NuCypher’s Worklock is an exciting and new token distribution method that plans to be a solution to some of the limitations of traditional ICOs and IEOs. This article will outline the Worklock distribution model and provide additional background information on NuCypher and its staking mechanics.
NuCypher is building cryptographic infrastructure for privacy preserving protocols and applications. Their Key Management System (KMS) is intended to address the current limitations that consensus networks have securely storing/sending/manipulating private and encrypted data.
NuCypher is designed to function as horizontal infrastructure for anyone building a dApp or decentralized protocol that’s managing private data. Broadly, this is how NuCypher’s technology could be used:
Secrets Management – Ability to store encrypted secrets in any storage backend, while allowing data owners to conditionally grant and revoke access to said secrets.
Dynamic Access Control – Grant or revoke access to data on demand or automatically under customizable, pre-specified conditions (eg. time-based, behavior-based).
Secure Computation – Perform operations on encrypted data while preserving the confidentiality of the inputs and results.
Nodes, known as Ursulas or workers are compensated for their participation on the network in NU (NuCypher tokens) and for work performed on the network in ETH. The probability of performing encryption services is proportional to the amount staked, and a minimum of 15,000 NU must be staked to an Ursula, via a staker, in order for it to be active on the network. There is a 1:1 relationship between a worker and staker, which means that only one staker can bond to one worker and vice versa.
NuCypher requires nodes to specify the duration they are willing to stake their tokens. The minimum staking period is one month, and you cannot decrease the length of the staking period once you specify its duration. You can however increase the length of the staking period at any time.NuCypher will have an inflation rate of 36.6% for the first five years, after which, the inflation rate will decay at an exponential rate via halving 4 years and 2 years, respectively.
Workers on the NuCypher network can be slashed. Slashing occurs when a node provides a false re-encryption. Slashing for downtime is still being discussed, as well as the specific penalties for any violations.
The Worklock is a new token distribution mechanism that is unique to NuCypher. 25% of the NU issuance tokens will be distributed during Worklock, and anyone with ETH can participate.
To put it simply:
- Participants in the Worklock will lock their ETH in a smart contract in exchange for NU tokens.
- The NU they receive will also be locked and they must be staked to a worker node.
- Both ETH and NU tokens will become unlocked after 6 months as long as a certain amount of work is performed by the worker node.
- NU can be restaked or traded after the 6 month period.
- ETH will be returned in full to participants who perform the required tasks.
Contribution Period and Initial Distribution
As mentioned before, anyone with ETH can participate in the Worklock. We expect there will be no geographic limitations in who can participate since there is no purchase of tokens or investment of money, which will maximize the likelihood of regulatory compliance. The contribution period will allow people to “bid” on NU tokens by sending ETH to the Worklock smart contract. Participants can cancel their bid at any time during the contribution period. There will be a minimum and maximum a participant can bid.
During the contribution period, NU will be distributed by the following principles:
- All NU will be distributed regardless of the amount of ETH that is sent to the Worklock.
- All bids must be greater than or equal to the minimum allowed bid.
- For each bid, the surplus above the minimum allowed bid is called the bonus; all bids are composed of a base bid (fixed minimum bid) and a bonus bid (variable amount).
- Each participant will receive at least the minimum amount of NU needed to stake on mainnet.
- Once all participants have been assigned the minimum amount of NU, each participant with a bonus will receive a portion of the remaining NU, distributed pro rata.
- If the resulting NU distributed to a participant is above the maximum allowed NU to stake, then such a participant has their bid partially refunded until the amount of NU is within the allowed limits.
Parameters have yet to be set for the Worklock, but you can view examples of how it will work in certain scenarios here.
NuCypher & Figment
Figment will be supporting the NuCypher mainnet and will provide nodes for those interested in participating in the Worklock. We were an active participant in NuCypher’s Come and Stake it incentivized testnet, which included a trial run of the Worklock distribution. Check out our first look article or our AMA recap featuring the CEO and CTO of NuCypher for more information on the network.