STAR Reward mechanism

[Updates: https://starbase.co/whitepaper
We considered our Swiss / Singapore law firm advice and the global legal situation like SEC announcement about DAO tokens, STAR token doesn’t have this kind of reward mechanism at the initial release. We may possibly include the mechanism in the future when the global token legal situation more clear]

STAR Token holders will receive rewards every quarter by the following mechanism, STAR Reward. This mechanism will also be provided for Starbase platform users who want to start innovative projects with tokens.

Purpose

To make every transferable STAR has same condition, and put the differences to non-transferable STAR (=Locked tokens).

Reason

• Most tokens including STAR need exchanges for liquidity.
• Most exchanges only accept transferable token which has same condition(fungibility), if transferable tokens have different conditions, there will be replay attack possibility.

Problem

Currently there are 3 ways of rewarding for token holders.
1. Distribute blockchain token (such as Ether, Bitcoin) to token holders from the project owner

2. Distribute blockchain token to token holders in a decentralized way. (such as fees accumulating to certain contract address by a transaction and token holders can withdraw there)

3. Deposit blockchain token to smart contract (program on blockchain) and token holders withdraw from the contract

1 & 2 are bad for Tokens on exchanges.

For example if you have STAR token on an exchange at the time of a quarterly reward distribution, then you will lose their Ether, or ERC 20 tokens, because you can not withdraw the rewards from exchanges in most cases.

Also such functionalities are not liked by exchanges, so STAR Token or ERC20 token we support will have less liquidity.

So we need to use 3 for creating reward mechanism, but the detail has some problems.

3–1. Reward accumulated for all tokens, and able to withdraw reward in any time (Problem)

1. Lock STAR to reward contract
2. Withdraw reward from reward contract
3. Unlock STAR from reward contract
4. Transfer No or less Reward-STAR to exchange, trade, then withdraw Rewardable STAR
5. Back to 1 and get Reward again.

This creates the attack above, it is similar to “Replay attack” of Ethereum classic, and most of exchanges will don’t like it.

3–2. Reward accumulated for all tokens, and able to withdraw reward in certain time (Still Problem)

1. Lock STAR to reward contract
2. Withdraw reward from reward contract
3. Unlock STAR from reward contract
4. Transfer no or less Reward-STAR to exchange, trade, then withdraw rewardable STAR
5. Back to 1 and get Reward again.

Even when we have some lockup time (for example 1 week) between 1 and 3, there will be the same-attack as 3–1. Because there will be transferable tokens with different conditions.

We can learn, if reward accumulated to transferable and non-transferable tokens, there will be problems for exchanges.

So need to do the following mechanism.

3–3. Reward accumulated only for Locked tokens, and able to withdraw reward in any time (Solution)

So let’s change the way we think. In order to make all transferable tokens have same conditions, we need to accumulate reward only for not-transferable tokens(=Locked tokens).

And locked token holders can withdraw reward or unlock locked tokens.
When they unlock, it also calls withdraw function.

Then, all transferable tokens don’t have any reward conditions and exchanges can accept the tokens.

Here’s the diagrams of the rewarding mechanism we will provide.

STAR Reward Mechanism

And the mechanism will be provided with user friendly Starbase web application like this.

Starbase v2 Reward view

Hope you will like it!