erc20-demurrage-token/README.md

# RedistributedDemurrageToken

## Use Case
* Network / Basic Income Token
  * 100 Sarafu is distributed to anyone in Kenya after user validation by the owner of a faucet which mints new Sarafu.
  * Validated users are those that validate their phone number in Kenya.
  * A monthly Sarafu holding tax aka ([demurrage](https://en.wikipedia.org/wiki/Demurrage_(currency))) of 2% is deducted from users 
  * Each month (after a number of blocks) the total amount tax is distributed evenly out to _active_ users.
    *  any single transaction by a user is considered _active_ (heartbeat) (possibly add minimum size of heartbeat in constructor (TODO))
  * This is meant to result in a disincentivization to hold (hodl) the Sarafu token and increase its usage as a medium of exchange rather than a store of value.
  * This token can be added to liquidity pools with other ERC20 tokens and or Community Inclusion Currencies (CICs) - and thereby act as a central network token and connect various tokens and CICs together.
  * Example 
    -  With a demurrage of 2% - If there are 10 users all with balances of 1000 Sarafu and only 2 of them trade (assume they trade back and forth with no net balance change). 
    - Then the resulting balances after one tax period of those two trading would be 1080 Sarafu while the remaining non-active users would be 980 Sarafu. If this behaviour continued in the next tax period, with the same two users only trading (with no net balance changes), they would have 1158.39999968 Sarafu and those users that are not trading would have their balances further reduced to 960.40 Sarafu. If this continued on ~forever those two active trading users would have the entire token supply and the non-trading users would eventually reach a zero balance.
    - this example calculation for 3 tax periods can be found here: https://gitlab.com/grassrootseconomics/cic-docs/-/blob/master/demurrage-redist-sarafu.ods


## Variables

* Inputs to Constructor (Set only once during contract deployment can't be changed )  
  * `Demurrage` aka Decay amount: A percentage of token supply that will be charged once per - aka `period` and evenly redistributed to _active_ users 
  * Demurrage Period (blocks)- aka `period`: The number of blocks (equivalent to a time frame) over which a new Holding Fee is applied and redistributed. 
  * Inflated Balance: The inflated balance of each user is stored for bookkeeping.
  * Number of Decimals: Resolution on token (TODO) (Default 6)
  * Minimum Activity Volume: (TODO) the minimum transaction amount to be considered active
  * Sink Token Address: Rounding errors and if no one trades the tax goes to this address


## Ownership

* Contract creator is owner
* Ownership can be transferred (also to ownership void contract "no more changes can be made")


## Mint

* Owner can add minters
  - A faucet contract would be a minter and choose the amount of tokens to mint and distribute to new _validated_ users.
  - The interface says the amount and is at the caller's discretion per contract call. _validation_ is outside of this contract.
* Minters can mint any amount


## Demurrage
* Holding Tax (`demurrage`) is applied when a **mint** or **transfer** is triggered for first time/block in a new `period`; (it can also be triggered explicitly)
  - Supply _stays the same_.
  - Updates `demurrageModifier` which represents the accumulated tax value and is an exponential decay step (of size `demurrage`) for each `period`
    - `demurrageModifier = (1-demurrage)^period` 
      - e.g. a `demurrage` of 2% at a `period` of 1 would be give a `demurrageModifier = (1-0.02)^1 = 0.98`.
      - e.g. a `demurrage` of 2% at a `period` of 2 would be give a `demurrageModifier = (1-0.02)^2 = 0.9604`.
* All client-facing values (_balance output_ , _transfer inputs_) are adjusted with `demurrageModifier`.
  - e.g. `_balance output_ = user_balance - user_balance * demurrageModifier`
* Edge case: `approve` call, which may be called on either side of a period.


## Redistribution

* One redistribution entry is added to storage for each period;
  - When `mint` is triggered, the new totalsupply is stored to the entry
  - When `transfer` is triggered, and the account did not yet participate in the `period`, the entry's participant count is incremented. 
* Account must have "participated" in a period to be redistribution beneficiary.
* Redistribution is applied when an account triggers a **transfer** for the first time in a new period;
  - Check if user has participated in `period`. (_active_ user heartbeat)
  - Each _active_ user balance is increased by `(total supply at end of period * demurrageModifier ) / number_of_active_participants` via minting
  - Participation field is zeroed out for that user.
* Fractions must be rounded down (TODO)
  - Remainder is "dust" and should be sent to a dedicated "sink" token address (TODO)
  - If no one is _active_ all taxes go to the same sink address


## Data structures

* One word per account:
  - bits 000-159: value
  - bits 160-255: period
  - (we have more room here in case we want to cram something else in)
* One word per redistribution period:
  - bits 000-055: period
  - bits 056-215: supply
  - bits 216-253: participant count
  - bits     254: Set if individual redistribution amounts are fractions (TODO)
  - bits     255: Set if "dust" has been transferred to sink (TODO)


## QA

* Basic python tests in place
* How to determine and generate test vectors, and how to adapt them to scripts.
* Audit sources?