XFUEL Explanation:

Interview with XTRABYTES Developer Borzalom on XFUEL:

https://blog.xtrabytes.global/xtrabytes-news/interview-xtrabytes-developer-borzalom/

XFUEL is a development token on the XTRABYTES blockchain, that serves as a way to fund XTRABYTES, while encouraging developers and others to participate in the project by offering a monetary incentive to push the XTRABYTES project forward. XFUEL is a real world solution where participants are paid for the hard work and time they put into this project with a token, that will only have worth if the project ultimately succeeded, and thus provides a strong incentive to see the project through.

XFUEL was created, because developers and other contributors couldn't be paid in XBY, since XBY is not an ICO and therefore had no funds initially reserved for salaries and bounties, and everyone participating had to buy XBY themselves, no one got them for free, so they are paid in XFUEL on a 1:1 ratio with XBY's USD valuation (more on this later).

Once X-CHANGE goes live, XBY/XFUEL will be the first pair available for trading, until then it can be traded on the forum or Discord through escrow.

What is the use of XFUEL?

From the whitepaper:

“The total supply of XTRABYTES will always be fixed at 650,000,000 XBY coins, as no XBY will be mined or added to the supply by any means. However, the total coins in circulation will be dynamically fluctuating as node owners register and break their STATIC nodes. When coins are stored in registered STATIC nodes, this removes them from the total available circulation, increasing the value of the coins still in circulation, as the available XBY supply shrinks. As all level 1, 2 and 3 STATICs become registered, our total circulating supply of XBY will become depleted. To counter this and to fund development, XFUEL ( an internal utility coin/token ) has been created. With XFUEL we are able to fund the development of XTRABYTES. XFUEL is an internal coin/token that can ONLY be earned ( initial emission ) and can later be traded on X-CHANGE. The final, intended purpose of XFUEL, is to allow for the entire network of STATIC nodes to be filled, while still maintaining a healthy circulating supply of XBY. The full STATIC network is made up of 3 levels, which contain a total of 3584 STATIC nodes. These nodes are capable of holding deposits which exceed the initial 650 million coins, therefore we have implemented a protocol which consists of a blend of XBY and XFUEL, where XFUEL is limited to approx. 33% of the deposit. The target result is to fill the entire network and maintain a circulating balance of +/- 100,000,000 XBY.”

In addition to greater node rewards payout, more uses for XFUEL have yet to be determined by the founders and management.

Source: https://blog.xtrabytes.global/xtrabytes/xby-community/xtrabytes-ceo-answers-your-questions/

So XFUEL can be used to fill exactly one third of a STATIC node (no more no less), which will give the node greater reward weight, and there could be other uses in the future, for now still undetermined. Since all the nodes cannot be registered using just XBY, a portion of the nodes will have to be those filled partially with XFUEL. Here is the math behind the XBY network:

Required deposits of STATIC nodes:

Level 1 is: 500,000 XBY or 330,000 XBY + 170,000 XFUEL

Level 2 is: 250,000 XBY or 170,000 XBY + 80,000 XFUEL

Level 3 is: 125,000 XBY or 85,000 XBY + 40,000 XFUEL

So, for a network with all the nodes filled with only XBY it would take:

512 L1 x 500,000 XBY + 1024 L2 x 250,000 XBY + 2048 L3 x 125,000 XBY = 768 million XBY

XBY total supply: 650 million XBY

Missing XBY: 118 million

The missing XBY will be replaced by XFUEL, but, since around 100 million XBY is also planned to remain in circulation, ergo not locked in nodes, that XBY will also have to be replaced by XFUEL.

So a blended network has been envisioned by the developers:

Blended % of XBY/XFUEL = 67% / 33%

XBY deposited in nodes when 100% of nodes are partially filled with XFUEL:

MAXIMUM Blended XBY deposit for Level 1 network = 168,960,000 XBY - 512 STATIC nodes

MAXIMUM Blended XBY deposit for Level 2 network = 174,080,000 XBY - 1024 STATIC nodes

MAXIMUM Blended XBY deposit for Level 3 network = 174,080,000 XBY - 2048 STATIC nodes

Total MAXIMUM Blended XBY deposit on STATIC network: 517,120,000 XBY

Total MAXIMUM XFUEL deposit on STATIC network: 250,880,000 XFUEL

Total deposit on the XBY network: 768,000,000 XBY + XFUEL

XBY remaining in circulation: 132,880,000 XBY

So around 133 million XBY will remain in circulation once all the XFUEL is locked into nodes, and the total planned supply of XFUEL is around 250 million. These are the numbers most of us have in mind when thinking about XBY's circulating supply »after« node lockup, but there are a few important things we tend to forget when making the calculations, because this is the network in its final form, once all the nodes are registered and all the XFUEL is released into circulation, and it's the theoretical form of the network, in reality there are no mechanisms in place to ensure these numbers are abided to.

