In this episode, we’re going to roll up our sleeves, dig in, and examine the CNR burn in detail.

After absorbing today’s post, you’ll be ready for Episode 3 to drop next week. That’s when we’ll discuss why the burning of CNR is something worth celebrating (Can I get a woot woot?).

But first…no cheating! Have you read Episode 1 of this three-episode series? If not, we recommend you read that first. Don’t worry, we’ll stay here and await your triumphant return.

Let’s Review

Remember in our last episode, we shared about all of our CNR tokens enjoying a splendid vacation in quarantine? Do you recall how they got there? If not, we’ll remind you in a moment. For now, let’s go back to the very beginning; the birth of Centric.

Centric began with an initial supply of 1 billion CNR tokens, and zero CNS tokens. Every CNS token that came into existence did so as a result of a CNR holder converting their CNR to CNS. (Or, said another way, by “minting CNS”). When a holder mints CNS, their CNR is held in quarantine as a security (so anyone holding the CNS will always have a claim to the CNR that minted it).

When CNR goes into quarantine, it stays there until a CNS holder chooses to release it. When a CNS holder wants to exchange their CNS for CNR, the equivalent amount of CNR is released from quarantine. (If this all seems repetitive from the last episode, stay with us. Things are about to get interesting).

The Plot Grows Thicker

In the last episode, we introduced you to the smart contract. (Remember Mr. SmartBot and his formidable army?) Well, it’s time for a plot twist.

Technically, Centric has two smart contracts: the Centric Rise smart contract, and the Centric Cash smart contract. (Mic drop).

Both contracts are necessary to ensure tokens can be converted both ways (from CNS to CNR, and from CNR to CNS). Makes sense, right?

One Protocol To Rule Them All

Now that we’ve got that detail out of the way, let’s move on to something else.

Have you heard of the Centric Protocol? Yeah, I know, it’s one of those really fuzzy and buzzy sounding names. You might have heard others exalting the protocol with statements like, “The Protocol is designed to drive CNS to one dollar!” Or exhortations like, “Trust in the Protocol!”

To the uninitiated (which you will soon no longer be), it might sound a bit like the Force. Use the Force, Luke! (Or “Use the Schwartz!” for all you Spaceballs fans).

What is this Centric Protocol that’s bandied about?

In a nutshell, the Centric Protocol refers to the CNS & CNR smart contracts, and the special relationship created between the CNS and CNR tokens as a result of both smart contracts.

We could express it in a simple formula, like this:

CNR Smart Contract + CNS Smart Contract = CENTRIC PROTOCOL

But that doesn’t really tell us the whole story. It doesn’t really show the “special relationship” between the CNR and CNS tokens. Therefore, the following “formula” (we use that term loosely) probably illustrates it better.

CNR Smart Contract + CNS Smart Contract

⬇

(special relationship created between CNR & CNS tokens)

= CENTRIC PROTOCOL

Alone, the smart contracts are fairly straightforward. But the combination of the two smart contracts creates something greater than the sum of the parts. The Centric Protocol regulates the supply of CNR and “governs” the interactions between CNS and CNR, creating a remarkable economic system.

By analogy, think for a moment of the Constitution of the United States of America. It’s the document that defines the framework for the federal government of the US. Although it’s “just a document,” it has given rise to an unique form of government, and a special relationship between the citizens and the government. The “rules” of the Constitution create it.

Want to simplify even further?

Try this. When you hear “Centric Protocol,” just think “the rules of CNS and CNR.” And think of how the rules of a government’s foundational document gives rise to an “experience” of living under that government rule (for good or ill) for the citizens of that jurisdiction.

I recognize this may sound vague. So let’s pause the analogies and conceptual “shop talk” and peek under the hood.

A “Peg” With An Attitude

Meet “Peg.” She’s a nerdy bean counter employed by the Centric Protocol to make sure everything stays ship-shape.

