3.17.2. Skin in the game

In the Proof-of-Deflation decision-making mechanism, decisions on implementing updates to the DeflationCoin blockchain at the second level are made based on the majority of votes, adjusted by the X-multiplier.

The principle of “Skin in the Game” means that people making decisions must be personally involved and bear responsibility for the consequences of their actions. This helps to avoid situations where benefits are enjoyed by some, while the risks are borne by others. Many systems and institutions in the modern world are structured so that decision-makers (e.g., politicians or financial managers) take no personal risks. This leads to moral and financial irresponsibility.

Those who make decisions must be ready to personally experience the consequences of their choices. This ensures that decisions are made with consideration of all risks, not just potential benefits. The “Skin in the Game” principle promotes more thoughtful and balanced decision-making because individuals risking their own assets are more likely to account for various factors and risks. It reduces the likelihood of decisions that are beneficial only in the short term but potentially disastrous in the long term.

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Voting occurs with weighted votes, determined by the number of staked tokens and the X-multiplier, according to the table below.

Table №6: Token Weight in the Proof-of-Deflation Mechanism.

Access to the “Skin in the Game” stage is granted only with staking periods of 8 years or more. When a hypothetical wallet A stakes tokens for 8 years, its initial multiplier is x8. After one year, this multiplier decreases to x7 and continues to decrease annually. At the same time, participants in smart staking can increase their X-multiplier at any time by extending their staking period.

Participants who acquire tokens and stake them for a long period risk their funds and their time. Therefore, they receive a higher X-multiplier.

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Vote share with the X-multiplier is calculated using the following formula:

$$\alpha(x)_{(N^\circ)} = \frac{S_{(N^\circ)} * X_{(N^\circ)} * 10^4}{S * \beta_{(S)}}$$

Formula Parameters:

• $a(x)_{(N^\circ)}$ - final voting share, adjusted with the X-multiplier and expressed as a percentage. Formula:

$$\alpha(x)_{(N^\circ)} = \frac{\beta_{(N^\circ)} \cdot 100}{\beta_{(S)}}$$

• $\beta_{(S)}$ - total ${\beta}$-value of all wallets.

• $\beta_{(N^\circ)}$ - intermediate variable representing the share of a specific wallet, adjusted with the X-multiplier. Formula:

$$\beta_{(N^\circ)} = \alpha_{(N^\circ)} * X_{(N^\circ)}$$

• $X_{(N^\circ)}$ - X-multiplier for a specific wallet

• $a_{(N^\circ)}$ - share of coin ownership, expressed as a percentage. Formula:

$$\alpha_{(N^\circ)} = \frac{S_{(N^\circ)} \cdot 100}{S}$$

• $S_{(N^\circ)}$ - number of coins in a specific wallet.

• S - total number of coins in all wallets staked in smart staking.

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Since 1957, economic crises in the United States have occurred approximately every 8.5 years on average. For this reason, access to the second level of the PoD decision-making mechanism is only granted to participants who stake their tokens for at least 8 years. Participants making decisions about the project's development must understand that during their staking period, they are highly likely to face an economic crisis. This is important to consider because macroeconomic shocks often lead to the collapse of many companies.

Thanks to deflationary tokenomics, any crises in various countries worldwide will merely serve as catalysts for the growth of DeflationCoin. These events should be seen as opportunities for development, as all economic crises have ultimately been accompanied by an increase in the money supply and rising inflation: factors that act as catalysts for the growth of a deflationary cryptocurrency.