Skuld Hard Fork: Transforming Callisto Network with Dynamic Monetary Policy
Last updated
Last updated
Change, as they say, is the only constant. Nowhere is this more evident than in the dynamic world of blockchain technology. Callisto Network, at the forefront of innovation, is about to take another major step by introducing the Skuld Hard Fork.
In Norse mythology, three goddesses weave the threads of destiny: Urd symbolizes the past, Verdande the present, and Skuld—the youngest goddess—represents the future.
In the coming weeks, Callisto Network will implement the Skuld Hardfork at block number 13,200,000, introducing significant changes that will profoundly impact the network. First and foremost, the introduction of a Dynamic Monetary Policy. This innovative mechanism will enable the burning of Callisto coins at rates higher than the minting rate based on blockchain usage, leading to deflation and a decrease in the number of coins in circulation.
The target is a maximum supply of 3 billion CLO coins; this means that the current circulating supply will decrease by approximately 370 million CLO coins.
As global inflation rates reach levels not seen in decades— with a 9.1% inflation rate in the USA in June 2022, the highest since 1986—the issue of inflation in cryptocurrency is becoming increasingly urgent. The Skuld Hard Fork is our answer to this challenge, offering a robust mechanism to control inflation in the cryptocurrency world. Cryptocurrencies often adopt inflationary models that can last over a century to encourage mining communities that secure the networks. However, this approach poses challenges for tokens with predetermined emissions, as their supply is disconnected from demand.
Inspired by Ethereum’s EIP-1559, Callisto Network leverages this concept to create a mechanism that will control essential parameters of Callisto Network, such as the block size and transaction cost. Alongside the mandatory ‘base fee,’ we’re introducing an optional ‘priority fee‘ for transactions. This optional fee serves a special purpose: it’s burned, reducing the overall CLO coin supply. Although optional at this stage, the priority fee will become a standard feature in our upcoming transition to Proof of Stake. All transactions will mandatorily incorporate burning fees in this phase, aligning economic incentives with network efficiency.
The number of coins burned, or in other words, the burning rate, is designed to be directly proportional to the network utilization. When the network utilization increases, the scarcity of the coins increases, leading to a higher demand. Based on the selected design, the dynamic monetary policy will transition to a deflationary model even at medium block usage. This selection addresses specific challenges like coin supply management and network efficiency.
This burning strategy encourages users to participate and engage with the network actively, knowing that their actions can directly influence the overall value and scarcity of the coins.
The most significant change is that the innovative coin-burning mechanism targets a maximum supply of 3 billion CLO coins, increasing the core value of Callisto Network coin and positioning it as a significant store-of-value asset akin to Bitcoin.
The following figures illustrate two scenarios showing how CLO coins will be emitted over time based on different block sizes (5M gas and 10M gas). We’ve also considered how the emission changes under different block utilization rates: one at 50% and another at full utilization. By doing this, we offer a projection of how these changes will impact the network’s economic stability. Additionally, we’ve assumed a 3% annual increase in transaction costs, anticipating higher utilization of Callisto Network.
The Skuld Hard Fork is the first milestone toward achieving our ambitious goal of scaling up to 100,000 transactions per second. This update introduces four key upgrades: (i) a new burning mechanism, (ii) faster block times, (iii) increased block size, and (iv) revised transaction fees to address current network inefficiencies.
Let’s delve into the upcoming Skuld Hard Fork’s transformative impact by examining its technical features.
Introducing a burning mechanism can have significant positive results for a blockchain network, particularly when the burning ratio is linked to network usage. Therefore, the first step to ensure the highest security and long-term network viability is to adopt a fixed reward per block.
Being the most widely adopted smart contract platform, maintaining compatibility with Ethereum wallets is of high importance. In this regard, the designed burning mechanism shares many similarities with the Ethereum burning mechanism. It includes a Base Fee that is burned and a Priority Fee distributed to the stakeholders, increasing their rewards through second-order auctions.
The introduction of fixed block rewards and the burning mechanism provides strong incentives for POS stakers, as they will see the APR of their investment increase due to the reduction in the total coins in circulation. This is particularly important as it aligns stakeholders’ interests with the network’s overall performance. To further enhance the DApp user experience on Callisto Network, the block time will be reduced by about 20% through difficulty calculation changes.
The burning mechanism and the fixed monetary policy have been implemented on the public Callisto Network testnet since November 10, 2022. Since then, the tests have been ongoing, and we are excited to announce that the initial results from the testnet have even exceeded our expectations.
The following examples illustrate how the burning mechanism can significantly impact the CLO coin supply, contributing to economic stability.
Here is a standard transaction with a transfer fee of 0.0210315 CLO. From this amount:
– 0.021 CLO has been burned.
– 0.0000315 were paid to the miners as a priority fee.
0.021 CLO were burnt during this transaction (Callisto Network testnet).
Here is an interaction with a smart contract involving a transfer fee of 0.1083893 CLO, of which 0.108 CLO were burned, and a priority fee of 0.0001623 CLO was paid to the miners.
0.108 CLO were burnt during this transaction (Callisto Network testnet).
In addition, a dedicated statistics page has been developed. It will present statistics about Callisto Network, the coins in circulation, the burning mechanism efficiency, and the dApp usability.
Screenshot of the Callisto Network Advanced Statistic page.
Screenshot of the Callisto Network Advanced Statistic page.
With the adoption of DeFi platforms, transaction bursts are becoming more frequent, which can lead to increased latency with fixed block sizes. To further enhance the user experience, a scalable network must adjust block size to network usage through variable-size blocks.
To enable the Callisto Network blockchain to handle more transactions, the block size will be increased from 8 million to 15 million when needed, for example, when a series of transactions need to be validated, which is a common scenario at DeFi, considering the high volatility of token prices.
Spamming is a problem faced by many Layer 1 networks. These transactions use network resources inefficiently, increasing the size of the blockchain and causing delays for users seeking to transact on the network. Spam transactions can dramatically increase the latency of transaction validation and lead to financial losses for dApp users.
Increasing the minimum transaction cost to 1000 gas is one solution to improve network usability. In this direction, the price of a standard transaction performed on Callisto Network will increase to 0.02 CLO, keeping this cost among the lowest and most competitive in the market. In addition, this change will help reduce network spamming, which, even if it does occur, will result in burning a significant amount of coins.
One of the Callisto network’s significant advances lies in its proactive approach to inflation management. By observing financial climates worldwide, notably the recent surge in inflation rates, Callisto Network recognizes the need to stabilize inflation in coin emissions. The burning mechanism integration solves inflationary challenges and balances the circulating supply to reach a maximum circulation of 3 billion coins.
Callisto Network responds to today’s challenges through the Skuld Hard Fork and subsequent integrations. It paves the way for a future that promises enhanced performance, economic stability, and user experience.
Callisto Network’s adaptive nature is not limited to its technical aspects. Listening to its community, understanding its needs, and adapting its roadmap based on user feedback emphasize its commitment to the interests of its community, making it a genuinely user-centric platform.
EIP-2565 “ModEXP Gas Prices.”
EIP-2718 “Typed Transaction Envelope.”
EIP-2929 “Gas Cost Increases For State Access Opcodes.”
EIP-2930 “Optional Access Lists.”
EIP 1559 “Base and Priority Fees” – Modified to align with Callisto Network needs.
