Economic Simulation
The methodology will center on the use of stochastic approximations to model and analyze the system. This approach allows us to estimate the collective behavior of agents within a system under conditions of uncertainty and variability. By leveraging stochastic approximations, we can efficiently simulate and predict outcomes without the need for detailed data on every individual component. This principle underpins our commitment to achieving both accuracy and computational efficiency in our simulations. Simulations will be used with a focus on understanding price dynamics, not with the aim of predicting the exact future price, but rather to comprehend the conditions and environment conducive to price appreciation or identifying factors leading to price declines.
While PhronAI is envisioned to evolve into a blockchain of blockchains, our current evaluation will concentrate exclusively on its initial Layer-1. However, the potential of Layer 1 should be assessed with the understanding that its scope extends beyond merely its launch. This principle underscores the importance of viewing PhronAI’s Layer-1 not just as an isolated product but as a foundational element that contributes to the overall growth and success of the ecosystem.
Modeling Parameters
Run time 5 years.
Initial price = $0.5
Starting monthly transaction volume = $30 million
Final monthly transaction volume = $300 million
Pricing equation: Equation of exchange P=T/(MV) Allocation and emissions are highlighted above.
Total tokens: 70% of the full supply (treasury and foundation are assumed to be out of circulation).
Holding time: Lognormal Distribution.
The holding time data utilized in our analysis was compiled from a collection of holding times extracted from various industry projects. This dataset has been adopted as a robust basis for determining holding times, underpinned by the rationale that observed patterns across these projects offer a substantial foundation for formulating well-informed assumptions about future asset holding durations. By leveraging this historical data, we have established a benchmark for holding times, ensuring our projections are anchored in tangible, real-world observations and trends.
A simulation was conducted to test the resilience of the current assumptions. The simulation ran for 100 iterations. Each iteration consisted of the parameters displayed above. The results are shown below. The solid blue line shows the mean fair price, while the shaded areas show 95% confidence intervals.
Base Scenario Simulation
It looks like a launch price of $0.5 can lead to a fair value of close to $60 as a best-case scenario over 5 years.
Conclusion
Price appreciation is observed even with conservative metrics. This indicates that even modest achievements relative to transaction volume can lead to significant value increases, highlighting the potential for growth despite cautious projections.
PPrice appreciation, along with the current token supply allocation and emissions, demonstrates that the tokenomics from a quantitative perspective are defensible and can appreciate even without modeling forward multiples, which are often observed in euphoric market conditions to be 5-10x.
Price appreciation is assessed exclusively within the scope of Phron L1, excluding consideration of the interconnectedness with L0 and other L1 networks. This approach underrates the real project’s value growth, which could be faster when the project’s ultimate vision is considered.
Token Allocations
The tokenomics of Phron AI is structured with an initial circulating supply of 2,100,000,000 PHRON, with emissions for additional token creation to support future growth and scalability of the ecosystem.
Private Sale (16%): Unlocks at Token Generation Event (TGE), followed by a 6-month linear vesting period. This is designed to protect the ecosystem from excessive token infusion during the chain bootstrap phase.
Public Sale (4%): Unlocks at TGE, followed by a 2-month linear vesting period.
Team (15%): Subject to a 9-month cliff, with linear vesting from that point until month 24. The longer vesting period is designed to insure that the team will continue chain support for the next two years at a minimum.
Ecosystem Supportive Nodes (15%): This amount is reserved for the ecosystem nodes Locked indefinitely to support the nodes.
Liquidity and market makers (17%): Fully unlocked.
Advisors (3%): Subject to a 9-month cliff, with linear vesting from that point until month 24.
Foundation (20%): Fully unlocked. The funds will be used for building the L0 and the grants program. The grants program will fund L1s with a strategic focus, facilitating the creation of the Phron ecosystem. The foundation will be utilized to support the construction of Layer 0 and the development of the system. This allocation strategy is designed to prevent the distribution of excessively large stakes to any particular group, thereby helping to manage early-stage volatility.
Treasury (10%): Vesting over 4 years, linearly at 25
Acknowledgements. We would like to acknowledge the contributions of our community, especially to the completion of this work.
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