As we get closer to Beta, the process by which we manage reward funds is taking shape. We've updated the Mind Map, which you will find in our Public Spec. It now has a "Narrative Rewards Flow" area:
Let's zoom into it here:
The first thing of note is that we are now calling it "Narrative Rewards", rather than "Network Rewards".
Fiat Conversion Change
The second, and larger change, is the way we handle fiat payments. We will continue to charge a 15% premium if someone pays in US Dollars, rather than NRVE, but the way that premium is allocated is changing.
In the original white paper, we said that the 15% premium would be allocated to the company, since we (the company) would assume all exchange rate risk when converting the USD to NRVE (before depositing into the Rewards Pool.
That approach would mean two things though:
1. The company might profit or lose money from that conversion, depending on the fluctuations in the exchange rates over time.
2. The company would be obligated to cover any shortfalls, if the exchange rate precluded us from acquiring the necessary NRVE.
Both points would seem to make the company more of a middleman than we want. Plus, we do not want to give any impression that we are in any way profiting from this conversion. The whole point of the fiat payment premium is to help offset exchange rate risk and not to line our own pockets. Plus, in the long term, what happens if there are persistent shortfalls and the company cannot cover them for some reason?
To improve this process, the 15% premium will not be paid to the Company at all. Rather, it is a simple markup applied when paying using US Dollars. The entirety of the collected fiat payment will be used to acquire NRVE, with no deduction for the company. (Note, however, that the gross amount collected in USD will be reduced by credit card processing fees and bank wire fees.)
We, the company, will still be responsible for converting such payments into NRVE on an ongoing basis. At the end of the rewards period, however, if there is a net gain or loss, that will be applied to the Rewards balance for the month. In other words, if we are able to purchase more NRVE than required, the additional NRVE will simply be added to the Rewards Payout for the month. Conversely, if we do not collect enough, then the difference will be deducted from the Rewards Payout for the month.
One thing we know for sure is that the amount converted to NRVE will never be exactly equal to the required NRVE balance from the payments at the time of purchase (because token prices will vary over time). Some months, we will come out ahead and some months we will come up short. This way, the risk and reward is assumed by the community, with the 15% premium helping to defray things on the negative side. And, this way, we as a company will never profit from the conversion process, which helps to ensure that everyone's interests are aligned.
The flow you see in the mind map does not otherwise represent a change, but it does clarify how things will work and may make it easier for you to visualize the process.
The most complex part of it is how it handles what we call "pro rata" fees, which are the niche and publication ownership fees that are paid annually but credited in 12 monthly installments. When we receive those fees, we only pay out 1/12 of the amount collected in the first month, with the remainder going into a separate Pro Rata account. Each month, the system will dole out the monthly pro rata balances from the Pro Rata account to the Rewards account.
All of the niche ownership fees we collect during the Alpha will fall into this Pro Rate processing.
When the system pays members at the end of each month, those funds will go into a Member Credits Account, so that they are reserved for member disbursements. The funds in the "credits" account will be stored in Hot and Cold wallets to increase overall security of the balances.