When discussing blockchain, it is important to remember that wallets are completely anonymous. On Ergo, you do not know who owns a particular wallet. Due to all transactions being public, this is an important aspect of blockchain wallets - if you know who owns a wallet, you can see all of their assets, transactions and any other wallets that they interact with.

That being said, there are situations when it might be handy, or even necessary, to prove who has access to a certain wallet. One possible scenario is when interacting with games on the blockchain. A common situation can arise when tokens are used as game elements, and only players owning certain tokens can participate in specific actions. How can it be known if a player actually has access to a wallet that they pretend to have?

In this situation, games can only rely on asking the player to make a transaction from the wallet owning the token in question. This approach has some obvious drawbacks: the player has to make a transaction and pay transaction fees, and the transaction may take several minutes to mine.

To help with this issue, Ergo core developers proposed ***EIP-0028 ErgoAuth***. It is already implemented in Appkit, Ergo’s SDK, and will be integrated in the upcoming release 1.9 of the Ergo Wallet App.

ErgoAuth bypasses the need to make a transaction on the blockchain by defining a similar protocol directly between a wallet application and a server run by the party in need to authenticate a user. It works as follows:

* The game (or dApp, website, etc.), wanting to check if a user has access to a certain wallet, shows a QR code to scan with a wallet app - or presents a button to open a wallet application.
* This will make the wallet application contact the game’s server and request specific information. The wallet needs to know what address the user should authenticate, as there can be multiple addresses.
* The wallet application will present the user a screen and ask if they want to prove access. When the user confirms, the wallet application will sign the message sent by the game server with the private keys and send the signed message back.
* The game server can now check (by using Appkit or its own implementation) if the proof sent by the user is valid and that the user has access to the wallet.

Developers can start integrating ErgoAuth into their applications right now. For more detailed information, please refer to [EIP-0028](https://github.com/ergoplatform/eips/blob/ccfe51957f75e24f0750b2813d694bd938851f7e/eip-0028.md) and the corresponding code example links.

Ergo’s EIP-0028: ErgoAuth

Infrastructure coins are important because we need them to pay gas fees for using decentralized finance and deploying contracts. Decentralized finance infrastructure covers a variety of tools from decentralized exchanges and financial tools like insurance contracts to NFT powered games. One problem users face is the need to carry additional coins to carry out the gas fees to continue using these platforms. The extended UTXO model makes it possible to pay fees with custom tokens and not only with the native infrastructure coin. In this article, we will discuss the [Babel Fees](https://iohk.io/en/research/library/papers/babel-fees-via-limited-liabilities/) concept and its functionalities on DeFi platforms.



## Infrastructure Coins



When referring to the infrastructure coins, we are talking about native Layer 1 coins. These assets are the nuts and bolts of a functioning smart contract platform. Miners need to be incentivized to secure the platform and users need these coins for distributed applications such as oracles, exchanges, lending protocols, NFTs, Metaverse and social media platforms. 



In Web2, service providers indirectly charge users through in-app purchases or by selling data to third parties. In Web3, the charges are directly taken when signing a transaction, uploading a contract or interacting with an application. Users connect to Web3 with a non-custodial blockchain wallet, thereby preventing Web3 applications from accessing information about a person’s password. However, a gamer may not want to use a DeFi application, therefore it is inconvenient for a gamer to hold a coin other than their desired game coin. The extended UTXO model introduces the Babel fees to pay gas fees in custom tokens for this problem.



## Babel Fees



In the Ethereum ecosystem, tokens are seen as secondary citizens when compared to infrastructure coins. Gas fees cannot be paid in custom tokens and a regular user will be forced to acquire a coin that is not necessarily useful. This situation will cause involuntary demand and may be problematic by causing synthetic price fluctuations. The user could be harmed because of the involuntary possession of coins on the balance sheet. Babel fees make this process smoother with instant exchanges. It could be fair to say that this model operates with [atomic swaps](https://www.investopedia.com/terms/a/atomic-swaps.asp) built into the protocol level.



