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V. Tokenomics of VOTs
In the Automated Market Maker (AMM) voting smart contract, a mathematical correlation exists between the rising value of VOTs and the expansion of their issuance volume. As more VOTs are minted, their price goes up, and the price remains stable when they are sold. This fluctuation in value follows a specific curve:
Upvote price vs. Total VOTs for ToP
On this graph, we can see the dependency between Upvote Initial Price (represented on the vertical Y-axis) and Total VOTs (displayed on the horizontal X-axis). The depicted curve is derived from a specific formula:
The Upvote Initial Price is the kickoff price for VOTs in each new round of voting, rallying behind a ToP. This starting price sets the stage for calculating the number of VOTs users obtain. The Upvote Initial Price springs into action and grows with each POPX-to-VOTs exchange.
Total VOTs embody the grand sum of VOTs issued by the smart contract since its very first exchange. Total VOTs comprise VOTs in circulation, meaning the tokens sponsors currently hold, as well as all sold or deactivated VOTs. For the initial upvoting round, there are zero VOTs in play, making the Upvote Initial Price for the first sponsor a clean slate - a flat zero.
To understand the number of VOTs a user will receive for the deposited amount of POPX, let's refer to the graph below:
Estimating the quantity of VOTs a sponsor acquires through the minting process
On the given graph, the sum allocated for upvoting a ToP - Sponsored in POPX - is depicted by the shaded area of the figure under the curve:
- On the left side (along the X-axis), the figure is bounded by the initial Total VOTs value prior to upvoting, which corresponds to the Upvote Initial Price (on the Y-axis) before upvoting.
- On the right side (along the X-axis), the figure is constrained by the aggregate volume of Total VOTs following upvoting, which corresponds to the future Upvote Initial Price (on the Y-axis) resulting from upvoting.
Our goal is to ascertain the length of the bottom side of this figure, running parallel to the X-axis. This length represents the desired VOTs quantity a user will receive upon purchase.
The emission volume of VOTs relies solely on the amount of POPX tokens being exchanged. In order to compute the VOTs quantity, we just need to know the total number of coins users have spent on acquiring VOTs or Sponsored in POPX, as well as the Total VOTs within the token before upvoting:
Influence refers to the combined value of all VOTs acquired by a user and is subject to fluctuations in the current Downvote Price:
The Downvote Price represents the average price at which users can initiate a downvote at any given time. A new Downvote Price is established after each upvoting round. The Downvote Price is calculated as the ratio of the ToP Cap to the number of VOTs in circulation (i.e., owned by all Sponsors):
When a sponsor initiates a downvoting action, they return some or all of their VOTs to the AMM by exchanging them for POPX at the prevailing Downvote Price. As a result of downvoting, the ToP Cap (Popularity Ranking) decreases by the amount of POPX coins paid to the user by the AMM smart contract. The returned VOTs are deactivated and removed from circulation, thereby reducing the total number of VOTs in circulation. During downvoting, the ToP Cap and the number of VOTs in circulation decrease proportionally, allowing the Downvote Price to remain at the same level after selling VOTs.
This section is subject to additions and modifications. Stay tuned for updates.