teleo-codex/domains/internet-finance/dynamic-license-fees-using-price-ratio-exponents-create-automatic-supply-throttles-that-self-stabilize-without-governance-intervention.md

type	domain	description	confidence	source	created
claim	internet-finance	COAL's c(y) function uses cubic price ratio to automatically increase crafting costs when COAL weakens relative to ORE, creating self-regulating supply without governance votes	experimental	futard.io, Meta-PoW: The ORE Treasury Protocol proposal, 2025-11-07	2026-03-11

Dynamic license fees using price ratio exponents create automatic supply throttles that self-stabilize without governance intervention

COAL's Meta-PoW implements a dynamic pickaxe license fee c(y) = c0 * (y / y_ref)^p where y = P_ORE / P_COAL, creating an automatic economic throttle that responds to relative token prices without requiring governance votes. With baseline parameters c0 = 200 COAL, y_ref = 50, p = 3, and bounds of 1 ≤ c(y) ≤ 300, the cubic exponent makes the license fee highly sensitive to price ratio changes.

When COAL strengthens relative to ORE (y decreases), the license fee drops, making pickaxe crafting economically attractive. This increases mining activity, which drives more INGOT smelting and more ORE flowing into the treasury. When COAL weakens relative to ORE (y increases), the license fee rises sharply due to the cubic exponent, making new pickaxe crafting prohibitively expensive and naturally throttling supply expansion without breaking existing tool holders.

The mechanism uses an EMA-smoothed TWAP for the price ratio to prevent manipulation through short-term price spikes. The license COAL is burned (not sent to treasury), making it purely a control parameter rather than a revenue stream. The proposal states: "When COAL strengthens, crafting scales up, more picks come online, more INGOT gets smelted, and more ORE flows into the treasury. If COAL weakens, crafting slows without breaking the system."

The cubic exponent (p = 3) is the critical design choice—linear or quadratic functions would respond too slowly to price changes, while higher exponents would create excessive volatility. The 1-300 COAL bounds prevent the function from collapsing to zero or exploding to infinity at price extremes. This creates a self-regulating feedback loop where the system automatically adjusts mining capacity in response to market conditions.

---

Relevant Notes:

• dynamic performance-based token minting replaces fixed emission schedules by tying new token creation to measurable outcomes creating algorithmic meritocracy in token distribution
• optimal governance requires mixing mechanisms because different decisions have different manipulation risk profiles

Topics:

• domains/internet-finance/_map
• core/mechanisms/_map