$KWH Distribution
React’s token model distributes value back to resource contributors in the form of KWH and stablecoins (initially USDC). Value distribution to resource contributors takes two forms: baseline incentives, and market compensation. Baseline incentives, in the form of newly minted KWH, are issued to resource contributors by the network to incentivize early participation and network growth. Over time, market compensation will overtake baseline incentives to compensate resource contributors, removing the need to continuously inflate the KWH supply. Market compensation is based on demand for the network’s data and energy services, as detailed in the next section. Demand for these services will be paid via Data Tickets, which are minted from burning KWH tokens. The React Foundation will facilitate this process for end users to alleviate them from the operational complexities of managing crypto infrastructure.
One example of demand for the network’s services is a market participant building a VPP pool on top of React. When users opt-in to a market participant‘s VPP pool, the compensation terms will be outlined by the operator. The operator then pays the network in USD according to these terms. React bridges this USD on-chain and settles it with individual participants as USDC on-chain. As a result, contributors will earn a mix of both KWH tokens and stablecoins for their participation.
This section highlights the initial parameters for KWH token distribution. As a complex system, it is inevitable that React’s token economy may change over time. For example, the community may need to tweak the multipliers as the network develops and the community is better able to determine how each asset should be weighted. The community will be instrumental in ensuring React’s token model evolves appropriately.
Baseline Issuance
Baseline incentives reward resource contributors for connecting data and energy devices to the network. The rewards a resource contributor earns are a function of how many connections they maintain per energy monitor, as well as how active they are in community growth and network building.
The baseline token issuance schedule is set to run for 8 years. Token issuance will slightly increase over the first 3 years, and then linearly decline at a 30% rate for the following 5 years. React is a digital network anchored to the physical world, where supply chains and other physical constraints can impact network growth. The slight increase in years 1-3 helps ensure rewards remain compelling while the network bootstraps itself into existence, before market forces take over the bulk of network compensation.
Baseline incentives are issued weekly. A weekly release schedule balances reward frequency and transaction fee optimization.
To qualify for baseline incentives, a resource contributor must deploy a React-whitelisted energy monitor. Ubiquitous real-time energy data is the key to unlocking distributed energy and the connected grid.
Baseline incentives payments to each resource contributor are defined by the amount of React Incentive Credits (RICs) earned in each weekly epoch. RICs are earned by the following:
Energy Monitor Baseline
Connected DER Multipliers
Referral Multiplier
Asset Reputation Scores
An individual resource contributor’s weekly RIC balance is compared to the total network’s earned RICs to determine the percent of the weekly token emissions to which they are entitled. To illustrate, if an individual resource contributor earned 10 RICs in a week and the entire network earned 1,000, the resource contributor would be entitled to 1% of the weekly reward distribution.
Each connected energy monitor earns a baseline of 1,000 RICs. This baseline is modified by the following multiplier schedule to define a resource contributor's total weekly RICs.
NOTE: These multipliers will likely evolve and change over time as we continue to develop and tweak the token model. Token-incentivized infrastructure projects are complex systems. We will continue to refine this model to create the optimal value distribution system.
Each DER multiplier is given for assets that are connected to the same building as the energy monitor. For example, a building with an energy monitor, a solar system, and a 5 kW battery would earn 7,500 points in a given period, all else equal.
React seeks to reward those that are aligned with its long-term vision of building a better energy system. The active multipliers seek to reward those specifically engaged in network value creation.
Each community member will be given a referral code. Community members that are active in engaging new users to sign up will earn a 1.5x multiplier per referral for the following 4 weeks. To illustrate, if the resource contributor we defined earlier (7,500 RICs) referred 2 energy monitor deployments, they would earn 16,875 RICs for the next 4 weeks (7,500 * 1.5 * 1.5). The most active community members will be able to generate significant earnings through referral multipliers.
Reputation scores ensure honesty among contributors. Reputation points are deducted for non-compliance, either through Proof-of-Energy failures or a failure to dispatch. Enough failures can result in a reputation score going to zero, which would imply zero token rewards. Similarly, a contributor will increase their reputation score by responding to Proof-of-Energy challenges and dispatch events.
Reputation scores have a maximum weighting of 1.0. A contributor with maximum reliability will not earn points above their baseline for reputation, but an unreliable asset will quickly degrade their point base. The goal is to capture the concept that reputation is difficult to earn, but easy to destroy.
Each instance of noncompliance with a Proof-of-Energy challenge or a dispatch instruction results in a reputation score weighting reduction by 1/3rd. Any reputation score below 0.33 rounds to zero. To illustrate, a single failure to respond to an energy command would result in an asset’s reputation score falling to 0.66. A second, consecutive failure would result in a weighting score decreasing to 0.33. A third consecutive failure results in a weighting score decreasing to 0. An asset’s point base quickly degrades for noncompliance, ensuring response integrity in React's asset base.
Responding positively to an energy instruction will increase an impaired reputation score by 5 points, to a maximum of 1. An asset with a reputation weighting of 0.66, after positively responding to an instruction, would increase its weighting to 0.71. It is intentionally more difficult to increase reputation than decrease it to ensure maximum responsiveness.
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