An infrastructure coin will still be the main currency, however the extended UTXO model enables the implementation of non-interactive custom fee conversion on the protocol level. Therefore, any user interacting with the blockchain does not need any amount of unwanted coin and liquidity pools on the governance layer will take care of the currency conversion for them. In return, the system achieves a more frictionless user experience on a decentralized platform.



## Custom Token Fees in Ergo



The concept of paying fees in custom tokens was [introduced to Ergo](https://www.ergoforum.org/t/ergomixer-zerojoin-mixer-for-erg-and-tokens/318/10?u=root7z) before the publication of the comprehensive Babel Fees research. For the ErgoMixer design, a smart contract function can be added to define fee boxes with specified token IDs and decimals. However, we expect to see the Babel Fees design implemented on various aspects of decentralized finance that are described above. The well-known speculation that users need to hold native coins to use the blockchain is gone. The extended UTXO is an accessible design that opens its doors to all tokens and applications without forcing them to buy native coins at random times.



To simplify the custom token payment of the Babel fees concept, researchers defined the process by creating temporary anonymous accounts. These accounts are never included in the ledger but they are defined to point out the liability of the people making the transaction. The users liability is called limited liability -which defines who owes how much of which token to whom at the moment of the transaction. 



These temporary accounts simplify the underlying exchange protocol and enable batch executions in a non-interactive manner. It should be noted that for every person who is willing to make a transaction with a custom token, there should be at least one facilitator willing to accept the offer at the proposed exchange rate.



### Conclusion



To summarize, the custom token fee payments on the extended UTXO model proposes a frictionless decentralized finance experience in a trustless manner. The Babel Fees concept is the reinterpretation of the atomic swaps model that can be implemented both in the blockchain as well as cross-chain. Users and institutions will be able to interact with the blockchain without needing to hold arbitrary amounts of a native coin.

DeFi on Ergo: Custom Token Fees

There are a lot of concerns about the emission being over in less than six years from now. Ergo is committed to the principle that the total supply must be preserved.  The long-term sustainability of the short emission schedule is an inherent risk to the long-term viability of the Ergo Network.  We would like to create a system that offers economic incentives to miners while protecting the long-term crypto-economic security of the network.  A 90% approval rate is required, which is a supermajority.  Joseph Armeanio explains:

EIP 0027 Soft Fork Proposal

Overview

Ergo’s native token is called ERG and its emission schedule may be of keen interest to users and miners of the platform. Ergs also have some unique characteristics which are highlighted in this post. Most basically and leaving out technical details, Ergo has a 

**Key Points**

- The Ergo block interval is 2 minutes
- All tokens are mined through an ASIC-resistant Proof-of-Work (“PoW”) algorithm called Autolykos. Therefore, there were 0 Ergs in existence at launch of mainnet as there was no ICO nor pre-mine. 
- Erg has a strictly limited supply of 97,739,925 Ergs.  
- The amount of Ergs going to the Treasury comprised a total of only 4,330,791.5, or 4.43% of the total monetary base, and was completed in just 2.5 years.
- There will be no additional inflation and the Erg monetary base will remain fixed. The Emission Chart below illustrates this. 
- Originally there was an 8-year emission schedule but this was extended to ~2045 with [EIP-0027](https://github.com/ergoplatform/eips/blob/master/eip-0027.md). 

## Tokenomics and Emission

As a Proof of Work blockchain, Ergo has a defined emission schedule for the release of ERG tokens. When Ergo launched in 2019, there was no ICO (initial coin offering), no pre-mine and no pre-allocation of tokens to any founders or venture capitalists. During the first two and a half (2.5) years, the emission schedule sends a small portion of each block to the Ergo Foundation Treasury - for the purposes of funding promotion and development on Ergo. After two and a half years, the Ergo Foundation ceased to receive any rewards from having recieved 4.43% of the total ERG supply.

