Thread by @pizzadren

🧵Time for a #Cardano Partnerchain thread, some questions yet to be answered & why it may be beneficial for #Cardano long-term.
@CardanoSaint @gotMeAHaskell

1/ Thread includes
- How Minotaur works (ELI5 level)
- How a dual-token system works (e.g. VET & VTHO)
- How babel fees work
- Summary

Keep in mind that views are of my own, and all I've written here are my educated guesses based on what's published or available.

2/ Minotaur is basically a concept of combining multiple consensus models (PoW & PoS) into validating blocks on a blockchain.
E.g. you can have #Cardano & #Ergo work together by having $ADA contribute 90% staking power & $ERG contribute 10% hashing power to validate a block.

3/ In fact, since it's multi-resource, you can also throw in another blockchain with a different consensus (e.g. #Radix 's Cerberus) into the mix so you'll have 3 highly secure & robust consensus protocols validating this blockchain.
Link to paper: iohk.io/en/research/li…

4/ While there's higher security guarantees for using multiple consensus protocols, the paper doesn't clearly state how the block rewards will be distributed to $ADA, $ERG & $XRD, since all 3 of them have different DLT designs & programming paradigms.

5/ Do all 3 blockchains with diff consensus shared a token reward for validating this multi-resource blockchain? Or do these blockchains still earn back their native tokens in $ADA, $ERG & $XRD for validating the blockchain?

6/ Answering these questions will be vital to explain how partnerchains from other ecosystems can use Minotaur to mutually benefit together.
For Midnight's case, Pi has an educated guess that there will be 3 diff consensus, but within IOG framework

https://twitter.com/pizzadren/status/1722803988813492381

7/ Speaking of block rewards, let's talk more about the tokens. It's been mentioned by Charles that there will be a dual token model, 1 unshielded as a CNT & 1 shielded and used as a fuel for the sidechain.

https://twitter.com/IOHK_Charles/status/1721606732089114700

8/ The closest comparison that we can do a case study for a dual-token model is #VeChain & #NEO. Both blockchains have a native token in $VET & $NEO, with a corresponding gas token in $VTHO & $GAS.

neo.org/neogas#tokens
vechain.org

9/ I'll cover only #VeChain for this thread since I had experience using it. The great thing about their dual-token models is you don't need to stake or delegate to receive these gas tokens, you just hold a certain amount of $VET or $NEO in your wallet and then

10/ it auto generates gas tokens inside your wallet. SS below shows how much $VTHO you're getting if you have 10k $VET in your wallet.

Paying SC execution fees with $VTHO is also extremely cheap (0.0xxx VTHO if I remembered correctly).

11/ Thus, you'll always have a huge surplus of $VTHO tokens that you can use their DEX called Vexchange & swap your $VTHO to $VET.


A dual-token model is beneficial to separate utility (tx & SC fees) & Store of Value (with governance).vexchange.io/swap

12/ Which brings back to IOG's proposal to implement dual-token model on the @MidnightNtwrk partnerchain. According to Eran Barak's interview, $DUST will be a shielded token, while an unshielded token is used to provide liquidity & security.

13/ For starters, using a dual-ledger (shielded & unshielded) actually make sense for businesses who wants to operate privately in certain scenarios while able to achieve a transparent regulatory compliance.

14/ Take for example a coffee shop that uses #Midnight blockchain to run their business.

Shielded ledger is useful to record micro-tx such as consumers buying coffee.

Unshielded ledger records a general overview of how many order are made in a day.

15/ As you don't need to tell the whole world you bought coffee, it's sensible for these types of tx to be in the shielded ledger, while regulators would wanna know how much coffee sales you made for tax purposes, so a reported no. of sales is suitable in an unshielded ledger.

16/ Back to the dual-token model, we at least have a fair understanding that $DUST will be used as a currency on the shielded ledger, but there's a lack of info on how the unshielded token works, the only info we got is that it's a CNT that prioritize liquidity & security.

17/ If we follow the #VeChain model, we can treat this CNT as $VET and generate $DUST for holding this CNT. From Charles tweet, there's a possibility that CNT has a fixed token supply while $DUST has unlimited supply with token burning, just like #VeChain

https://x.com/IOHK_Charles/status/1721606732089114700?s=20

18/ Furthermore, there's mention of a $DUST airdrop for $ADA holders, but why not mention a CNT airdrop together with $DUST too? Unless if CNT = $ADA, at least it's what I half-understood from Charles' tweet here.

https://twitter.com/IOHK_Charles/status/1721613225320448477

19/ Which brings to Babel fees.

For starters, highly recommend you rewatch the video about babel fees with limited liabilities. You'll understand how fees work in partnerchains after watching it.

20/ In summary, say 1 $ADA = 1 $DUST & assume 0.2 $DUST is the fee used to pay for the tx, a liability of -0.2 ADA is created, to which my guess is that @MidnightNtwrk SPOs will need to consume this liability to be able to complete the tx.

https://x.com/pizzadren/status/1720628350979293599?s=20

21/ I see two positive scenarios here:
- Midnight SPOs pay $ADA fee to consume the liability. +ADA fee revenue for other SPOs.
- Midnight SPOs get $DUST alongside $ADA rewards for securing the Cardano network. +ADA & DUST revenue for Midnight SPOs & delegators.

22/ So what does all of it mean? Well, I still see a lot of strong links between #Cardano & #Midnight. I think Minotaur will make a blockchain a 4th gen blockchain with it's novel multi-consensus techniques of providing security & robustness to a blockchain.

23/ How the dual-token model will work in detail for Midnight & other partnerchains still remain to be seen, but Babel fees definitely fits a better picture on how the fees in partnerchains will work that will also benefit the #Cardano SPOs.

24/ The questions left to be answered are:
- How token reward mechanisms work in a multi-resource blockchain setting where different blockchains want to join #Cardano as partnerchains?
- What's the detailed use case of the unshielded CNT token? and why not use $ADA = CNT?