First of all, the node registration won't be a time-limited process, but it will remain open indefinitely, with the ability for nodes to be traded in the future, since there will always be opportunities to register nodes on a proprietary STATIC node marketplace, allowing the nodes to change hands freely.

And secondly, not all the XFUEL has been released yet, since it is essentially »mined« by working for the project, and is paid out every month until it will run out once all 250,880,000 XFUEL is in circulation. And so far, not that much has been paid out yet, in fact to date only around 80 million XFUEL has been released, so once node registration opens, to make calculations easier, let’s estimate there will only be around 100 million XFUEL in circulation, and that’s generous, could be less, it depends on the timing.

Also keep in mind that the total possible supply of XFUEL is 650 million, bringing it to a 1:1 ratio with XBY’s supply, but that is completely dependant on how much work will be done for the XTRABYTES project, and with the price increasing and XFUEL emission thus decreasing, it is very well possible it might take a long time to get even to the planned 250 million.

Source: https://blog.xtrabytes.global/borzalom/777-xtrabytes-february-q-borzalom/

So, what does this mean?

This has a number of implications, but some more math will be required, so please bear with me.

Total possible deposit on the XBY network: 768,000,000 (XBY + XFUEL, in continuation coins)

Deposit available when node registration opens: 650,000,000 XBY + 100,000,000 XFUEL

750,000,000 coins

Missing deposit: 18,000,000

That means that, when node registration opens, it will not be possible to register all the available nodes yet. Since all Level 1 node spots are already taken or planned to be, we can safely assume that at least 256,000,000 coins will be locked in nodes. This means when the time comes for Level 2 and 3 nodes, this is the network status:

256,000,000 coins locked in nodes

494,000,000 coins available in circulation

512,000,000 coins needed to fill the entire network

18,000,000 coins »missing«

150,880,000 XFUEL still unreleased

So only once additional 18,000,000 XFUEL is released into circulation will it be possible to register all 3584 STATIC nodes, and even then the circulating supply of both XBY and XFUEL would be 0. Only once all the still available 150,000,000 XFUEL is released will the entire network be able to attain its final form.

So, what does this tell us? Well, since there is no mechanism in place to ensure any XBY remains in circulation, and the supply required for a full network will be greater than the supply available at the time, it means that the circulating supply of both XBY and XFUEL could drop to 0 and the whole network would still not be filled! Now while the supply dropping to 0 may not be realistic, it would not be too bold to say that the circulating supply of XBY could initialy be reduced to much lower than the often postulated 132 million, if the demand for Level 2 and 3 nodes is high enough, at least until more XFUEL is released into circulation. And since all XFUEL is meant to be locked into nodes to enable more XBY to circulate, it would not be too insane to think XFUEL's circulating supply might drop considerably (or completely) as well.

On the value of XFUEL

Now we must first talk about value. What determines the value of commodities in a free-market economy? Basically, in an unregulated market the value is derived from the principle of supply and demand. In simple terms, this means that the more a commodity is demanded, the more valuable it gets, as buyers compete over the price. In a more traditional economy, that would mean that the supply of the commodity would also increase to meet the elevated demand, bringing the price back down to an equilibrium. Usually this is done by increasing the production of the commodity (like food or clothes for example). But when it comes to cryptocurrencies, the supply is usually limited and controlled, so the value is much more dependant on demand itself.

XFUEL supply

Total planned supply: 250,880,000 XFUEL

Circulating supply at the time of writing: approximately 80,000,000 XFUEL

Inflation rate:

Important to note is, that XFUEL is only being awarded for work on the XTRABYTES project at a 1:1 ratio of XBY’s USD valuation:

“We must also keep the following in mind: As we release more and more of the XTRABYTES platform, the price of XBY will naturally rise and this price directly influences the amount of XFUEL we pay out. We do not pay a fixed salary of XFUEL, we pay with USD as a base number and also use XBY as the 1 to 1 reference for XFUEL payments, along with the USD-XBY price being calculated with the current BTC value As an example, we use $200 as the base and a moderator gets paid with a multiplier of 1.0. Therefore, a moderator gets paid an XFUEL value of $200 per week. At the time of writing, XBY is sitting at 174 sats average (with USD value of $0.0173) and therefore the current moderator pay would be 11,351 XFUEL. However, let's move ahead a few months and use some different figures for XBY and BTC: If XBY is 1000 sats and BTC is $15,000 a moderator at that time will get paid 1,333 XFUEL, which is still the equivalent of $200 USD. In other words, the more successful we become, the less XFUEL will get paid out. This extends our available supply tremendously and at the same time ensures that a massive amount of time and energy is going towards the completion of XTRABYTES without devaluing either XBY or XFUEL as a result of paying our developers and contributors with XFUEL. “