## The Original Emission Schedule

Ergo currently mines blocks every two minutes. For the first two years, each block was set to release 75 ERG into circulation. At the end of the 2nd year, the emission rate was set to drop by 3 ERG/block with a schedule that would see block rewards further reduced by 3 ERG every three months. After eight years, the total supply of ERG would have been completely mined and the mining protocol would be reliant on transaction fees and Storage Rent alone to reward miners.

## EIP27 and the Adjustment of Ergo’s Emission Schedule

Recently, the Ergo Foundation undertook the initiative to ensure the long-term sustainability of the mining protocol by proposing an amendment to the emission schedule. As the blockchain is still in the early stages of focusing on promotion and development, there was a concern that the ecosystem may need more time before the end of the eight-year emission schedule. If there are not enough dApps and users in the ecosystem at the end of the original emission schedule, there may not be enough transactions to incentivize miners to maintain the network.

Ergo’s co-founder, Alex Chepurnoy, proposed a solution to this possible scenario. The proposal, EIP27, would see Ergo emissions extended by 20 years, thereby offering the time to develop the necessary crypto-economic security for the blockchain. On Ergo, miners enjoy the ability to suggest and vote on proposed changes to the network. With EIP27, the proposal required a 90% pass vote in order to be scheduled for implementation. The mining community voted over 90% in favor of this proposal and the new emission schedule is slated for deployment after testing has been completed on the testnet. 

Once EIP27 is activated on the mainnet, the block reward will be reduced by 12 ERG. Since new blocks currently produce 66 ERG/block, the new emission would start producing 54 ERG/block. Following this, block rewards will reduce by 3ERG/block at regular intervals until new blocks mint 3 ERG/block. From that point onwards, the emission will remain at 3 ERG/block until all of the ERG have been minted. 

The code for the emission schedule can be found [here](https://github.com/ergoplatform/ergo/blob/e6086e23ecd45f1e01a3e4c0344f003cec1a5b11/src/test/scala/org/ergoplatform/mining/ErgoMinerPropSpec.scala#L24)

## The Ergo First Year Token (“EFYT”)

EFYT was airdropped and distributed on [Waves DEX](https://wavesplatform.com/) starting with a 100,000 EFYT airdrop 2 years ago in May, 2017. EFYT served the dual purposes of helping to build an early community of stake holders and enthusiasts for Ergo and of raising a small amount of funds for the platform before launch to fund development, promotion etc. EFYT is strictly a Waves token and is not the same as an Erg, which is the Ergo mainnet native token mined after Ergo’s mainnet launch.

EFYT will be swapped with a fraction of the Ergs mined within the first 1 year post mainnet launch. The planned mechanism for executing the swap is first, a new payment gateway will be set up on Waves for Ergo’s mainnet token, Erg. More on Waves payment gateways can be found [here](https://blog.wavesplatform.com/waves-launches-cryptocurrency-payment-gateway-framework-d37c1bb2fe1b). After the gateway is set up, as the Ergo Treasury receives Ergs from the mining reward, the Treasury will deposit these Ergs to Waves via the gateway, at which time, the Treasury will make a bid in the market at fixed price of 1.00 ERG / 1.00 EFYT and owners of EFYT can then swap their EFYTs for Ergs and do as they wish with their Ergs including holding them on Waves, trading on Waves or transferring their Ergs out of Waves via the gateway to their own wallet for use elsewhere. All EFYT purchased by the Treasury in this process will be burned.

The current distribution of EFYT can be found [here](http://dev.pywaves.org/assets/725Yv9oceWsB4GsYwyy4A52kEwyVrL5avubkeChSnL46). It should be noted that the max supply of EFYT is 1,970,945.0. This is 10% of the first year of Ergo token emission and the same number of Ergs that the Treasury will receive, meaning that the Treasury will have received 1,970,945.0 Ergs during year 1, sufficient to swap the max supply of EFYT for Erg.

