Introducing (M)Pond: The Marlin Network Tokens

Marlin is a layer-0 protocol focused on network-layer performance and security. Think of it as SilverPeak for blockchains or Akamai for decentralized storage. This means that Marlin could be a backend to Polkadot, Near, Solana, xDai, Matic, Filecoin - at the same time, supporting them from the ground up. Check out this article for a high level overview.

Validators, miners and communities of different blockchains are thus important stakeholders in the Marlin network. After several months of hard work, we’re happy to share the distribution mechanism of our network tokens POND and MPond to facilitate inclusive governance, provide strong economic security and foster development of a critical piece of web 3.0 infrastructure.

Design Rationale

Being at the base layer imposes strict requirements on Marlin to provide strong security and decentralization guarantees expected by blockchains. Not unlike blockchain platforms themselves which require years of real-world testing to display their characteristics before an ecosystem develops around them, the deployment of the Marlin network is the first step in its goal to establish itself as the de facto incentivized networking layer.

Incentives and consequently the nature of token ownership affect the evolution of a network. Hence, it is important to ensure that tokens are distributed in a way that ensures that the network develops to meet its envisaged purpose. Some factors that went into the design of the Marlin Token distribution include:

  1. Geographical diversity: Geographical clustering and colocation of nodes harms the censorship-resistance properties required by users.
  2. Economic security: Protocols building on top of another are only as secure as the one they build on top of.
  3. Cross-community distribution: Token ownership shouldn’t be dominated by any one group of whales, VCs, or the team.
  4. Illiquid governance: It shouldn’t be easy to bribe, borrow or quickly accumulate and dispose off governance rights in the network.
  5. Usage: Token ownership should incentivize active participation.

The Network Tokens

The Marlin economy uses two Ethereum-based tokens - POND and MegaPOND (MPond). While POND is initially transferable, MPond is not (with a few exceptions such as the token distribution contract and transfers to/from a bridge). The bridge allows conversion from 1,000,000 POND to a 1 MPond and vice versa while imposing certain restrictions (described later).

The total supply of POND is 10 billion. Thus, there can only exist up to 10,000 MPond.

Pond and MPond total supply

As an example (find actual numbers in further sections): if there exist 6 billion POND in circulation, 6000 MPond is locked in the bridge to back future conversions. Correspondingly, 4 billion POND is locked in the bridge to back the 4000 MPond distributed amongst users.

Note 1: MPond is also referred to as LIN.

Note 2: The MPond-POND design is similar to the MSRM-SRM design used by Serum.

The Token Utility

A Marlin node relays and caches data. Every Marlin node is required to stake at least 0.5 MPond. The node receives staking rewards and fees based on its performance. Both MPond and POND can be delegated towards other Marlin nodes. In such cases, delegators share a portion of their rewards with the node operator.

MPond stakes may receive a different rate of staking reward as compared to POND delegators. Initially, they are set to the same values but may be modified via governance. MPond holders also gain the right to participate in governance by making or voting on proposals. Discussions on the first proposal is already live at https://research.marlin.pro/t/proposal-1-change-the-calculation-of-mpond-distributed-to-different-blockchain-communities.

The Bridge

Conversion between POND and MPond is facilitated through a permissionless bridge. Anyone, at any time, can lock x million POND in the bridge and receive x MPond or lock x MPond and receive x million POND.

It is to be noted, however, that while the conversion from POND to MPond is instantaneous, the bridge enforces a delay when converting from MPond to POND. The delay is implemented via two parameters, d and l, which allows only l % of MPond in an account to be converted to POND in an interval d. Both d and l can be updated via on-chain governance.

This setup ensures that no malicious actor can easily acquire governance rights within the system. It also guarantees that there’s always a threshold amount of economic security provided by the system. More information on the bridge is available at https://www.marlin.pro/docs/staking/token.

Token Distribution

Marlin Tokens, POND and MPond, are cumulatively allocated for different stakeholders as per the pie chart shown below:

Marlin Token Distribution

In particular, the following participants are distributed tokens in the form of MPond to enable their participation in the upcoming Larvanet:

  1. Validators and delegators of various chains receive 1600 MPond via FlowMint [Note 3]
  2. Core team members receive 1000 MPond
  3. Advisors are allocated 300 MPond
  4. 1723 MPond have been sold in several private rounds

Providing validation services even during the Larvanet incurs day-to-day operational expenses. This is met by a transactional token POND which can be exchanged amongst users to enable new users to join the Larvanet. POND is distributed amongst service providers in the network as participation rewards:

  1. 2.184 billion POND tokens are reserved towards staking rewards to incentivize node operators to participate in the network
  2. 3.193 billion POND tokens are allocated to various ecosystem Service Providers including but not limited to validators, staking infrastructure providers, community evangelists, consultants and developers

The DAO managed by MPond token holders is expected to eventually take control of the latter.