Source: https://community.xtrabytes.global/threads/is-this-how-it-works.231/#post-2145

So if 100 million XFUEL is in circulation with mainnet launch, the supply of XFUEL:XBY will be:

100,000,000 : 650,000,000 or

1 : 6.5

Which means that, with the same demand, the price ratio should look the same. This gives us a rough estimate of what the XFUEL value could come up to one day, since we must also keep in mind the slow emission of XFUEL.

For example, if we take this statement from the Discord:

“Hello. This month the company spent 681,986.60 XFUEL on January payroll. I did an extensive audit of all of our XFUEL expenditures since we started using and the figure I came up with is 36,198,753.89. I apologize for the earlier incorrect number. I have some XFUEL in escrow for people that have not picked up their XFUEL yet and it was being counted as in circulation. Thanks, Chris”

So that’s almost 700K XFUEL a month. Now if we assume that XBY is gonna rise in value by the end of 2018, that means that each month less and less XFUEL is gonna be paid out. Let’s assume then a yearly average of 500k XFUEL per month for 2019. With 12 months in a year that means 6 million XFUEL could be paid out a year. If the average stays the same, that is only 60 million XFUEL issued over the next 10 years, meaning it will take about 25 years to even reach the 250 million planned XFUEL and around 3 years before all the nodes can even be filled.

XFUEL demand

For now, XFUEL has only one purpose, and that is to be locked into nodes, replacing exactly one third of the XBY that would be needed otherwise, giving the node greater reward payouts from the network. Since there is not enough XBY to fill all the STATICs, and registering nodes will be the primary driving force behind the demand for XBY until all the nodes are filled, the demand for XFUEL should be about the same as for XBY.

Let’s think of it like this: I want to register a node. Now I have two options, either I go for a regular, XBY-only node, or I can get a node filled with 67% XBY and 33% XFUEL, which also gives me a greater return on investment. Now if the nodes cost the same (meaning a 1:1 XBY:XFUEL ratio), there is no reason not to buy the XFUEL and have an objectively better node, meaning that all the XFUEL nodes would be filled before any XBY ones are, which would drain the XFUEL supply. Now if the demand is high enough, an XFUEL node should always cost a little extra, for those that wish to have increased node rewards, so ideally, there should always be a little premium on XFUEL nodes and thus XFUEL itself.

For example, let's say that the management determines that the nodes with XFUEL have an increased ROI of about 10% more than regular nodes. That means, for a level 3 node (the end result is the same at every level):

125,000 XBY + 10% = 137,500 XBY for an XFUEL node with greater voting weight

85,000 XBY + 40,000 XFUEL = 137,500 XBY /- 85,000 XBY

40,000 XFUEL = 52,500 XBY /: 40,000

1 XFUEL = 1.3125 XBY

So every 1% increase in XFUEL node price correlates to a 3% increase in XFUEL price, since it only takes up one third of a node, thus giving XFUEL exponentially more value.

Now, since the price is still dependant on supply and demand, and the market is not rational, no one can safely predict anything, but simple rules of supply and demand show us that 1 XFUEL should always be worth more than 1 XBY, since all of the XFUEL is ultimately planned to be locked up in nodes anyway. Although exactly how much greater the value of XFUEL will be, remains to be determined by XFUEL sellers and the demand for increased node rewards, but we must also keep in mind the delicate balance the STATIC deposits create by valuing XBY and XFUEL as equal when it comes to depositing them into the node:

“CCR: I have done a lot of calculations before I released this idea. The 1:2 deposit rate of XFUEL:XBY prevents STATICS from having only XFUEL deposits. If the XFUEL owners want a STATIC then it is required to buy XBY. If XFUEL is cheaper, then many XBY owners will buy XFUEL. If XBY is cheaper, then the XFUEL owners will want to buy XBY. This is the balance that will occur naturally and the result is more STATICS and a stronger network. And another important thing is again that this will not flood the market. All XFUEL is related to real value (paid work). I also think XFUEL owners won't be so quick to sell their XFUEL. The XFUEL owners will want STATICS and they will need to also buy the required XBY. The final result will be more STATIC nodes, a stronger network and more valuable XBY.”

Source: https://blog.xtrabytes.global/xtrabytes-news/interview-xtrabytes-developer-borzalom/

You can learn more on the website, where you can also help to spread the word through the bounty program and get rewarded in XFUEL, or join the community and hop into the discussion right now!

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