Tokenomics and Emission

#1186 : fix for #1185: command-line parameters support back for docker containers #1184 : Accept to the mempool and propagate locally generated transactions in the digest mode (also, do not download transactions in this mode)

Ergo Platform Mainnet 3.3.3 released


__Ergo allows any user to run a full node with low resources – meaning you can help maintain the network with a device as simple as a Raspberry Pi.__

In a previous post, we looked at [Ergo’s SPV](https://ergoplatform.org/blog/2020_05_1_spv_security/) mode, which allows for secure, efficient mobile clients. This enables users to make transactions using almost any device. 

At the other end of the scale, you might want to run a full node. If you’re a miner, this will require that you download the full blockchain, because you’ll need the whole UTXO (unspent outputs) set to mine new blocks. But you can still run a full node without that UTXO set – vastly reducing the specification and expense of the hardware needed.

## Ergo blocks

In Ergo, just like Bitcoin, Ethereum and other blockchains, blocks are broken into sections. In Bitcoin, there’s simply a block header and the transactions themselves. But in Ergo, we have some extra sections that enable new functionality:

* Header
* Transactions
* Extensions
* Proofs of UTXO transformation

The ‘extension’ section contains certain mandatory fields (including links for NiPoPoW, once per 1,024 block epoch) and parameters for miner voting, such as current block size. It can also contain arbitrary fields.

What this means in practice is that different types of node and client can download only those sections of the blocks they need – reducing the demands for storage, bandwidth and CPU cycles.

## Lite full nodes

While miners need to download everything, lite full nodes only need the transactions and proofs. This means they have a cryptographic guarantee of transactions, without holding the full UTXO set itself.

Lite full nodes check the proofs generated by full nodes (including miners) who do hold the full blockchain, providing a guarantee of ledger validity. In Ethereum, these nodes are called Stateless Clients.

For Ergo, it means you can run a full node and maintain the network with a device as simple as a Raspberry Pi with 512 MB RAM. This provides the ideal balance between ensuring the security of the network and placing an unnecessary burden on users who wish to do so – improving decentralisation and democratising participation in the Ergo network and community.


Building Ergo: Lite full nodes


__Because a blockchain is a siloed, self-contained system by design, interacting with other blockchain protocols is challenging. Atomic Swaps enable cross-chain exchange of digital assets, avoiding the need for centralised exchanges.__

Blockchains are excellent at decentralised value transfer within their own domains. That is, you can send BTC to any Bitcoin address securely and easily, and you can send LTC to any Litecoin address securely and easily too.

But because blockchains are based on consensus between miners, they are not designed to interface with other blockchains. Trading assets on different blockchains has therefore traditionally involved third parties like exchanges and OTC desks – with all the risks and inefficiencies they bring.

## Cross-chain swaps

Atomic swaps solve this problem by enabling cryptocurrencies to be traded across blockchains. This allows trustless exchange of assets, quickly and efficiently. Here’s how they work in theory:

* Alice and Bob agree to exchange some cryptocurrency. Alice will send Bob 1 BTC, and Bob will send Alice 50,000 ERG. Neither party trusts the other, so neither wants to send their crypto first.
* Alice generates a secret – a long random number – and hashes it. She then creates a transaction on the Bitcoin blockchain with a script attached, locking 1 BTC and specifying a condition: when the secret (pre-image) to the hash she has created is revealed, the BTC will be sent to Bob’s address. The hash can safely be included in the transaction script, because the pre-image cannot be calculated from it.
* Bob then similarly creates a transaction on the Ergo blockchain, including a script with the same hash Alice has used. When the pre-image is revealed, 50,000 locked ERG will be sent from Bob’s address to Alice’s address. Because Bob doesn’t have the pre-image, he can’t execute Alice’s transaction before he has created his own.
* Once Alice sees that Bob has created his transaction on the Ergo blockchain, she can publish the secret and execute his transaction. Because the pre-image is now public, Bob can also use it to execute the script that will send him his BTC.
* Neither party can delete their transactions and scripts once they have been posted to the blockchain. They may include a condition that the transaction will expire within a certain time, to avoid their coins being locked indefinitely if Alice does not reveal the secret.

