This is not financial advice, and this information is purely for your entertainment only.
If read my “Ultimate Guide to Koinos” you’ll eventually find yourself wondering "What is the relationship between $KOIN and $VHP? We’ll dig deeply into both tokens, their purposes and usage in this Ultimate Guide series.
This document is packed with information and is geared towards the inquisitive reader who wishes to have an in-depth understanding to the Koinos Blockchain. This document is lengthy, and contains a significant amount of information for the reader. I suggest you read it in its entirety and post up any questions to help me make this document as easy to understand as possible.
1. Introduction to the $KOIN Token
$KOIN is the main token that users will be interacting with while using the Koinos blockchain. $KOIN possesses a unique property called Mana which is exclusive to $KOIN only. No other token can inherit this feature.
If you want direct access to Mana, it can only be done through $KOIN.
Introduction to the $VHP Token
$VHP is a token that is used exclusively by block producers. It cannot access the Mana property and it has no other primary usefulness within the Koinos ecosystem other than to fuel block production. $VHP is an acronym for Virtual Hash Power.
Block producers are required to have $VHP to produce blocks.
2. The Creation and Destruction of $KOIN
For all intents and purposes,
$KOIN can only be created through inflation via Proof of Burn mining.
Newly minted $KOIN is created and rewarded to block producers who create valid blocks. Valid blocks are only those blocks that end up on main chain. Orphaned blocks do not count.
However, there exist one other method to create $KOIN that is extremely limited in scope. Users can claim main net $KOIN if they held ERC-20 KOIN during the October 31, 2022 snapshot. If a user did not hold tokens during the snapshot or if you bought tokens after the snapshot, then claiming does not apply to them.
In total, there are 99,738,744.02587864 $KOIN that can be claimed. As of this writing, 39,876,022.65737386 has been claimed, or about 39.9%.
You can find this information a the top of the claim website.
Once all 99,738,744.02587864 tokens are claimed, the only new way to get more $KOIN is through inflation as I described before.
$KOIN can be destroyed by burning the token via the “burn” command. Unlike other protocols, burning $KOIN is not simply sending it to a null address. Instead, burning $KOIN results in the removal of $KOIN from the $KOIN token supply and automatically triggers the creation of the $VHP token, which is issued to the wallet defined by burner.
3. The Creation and Destruction of $VHP
There is only ONE native way to create $VHP.
The user must burn their $KOIN and the network will automatically issue $VHP to them.
The exact method on how this is done can be found at KoinosGuide.com which details the setup and operation of Koinos mining nodes.
Bare in mind that $VHP is a fungible token, so users may also obtain it from another user who has already burned their $KOIN. This obviously does not change the total_supply of $VHP, just who holds it.
$VHP is continuously destroyed at each and every block.
When a node produces a valid block, it will cost the block producer a calculated amount of $VHP.
The $VHP is also burned and the block producer will gain the exact amount of $KOIN that was consumed PLUS ADDITIONAL $KOIN as a reward for producing that block as I previously described above.
Note, that $VHP held in a wallet does nothing, much like putting gas in a car does not consume it.
The Virtual Supply
By definition, the total supply of $KOIN plus the total supply of $VHP is called the Virtual Supply.
The virtual supply has only 1 purpose and that is to calculate the block reward. Because all $VHP is created from the destruction of $KOIN, the Virtual Supply simply adds $KOIN and $VHP together.
The simple calculation to determine block rewards is as follows:
Bare in mind that this is ONLY for the conditions in which the virtual supply is 100,000,000. Since the virtual supply changes at every block, the block reward also changes based on the virtual supply.
The Value of TIME
Time is a massive part of block production in Koinos that needs to be discussed. If a user participates in Koinos block production and burns their $KOIN tokens for $VHP, there is only 1 native way to turn the $VHP back into $KOIN, which is by producing blocks. On average this process should take 12 months, however it can be longer or shorter depending on how much $VHP is actively used in mining. I will go into this in my next ultimate guide about Proof of Burn mining.
The main point I want to share with you is that you should NOT expect to be able to easily go from $VHP back to $KOIN. Mining is a commitment and if you burn a lot of $VHP, you’ll find that you wont have much $KOIN to play with.