Definition: In the Haircomb ecosystem, supply limits refer to the fixed maximum amount of COMB tokens that can ever exist. These limits are critical for maintaining scarcity, ensuring that the value of the token can potentially rise over time, and aligning with Bitcoin’s finite supply principles.
Purpose: The primary purpose of supply limits is to prevent unchecked inflation of the COMB token, ensuring long-term economic stability. By capping the supply, Haircomb aims to mimic Bitcoin’s model of scarcity while offering additional security and quantum resistance.
Supply Cap
Total Supply: The total maximum supply of COMB is capped at 12,423,823.39976706 COMB. This fixed supply is enforced through the Haircomb consensus protocol, and no more tokens will be created once the supply limit is reached.
Distribution Plan: COMB is distributed through the Combbase reward system, which is tied to Bitcoin block heights. The reward starts high and gradually decreases as more blocks are mined, with the reward reaching zero at block height 21,835,313. The supply distribution is sub-exponential, meaning it decays at a slower rate than Bitcoin’s halving model. This ensures the slow release of tokens over a prolonged period, incentivizing participation for centuries.
Inflation and Deflation
Inflation: Haircomb’s inflation is carefully managed through the decreasing block rewards issued with each Bitcoin block. The reward mechanism follows the formula MAX(2.1 - FLOOR((LOG(h) / LOG(2))^6) / 100000000, 0) where h is the Bitcoin block height. Over time, this mechanism leads to a steady reduction in the rate of new COMB creation, ensuring a deflationary pressure as the network matures.
Deflation: Deflationary mechanisms, while not actively enforced like coin burns, naturally occur as the issuance of new COMB diminishes and fewer rewards are distributed over time. This scarcity, combined with the fixed supply cap, ensures deflationary tendencies in the long run, similar to Bitcoin’s halving events.
Examples
Supply Projections:
At block height 1: 2.10000000 COMB reward.
At block height 2: 2.09999999 COMB reward.
At block height 21,835,313: 0.00000000 COMB reward, with the total supply reaching its maximum cap of 12,423,823.39976706 COMB.
Historical Data: The 2019-11-06 Supply Fix Hard Fork corrected an error in the initial supply model. Before the fork, the total COMB supply was 12,423,823.18141419, approximately 21835287 Nats (smallest units of COMB) short of the true supply. This hard fork ensured that future rewards properly aligned with the intended supply formula.
Purpose: The reward distribution mechanism in Haircomb serves to incentivize miners and participants to secure the network and validate transactions. By tying the issuance of COMB to Bitcoin’s mining process, Haircomb ensures that rewards are distributed fairly among active network participants.
Types of Rewards:
Combbase Rewards: The primary reward is distributed through the Combbase system, where miners claim COMB by finding unique P2WSH outputs in Bitcoin blocks.
Transaction Fees: Although not yet fully implemented, future iterations of Haircomb may allow miners to earn fees from COMB transactions and smart contracts.
Distribution Mechanism
Reward Allocation: Rewards are allocated to the first valid, previously unseen P2WSH output in each Bitcoin block. The amount of COMB distributed is based on the block height, with rewards decreasing over time.
Reward Schedule: The reward schedule follows a decaying model, with rewards starting at 2.1 COMB per block and gradually decreasing over time. This model ensures a long-term, sub-exponential distribution of COMB that can sustain mining incentives for centuries. There are no halving events, but the decay is controlled by the logarithmic formula mentioned above.
Factors Affecting Distribution
Mining Difficulty: As Bitcoin’s mining difficulty increases or decreases, the rate at which COMB is claimed may vary. However, the supply cap and reward decay ensure that no additional COMB is created beyond the maximum supply.
Network Activity: The frequency and volume of P2WSH outputs directly impact how quickly rewards are claimed. High network activity may lead to faster reward claims, while periods of low activity might slow down the distribution process.
Examples
Reward Calculation:
At block height 1: 2.10000000 COMB is rewarded for the first valid P2WSH output.
At block height 16383001: 0.20530062 COMB is rewarded (a slow decrease over millions of blocks).
Scenario Analysis:
If Bitcoin block production remains stable, Haircomb rewards will steadily decrease. However, if network congestion slows down Bitcoin block times, the distribution of COMB will also slow, potentially extending the mining incentive period.
Further Reading
Technical Papers:
Haircomb Whitepaper: Detailed information about Haircomb's reward system and supply mechanics.
Supply Fix Fork Analysis: An analysis of the 2019-11-06 hard fork that corrected the supply discrepancy.