* Ergo’s atomic swaps

They are called ‘atomic’ swaps because the orders are either executed in their entirety, or not at all – a kind of fill-or-kill order. But while that’s useful up to a point, it doesn’t allow for active trading, like you would be able to do on an exchange.  

Ergo’s implementation of atomic swaps develops the concept further. It’s relatively easy to swap coins or custom tokens trustlessly across any Bitcoin-like blockchains. But beyond that, Ergo allows partial swaps. Just like on a regular exchange, orders can be partially filled, if that’s what the trader wants.

This means it’s possible to build a fully-fledged decentralised exchange (DEX) that enables cross-chain trading: a totally trustless version of existing crypto exchanges. There’s no need for any gateways, token wrapping or other potential bottlenecks or points of failure.

You can find out more about Ergo’s implementation of atomic swaps and intra-chain and cross-chain token swaps in the [ErgoScript white paper](https://ergoplatform.org/docs/ErgoScript.pdf).


Building Ergo: Atomic Swaps

This release includes API improvements.

Ergo Mainnet 3.0.2 released


## Overview

Ergo’s native token is called Erg and its emission schedule may be of keen interest to users and miners of the platform. Ergs also have some unique characteristics which are highlighted in this post. Most basically and leaving out technical details, Ergo has a strictly limited supply, an 8‐year emission schedule and a declining rate of emission over these 8 years. All tokens are mined through an original Asic and Pool‐resistant Proof‐of‐Work (“PoW”) algorithm called Autolykos. Therefore, there are 0 Ergs in existence at launch of mainnet as there was no ICO nor pre‐mine. At the end of 8 years, the final Erg supply will be 97,739,925 Ergs.  The Ergo block interval is 2 minutes and for the first 2 years, each block will release a total of 75 Ergs to be shared between the miners and the Treasury (Treasury discussed below). But starting at year 2, the rate of emission will fall by 3.0 Ergs and thereafter further decline every 3 months by an additional 3.0 Ergs, which will result in an end to emission 8 years after launch. There will be no additional inflation and the Erg monetary base will remain fixed. The Emission Chart below illustrates this. 

## The Ergo Treasury

To fund development, promotion, events, to swap Ergo’s Ergo First Year Tokens (“EFYT”, further discussed below) into Ergs and to fund other activities which may advance the platform, Ergo has in place a Treasury which will receive 4.43% of the Ergs released during emission. During the first 2 years post‐mainnet launch, the Treasury will receive 7.5 Ergs per block. Given that the block reward for each block is 75 Ergs total, the Treasury’s allocation of Ergs is equivalent to 10% of the total block reward over the first 2 years and leaves miners with a block reward of 67.5 Ergs per block. After 2 years, the Treasury will continue to receive the part of the block reward that exceeds 67.5 Erg, however, this will be 0 after year 2.5 when the block reward becomes 66 Ergs per block.  Readers familiar with some other PoW protocols with a Treasury, such as ZCash, may find this to be similar, however, it should be noted that the amount of Ergs going to the Treasury comprise a total of only 4,330,791.5, or 4.43% of the total monetary base, and is completed in just 2.5 years. This compares with ZCash’s Treasury, which was 10% of the ZCash total monetary base and 20% of all issued ZCash coins during the first 4 years. With Ergo, it is hoped that by 1 year post‐mainnet launch, Ergo will have achieved a high level of decentralization with a diverse developer, miner and user base. For the first year, the Treasury will be used for swapping of the EFYT on the Waves platform for Erg. For the remaining 1.5 years, a community voting mechanism will be put in place to determine how Treasury funds are spent. 

