Nym’s token cycle: Next step, Magura

Progressing from free Beta network to fair usage and a market-ready Nym network

Author: Nym

November 18, 20248 mins read

NymVPN is about to launch. This will be the first commercial application to run on the Nym network, taking the network from its current free and experimental phase to a fully fledged, market-ready, and secure traffic routing network for the age of AI.

The NYM token buy-back is currently trialing the mechanics of a perpetual buyback mechanism to be provided by NymVPN subscriptions.

To get there, Nym’s tokenomics will be going through some major upgrades over the next three months. This article provides an overview of upcoming changes to Nym tokenomics and contains important information for node operators, stakers, and those of you who have been following Nym’s evolution over the past couple of years.

Snapshot of changes to Nym tokenomics

Nym has so far been free to use and nodes have been bootstrapped with rewards from a mixmining pool. With the launch of NymVPN app the network is entering into paid phase and rewards will be correlated to actual network usage. How will this work?

User subscriptions will trigger NYM token buy-orders, which are then used to reward operators, stakers, and the Nym team for running and maintaining the network software, creating a flywheel effect that benefits the whole ecosystem. This closes the loop in the virtuous cycle of Nym token economics.

To get there, Nym token economics has to go through a series of changes, the first being “naive rewarding” to update the reward algorithm. This is scheduled to happen in the next 24 hours with the Magura release.

Stakers and operators have to take action to continue to earn rewards. Breaking changes to APIs can be viewed here.

For a full presentation of the changes and what they mean for operators, watch the recent Node Operator Town Hall.

Immediate changes: Naive rewarding

The Magura release will be happening in the next 24 hours. This is a major network release that will update Nym token economics and likely have effects on operator and staker rewards.

Effects for stakers

To maintain a high level of staking rewards and contribute to a performative network, we encourage all stakers to:

Review the nodes to which you are staking at the end of the week to check if they have upgraded. We expect there to be a number of passive and outdated nodes which will be removed from the reward set, so check to make sure you are not delegating to a “dead” node!
If necessary, move your stake to new nodes that have upgraded, have a high performance and config score, and can serve the functions of both mix nodes and gateways.
We encourage stakers to support nodes in the Delegations program in particular as these have gone through a rigorous vetting process.

If in doubt, check harbourmaster or ask in community channels to understand if a node *:

is running the latest software v1.1.10
has a good config score
has a good performance score
agreed to operator Terms & Conditions

* All nodes participating in the Nym Delegations Program meet these criteria, and all nodes delegated to by the Nym Treasury wallet are Delegations Program participants.

Effects for operators

Many of our more active operators will be well prepared for the upcoming changes already after having attended the Operator Town Hall a couple of weeks ago.

Here is a summary of the main changes that will happen as part of the Magura release:

The 2% emissions from the mixmining pool will now be distributed across 5 layers of active nodes rather than 3. This is to ensure that gateways are rewarded algorithmically rather than only via grants. The aim is to encourage more nodes to run in gateway mode and enable more gateway options for end-users.
Action: Completion of project smoosh requires that operators upgrade to run the Nym node binary. This means operators will be running a single binary for either gateway or mix node mode. Gateways will have to get stake for the first time in order to be selected to the active set.
A configuration score is now included in the node selection algorithm to determine if a node is included in the active set: Selection = config score * total stake * performance ^ 20. This is to cull any outdated nodes from the set and make sure the network is running up to date software.
All node operators will have to do smart contract migration from legacy modes to Nym Node to receive any rewards (to be done via Nym wallet).
Action: Operators have to agree to operator Terms & Conditions to confirm legally that they do not gather logs on users.

The effect of these changes are expected to be a more performant network and better spread of gateway options for users of the Nym network. And it is the next step towards the fully fledged virtuous cycle of Nym tokenomics!

Nym’s vision: Fair usage, fair rewards

The end goal of Nym token economics is to have a virtuous cycle flywheel in which increasing adoption leads to a scaling of the network and rewards. Currently, stakers and node operators are rewarded from the mixmining pool, which is bootstrapping rewards while the network is free to use. With the network entering a paid version, rewards can soon become tied to real world usage.

Fair usage and fair rewards simply means that users will be paying for network services and that payments will enter the node reward pool with a percentage going towards topping up operator and staker rewards. But there is a lot more happening under the hood to make sure that:

nodes are rewarded based on actual usage of their services
measurement of actual usage does not deanonymize a user!

The Nym R&D and dev teams have been very busy this past year to flesh out this scheme, combining zero-knowledge cryptography, evolving the coconut credential scheme into “e-cash” and now finally the zk-nym credential scheme. Zk-nyms ensure that a user’s payment is entirely de-linked from their network usage. For a full breakdown of the virtuous cycle enabled by zk-nyms, read more here.

For stakers and operators, the end goal is to have a rapidly scalable network, with no limits on the number of gateways. Rewards will be based on tickets gathered by gateways andrepresenting real usage. Nodes will be multi-functional. They will continuously have the chance to earn dVPN rewards as both entry and exit gateways. And they will compete with each other every epoch for the chance to earn additional rewards by getting into the active set of the Nym’s noise generating mixnet as either gateways or mixnodes.

Preview of fair usage, fair rewarding

Timeline overview

Here’s a breakdown of what to expect from the Nym node roadmap each month into 2025.

Mid-November

Release (Magura): The release will include gateways in the reward algorithm, with mixmining emissions divided across not just mixnodes, but also gateways. We expect this release to result in a slight decrease in mix node rewards due to more layers being rewarded, but with more chances for active set selection as old nodes will be removed.
Staker action: Review delegations and restake if necessary.
Operator action: Operators will at this point have to run up-to-date software, aka “smooshed” Nym nodes. They will also have to agree to operator T&Cs in order to be selected for the active set. Configuration scores will become part of the selection algorithm: config score * total stake * performance ^20
Team action: Onboard service grantees to the Delegations Program.

End of November

Release (Crunch): The release will include an IPv6 listener for gateways and allow operators to run a node in all modes (entry, exit gateway, and mix node, with all exit gateway-enabled nodes also serving as dVPN nodes).
Operator action: Enable your Nym node to run in all modes.
Team action: A new service grants program will the expand number and coverage of gateways.

December

NymVPN early bird launch
New network explorer release
Staker action: Use the explorer to explore nodes and fine-tune your staking for maximum network performance and staker rewards.

2025

Release: Fair network usage, fair rewarding. This is the fully-fledged paid version of the network. Rewards will be based on tickets gathered from usage, with rewards matching real world network usage. The mixmining pool will continue to bootstrap rewards as usage grows.