It is to be noted that the POND token contract is Mintable with a supply cap of 10 billion. Not all of POND's maximum total supply is minted at the beginning. A fraction of it (46.23%) is to be locked in the bridge to back the MPond supply. [Note 4]

Note 3: FlowMint comprises 16% of the Total Supply or approximately 20% of the Genesis Supply which excludes staking rewards.

Note 4: The 4.623 billion POND required for the bridge (to back MPOND) will be minted later to provide sufficient time for a public review of the bridge codebase. There have been 3 rounds of audits already but there's no harm in allowing further time for examination given the MPond→POND conversion via the bridge doesn't open until at least 6 more months (the Smoltnet). This setup enables MPond holders to participate at an early stage of the network and provide feedback on the upcoming Larvanet and Frynet while still being rewarded for their effort.

POND Release Schedule

POND has an initial Total Supply of 3.184 billion and a potential Circulating Supply of up to 1 billion. But 2.184 billion are staking rewards vested over 24 months and which start with Larvanet stage going live. The 10% unlocked tokens (of the 10 billion total supply) are distributed in the following ratios amongst ecosystem service providers:

  1. Validators (4.33%): 433 million tokens are distributed amongst eggnet participants: developers and validators who helped test the network, relay blocks, and improve the ecosystem as a whole for the past few weeks. Thank you!
Marlin Node Coverage
  1. Developers and Community, TBA (5.67%): 567 million tokens are not yet allocated and are available initially to reward developers and participants engaging in the development of the peripheral tools, increasing awareness and growing the ecosystem. We expect it to be decided by community members on how to further allocate these funds.

There is no team, liquidity fund, or any other portion of liquid POND that is available to the team or SAFT participants in the first few months. We have taken this approach to make the launch community-oriented, and to encourage developers to join Marlin on its mission!

Pond and MPond

The initial circulating supply is thus going to start at 433 million and can expand up to 1 billion in the first 6 months (excluding staking rewards). The remaining 2.184 billion tokens generated as part of the initial total supply is to be moved to the staking contracts once the Larvanet is live.

MPond Release Schedule

4623 MPond as per the allocation shared earlier is released according to the following schedule:

  1. Team: Vested over 24 months in the form of MPond at half-yearly intervals with a 1 year cliff.
  2. Advisors: Vested over 12 months in the form of MPond at half-yearly intervals.
  3. Stake Drop: Vested linearly over 24 months in the form of MPond.
  4. Private sale: Vested over 12 months in the form of MPond at half-yearly intervals.

As a result, 4.623 billion POND will be minted and locked on the bridge in the future to back these MPond if they were to convert to POND. MPond is initially non-transferrable but can be turned transferrable after a corresponding governance proposal is successfully passed. The success of the governance proposal would depend on the maturity and adoption achieved by the network ensuring long-term alignment of core developers and early backers.

In the meantime, rewards for staking and other kinds of possible engagements are distributed in the form of POND incentivizing MPond holders to be active participants in the network.

Effective POND Release Schedule

MPond converted to POND cannot increase POND's total supply beyond 10 billion as described earlier. However, it can change POND's and MPond's circulating supply. In order to ensure some predictability in the circulating supply of POND and economic value locked in MPond, the Marlin protocol uses two governance parameters, d and l mentioned earlier on the section about the Bridge: https://www.marlin.pro/docs/staking/token/#bridge.

These parameters being governance controlled ensure that different factors such as adoption, level of economic security required, unforeseeable conversions from POND to MPond can be accounted for to prevent unhealthy changes to the economic guarantees provided that may affect protocols relying on Marlin.

Conclusion

Such a partially dual token model with a governance controlled barrier is fairly unique to the best of our knowledge. It ensures recovery of operating costs and provides only as much liquidity as is required for healthy functioning of the network. Simultaneously, the idea of semi-liquid governance creates strong incentives for the team and early backers to be aligned with the community in supporting network adoption in the long run. All parameters are governed by MPond holders but require them to justify their actions making them accountable to the community at large.

Speaking of community, we believe that the FlowMint stakedrop coupled with initial validator distribution amongst Eggnet participants will result in tokens being distributed to all kinds of ecosystem participants allowing anyone, anywhere to be able to run a Marlin node without much barrier. The token model and its distribution seems to meet the goals of wide distribution, economic security, illiquid governance and active participation initially envisaged. We hope this turns out to be an interesting experiment if executed well. The Larvanet, the reason behind the token distribution, begins in a couple of weeks.