## The Ergo Emission Chart and Code

![Ergo emission curve](/img/blog/emission_curve.png)

The code for the emission schedule can be found [here](https://github.com/ergoplatform/ergo/blob/e6086e23ecd45f1e01a3e4c0344f003cec1a5b11/src/test/scala/org/ergoplatform/mining/ErgoMinerPropSpec.scala#L24)

## The Ergo First Year Token (“EFYT”)

EFYT was airdropped and distributed on [Waves DEX](https://wavesplatform.com/) starting with a 100,000 EFYT airdrop 2 years ago in May, 2017. EFYT served the dual purposes of helping to build an early community of stake holders and enthusiasts for Ergo and of raising a small amount of funds for the platform before launch to fund development, promotion etc. EFYT is strictly a Waves token and is not the same as an Erg, which is the Ergo mainnet native token mined after Ergo’s mainnet launch.

EFYT will be swapped with a fraction of the Ergs mined within the first 1 year post mainnet launch. The planned mechanism for executing the swap is first, a new payment gateway will be set up on Waves for Ergo’s mainnet token, Erg. More on Waves payment gateways can be found [here](https://blog.wavesplatform.com/waves-launches-cryptocurrency-payment-gateway-framework-d37c1bb2fe1b). After the gateway is set up, as the Ergo Treasury receives Ergs from the mining reward, the Treasury will deposit these Ergs to Waves via the gateway, at which time, the Treasury will make a bid in the market at fixed price of 1.00 ERG / 1.00 EFYT and owners of EFYT can then swap their EFYTs for Ergs and do as they wish with their Ergs including holding them on Waves, trading on Waves or transferring their Ergs out of Waves via the gateway to their own wallet for use elsewhere. All EFYT purchased by the Treasury in this process will be burned.

The current distribution of EFYT can be found [here](http://dev.pywaves.org/assets/725Yv9oceWsB4GsYwyy4A52kEwyVrL5avubkeChSnL46). It should be noted that the max supply of EFYT is 1,970,945.0. This is 10% of the first year of Ergo token emission and the same number of Ergs that the Treasury will receive, meaning that the Treasury will have received 1,970,945.0 Ergs during year 1, sufficient to swap the max supply of EFYT for Erg.

## How can Ergo Issue the Entire Erg Supply in only 8 years whereas other PoW blockchains all have much longer emission schedules?

Other than Ergo, few, if any, PoW protocols have such a short emission schedule as 8 years and it is worth mentioning what makes this possible for Ergo. Firstly, to briefly compare with just a few prominent PoW and recently issued PoW tokens, Erg supply is 100% issued after 8 years, with no long tail of emission, whereas emission of:

* Bitcoin is approximately 75% issued after 8 years with a long tail of emission to follow;
* ZCash and Ravencoin follow the same emission schedule as Bitcoin;
* Beam will be 75% issued after 8 years and has a long tail of emission;
* Grin inflation extends out indefinitely

Ergo’s short emission schedule is made possible through its new economic model, namely, the storage rent fee component of its protocol. Miners will have an additional source of income and a paper on that is available [here](https://fc18.ifca.ai/bitcoin/papers/bitcoin18-final18.pdf). In summary, miners are able to deduct a storage rent fee every 4 years denominated in Erg from an unspent box (similar to a UTXO in Bitcoin) in exchange for the cost of keeping such box in state which resides in high cost memory. Therefore, miners will be highly incentivized to secure the network even in the absence of a block reward subsidy and this will lead to a more stable mining reward than just relying on transaction fees alone which miners will also receive. Other benefits from having the storage rent fee include prevention of “state bloat”, building of an economy around state (users must pay to keep unspent boxes in miners’ memory for the long‐term) and a gradual return of any lost coins back into circulation. Note that in Ergo, miners can use on‐chain voting to gradually change many key parameters including the storage rent fee, block size and maximum computational cost of a block.


The Ergo Emission Schedule

Wallet persistence added. Stateful validation of transactions via API.

Testnet 2.0.5 released

Testnet 2.0.3 released with various bug fixes and GPU mining support.

Testnet 2.0.3 released

The super big step towards Ergo Platform launch! All the major features are implemented, just optimization, testing and security audit remain. It should be binary compatible with the mainnet, time to integrate and write your DApps!