Lux Tokenomics

In this section Lux exchange will outline the mathematical equations chosen to calculate the staking and rewards models as well as the algorithms that are used to assess the value of the governance token and liquidity pool tokens.

Equation of exchange

The equation of exchange is defined as: MV=PT

Where: M= money supply, V= velocity of money, P= average price level of goods, T= index of expenditures (such as the total number of economic transactions)

In token economies, this has been adopted by two prominent people — Chris Burniske and Vitalik Buterin.

Burniske definition: MV=PQ

Where: M= size of the asset base, V= velocity of the asset (the number of times that an average coin changes hands every day), P= price of the digital resource being provisioned, Q= quantity of the digital resource being provisioned

Using the Burniske definition, valuations typically solve for M by rearranging the equation: M=PQ/V

In order to solve for token price, one must calculate M, by working out the size of the market in dollars (PQ), divide it by the velocity (V) and then divide M by the number of coins in supply.

Buterin definition: MC=TH

Where: M= total money supply (or total number of coins), C= price of the currency (or 1/P, with P being price level), T= transaction volume (the economic value of transactions per time), H= 1/V (the time that a user holds a coin before using it to make a transaction)

Using the Buterin definition, to solve for the token price, one must solve for C:

C=TH/M

In either definition, one can see that the velocity of the coin is inversely proportional to the value of the token i.e the longer people hold the token for, the higher the price of each token. This is intuitive, because if the transactional activity of an economy is $100 billion (for the year) and coins circulate 10 times each over the course of the year, then the collective value of the coins is $10 billion. If they circulate 100 times, then the collective coins are worth $1 billion. Thus, understanding and calculating the velocity in any token economy is extremely important.

LUX Exchange Token Staking and Rewards

• How to Stake LX?

• Staking your LX tokens on Lux Exchange is the best way you can help secure the world’s highest-performing blockchain network, and earn rewards for doing so!

• In order to stake tokens on Lux Exchange, you first will need to transfer some LX into a wallet that supports staking, then follow the steps or instructions provided by the wallet to create a stake account and delegate your stake.

• The whole process might take you not longer than 20minutes, ànd you will keep full control of your funds.

• There is no required minimum amount to stake and the rewards are automatically reinvested.

• For more information on Staking LX, please read our Step-by-Step Guide on How to Stake Lux Exchange.

• How much can I make staking LX?

• Lux Exchange has a proposed 8% inflation rate which is gradually decreasing by 15% per year, until reaching a floor of 1.5%.

• The proposed inflation is considering a 400ms slot time. However the current average slot time could the longer, and thus the inflation is considerably lower.

• The inflation is distributed together with transaction fees between all validators proportionally to their staking balance.

• Validators share the rewards with their delegators after deducting their commission.

• To estimate your Staking Rewards check out the Lux Exchange Staking Rewards Calculator here.

• How to choose the right Lux Exchange Validator?

• When choosing a validator to delegate your LX tokens, make sure to look at the commission rate which has a direct impact on your rewards being paid out. Low Commission = High Rewards.

• However please note that commission rates are the bread and butter for many validators. They rely on it to maintain reliable operations.

• Furthermore, it is important to make sure that the selected validator is able to maintain a solid close to 100% uptime for their services.

• You may want to consider delegating to smaller validators in order to further decentralize the network. This does not only support the network resilience, but also the value of your LX investment long-term.

• Also consider validators that are long-term committed to providing value to Lux Exchange by supporting the platform's app development, tooling, and educational materials.

• At Staking Rewards we have pre-vetted a bunch of validators in Lux Exchange. Browse through the list above and search for the verified badge. These validators are registered with Staking Rewards and are considered reliable. Please note that any validator is free to get in touch with us to get verified. We are not affiliated with any of them and thrive to provide an independent ranking.

• Is there any risk to staking LX?

• There is no significant risk when delegating LX.

• Please consider that there is a risk of slashing up to 100% of your funds, in case that the validator you delegated to, signs illegal transactions or votes for illegal forks. However if the validator and your funds get slashed would be decided case by case based on an on-chain governance vote.

• If you choose a reliable validator, the risk of slashing should be close to 0.

• Additionally, please consider that there is a 2 days unbonding period before you can access your delegated funds and transfer them.