Risks

You acknowledge and agree that there are numerous risks associated with purchasing MPond/POND, holding MPond/POND, and using MPond/POND for participation in the Marlin network. In the worst scenario, this could lead to the loss of all or part of the MPond/POND which had been purchased. IF YOU DECIDE TO PURCHASE MPond/POND, YOU EXPRESSLY ACKNOWLEDGE, ACCEPT AND ASSUME THE FOLLOWING RISKS:

  1. Uncertain Regulations and Enforcement Actions: The regulatory status of MPond/POND and distributed ledger technology is unclear or unsettled in many jurisdictions. The regulation of virtual currencies has become a primary target of regulation in all major countries in the world. It is impossible to predict how, when or whether regulatory agencies may apply existing regulations or create new regulations with respect to such technology and its applications, including MPond/POND and/or the Marlin network. Regulatory actions could negatively impact MPond/POND and/or the Marlin network in various ways. Marlin Labs (the "Company"), the Distributor (or its affiliates) may cease operations in a jurisdiction in the event that regulatory actions, or changes to law or regulation, make it illegal to operate in such jurisdiction, or commercially undesirable to obtain the necessary regulatory approval(s) to operate in such jurisdiction. After consulting with a wide range of legal advisors and continuous analysis of the development and legal structure of virtual currencies, a cautious approach will be applied towards the sale of MPond/POND. Therefore, for the token sale, the sale strategy may be constantly adjusted in order to avoid relevant legal risks as much as possible. For the token sale, the Company and the Distributor are working with Bayfront Law LLC, a boutique corporate law firm in Singapore with a good reputation in the blockchain space.
  2. Inadequate disclosure of information: As at the date hereof, the Marlin network is still under development and its design concepts, consensus mechanisms, algorithms, codes, and other technical details and parameters may be constantly and frequently updated and changed. Although this white paper contains the most current information relating to the Marlin network, it is not absolutely complete and may still be adjusted and updated by the Marlin team from time to time. The Marlin team has no ability and obligation to keep holders of MPond/POND informed of every detail (including development progress and expected milestones) regarding the project to develop the Marlin network, hence insufficient information disclosure is inevitable and reasonable.
  3. Competitors: Various types of decentralised applications and networks are emerging at a rapid rate, and the industry is increasingly competitive. It is possible that alternative networks could be established that utilise the same or similar code and protocol underlying MPond/POND and/or the Marlin network and attempt to re-create similar facilities. The Marlin network may be required to compete with these alternative networks, which could negatively impact MPond/POND and/or the Marlin network.
  4. Loss of Talent: The development of the Marlin network greatly depends on the continued co-operation of the existing technical team and expert consultants, who are highly knowledgeable and experienced in their respective sectors. The loss of any member may adversely affect the Marlin network or its future development. Further, stability and cohesion within the team is critical to the overall development of the Marlin network. There is the possibility that conflict within the team and/or departure of core personnel may occur, resulting in negative influence on the project in the future.
  5. Failure to develop: There is the risk that the development of the Marlin network will not be executed or implemented as planned, for a variety of reasons, including without limitation the event of a decline in the prices of any digital asset, virtual currency or MPond/POND, unforeseen technical difficulties, and shortage of development funds for activities.
  6. Security weaknesses: Hackers or other malicious groups or organisations may attempt to interfere with MPond/POND and/or the Marlin network in a variety of ways, including, but not limited to, malware attacks, denial of service attacks, consensus-based attacks, Sybil attacks, smurfing and spoofing. Furthermore, there is a risk that a third party or a member of the Company, the Distributor or its affiliates may intentionally or unintentionally introduce weaknesses into the core infrastructure of MPond/POND and/or the Marlin network, which could negatively affect MPond/POND and/or the Marlin network. Further, the future of cryptography and security innovations are highly unpredictable and advances in cryptography, or technical advances (including without limitation development of quantum computing), could present unknown risks to MPond/POND and/or the Marlin network by rendering ineffective the cryptographic consensus mechanism that underpins that blockchain protocol.
  7. Other risks: In addition, the potential risks briefly mentioned above are not exhaustive and there are other risks (as more particularly set out in the Terms and Conditions) associated with your purchase, holding and use of MPond/POND, including those that the Company or the Distributor cannot anticipate. Such risks may further materialise as unanticipated variations or combinations of the aforementioned risks. You should conduct full due diligence on the Company, the Distributor, its affiliates and the Marlin team, as well as understand the overall framework, mission and vision for the Marlin network prior to purchasing MPond/POND.

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