the best type of reward model should be like.
It didn’t take long until they realized that all the currently available reward mechanisms (PoW, PoS, etc) are getting in the way of mass adoption.
At present time you need to be relatively tech-savvy and have access to expensive hardware or simply need a lot of money to invest. How can you expect to take crypto to the masses if the point of entry is focused around such a small group of people compared to the entire world’s population? It became painfully obvious that the old ways simply weren’t going to cut it.
The Cold Rewards model
In essence the Cold Rewards model is a system which incentivizes coin holders to simply keep their coins in the same wallet for at least a month. It is reasonable to expect such a model to reduce the selling pressure on exchanges. Not only that, but the simplicity of it all should, at least in theory, contribute to mass adoption as well since the technical and financial barriers have been dramatically reduced. Requirements
As mentioned earlier the Cold Rewards model is built with simplicity in mind. All it takes to start earning rewards is to keep a minimum of 25,000 of your coins in one wallet for at least around 1 month or however long it takes to mine 21,915 blocks.
Once you have held the coins in your wallet for at least 21,915 blocks, you will start earning interest at a rate of 1.25% monthly. That’s 15% per year in the first year, decreasing yearly thereafter. The current yearly rates, which are subject to change should the community deem necessary, are as follows: 15, 12, 9, 7, 5, … %
How are Cold Rewards calculated and paid out?
Cold Rewards are only paid out to unspent transactions (UTXOs). What are UTXOs? DeVault explains it pretty well in their official WhitePaper:
“ The analogy to UTXO transaction model would be paper bills which you have in your wallet. In order to make a transaction of $1,000 (for example), your wallet should have at least $1,000 in total (after summing up all the bills). You can imagine each of these bills as a UTXO. If you have a 10, and you get change for two 5s, you still have 10, but it’s no longer in one UTXO. At each new block, all the valid UTXOs will be evaluated for possible ColdReward payout. ”
Basically what happens is all UTXOs will get evaluated at the beginning of every new block. The block number at which the UTXO was created (for first time rewards) or the block number at which the UTXO received its last reward is subtracted from the current block number.
This result is called a “differential height”. The address which will receive a reward pay-out is the one with the highest differential height. If multiple UTXOs have the same height, only the largest one will receive a reward.
Note that the eligible unspent transactions must come from regular transactions and not from mining rewards or previous Cold Reward transactions. Also addresses are not evaluated by their total amounts, instead each individual UTXO is considered.
There’s also a maximum amount each reward payout can be and at present it’s set at 62,500 $DVT coins. This should prevent whales and exchange wallets from accumulating too many Cold Rewards in theory, but since DeVault is a project driven by the community, this hard cap is also adjustable.
For more info visit the DeVault ColdRewards Informational Document