Technically, you could say she’s a part and parcel of the protocol itself. You can’t really separate Peg from the Protocol, ya know? (She’s a bit prickly, and she’d never let it happen anyway).

Here’s the deal with Peg (besides that she’s a bit “extra”).

According to the Centric smart contracts, CNS is “pegged” to a dollar of CNR. (Get it? CNR is “pegged.” Like the name, Peg.)

Okay, but what does “pegged to a dollar of CNR” mean?

It means one (1) CNS is hardcoded to 1 USD of CNR.

Please don’t gloss over the previous line. It’s a super-important point, and you might want to read it again. (If your math-anxiety is starting up, take a deep breath and we’ll get you through.)

The major implication of the peg/Peg is that the face value of a single CNR token represents its CNS “minting power.”

Question: How many CNS tokens can a CNR token mint?

Answer: Check the current price of CNR to find out!

This is easier than you might think. Let’s look together.

For example, if CNR’s current price is $100 USD, then 1 CNR can mint 100 CNS tokens.

If the price of CNR is $110, then 1 CNR can mint 110 CNS.

When CNR reaches $1,500 (which will happen in June of 2023), how many CNS do you think 1 CNR token will print? That’s right, 1,500 CNS.

The peg of 1 CNS token hardcoded to 1 USD of CNR is dictated by the immutable Protocol. (Immutable means “cannot be changed”). Peg remains perpetually vigilant. She won’t allow any nonsense on her watch.

It’s worth emphasizing that the $1 peg of CNS to CNR holds true regardless of the trading price of CNS on the exchanges or other secondary markets. Whether CNS is “up” or “down,” you can be sure CNS will remain pegged to a dollar of CNR value. (Peg insists!)

Let’s get super practical.

As the price of Centric Rise grows each hour, the minting power of every CNR token grows. For that reason, we say CNR “yields” more CNS (or CNS value) every hour.

In other words, as each hour ticks by, a single CNR can produce more CNS than it could the hour prior.

Powerful, right?

I don’t know about you, but I like my CNR extra-minty!

Also keep in mind that the $1 peg does not mean CNS is somehow beholden to the US Dollar.

The peg is not between 1 CNS and $1 USD.

It’s 1 CNS to $1 USD OF CNR.

Centric could have just as well pegged CNS to a bunch of bananas (if they came in predictably equal bunches). Since USD is currently the predominant currency, it’s a familiar measuring stick, and thus a convenient way to express the value of CNR. (Even if the global monkey population sees it differently. Or do they?).

Burn, Baby, Burn!

We’ve covered a lot of ground. Great work sticking with it until this point.

If you’ve been confused about “the burn” in the past, we predict it’s about to pay off for you in the form of a breakthrough. Just a little more concentration, and you’ll see how this works.

Recall that we said every hour, as the price of CNR increases, your CNR is able to “yield” more CNS tokens. Well, the reverse of that is also true. As you hold CNS (instead of converting it to CNR), the price of CNR token is growing, meaning it takes more CNS to acquire a full CNR every hour.

Imagine the current price block of CNR is $100, and you are holding 100 CNS tokens. That means Peg is holding a single CNR in quarantine for you. You can burn your 100 CNS in exchange for 1 CNR. But what if you held off a few days before converting? Think about it for a moment before reading on, and see what comes to mind.

Well, after four days, CNR would have grown to $102. Meanwhile, you’d have your 100 CNS tokens. Could you then claim a “full” CNR for your 100 CNS tokens?

Uh oh. No you cannot.

Of course, you can still convert, and claim a “partial” CNR. But because CNR has become more valuable (and thus “more expensive”), your 100 CNS is no longer enough to claim a full CNR. If you converted at this point, you’d acquire about 98% of a single CNR.

Recall the whole reason the CNR was in quarantine. It’s to ensure you or anyone else to whom you might give your CNS could redeem it for CNR. As every hour ticks by, the price of CNR goes up, which also means that it requires more CNS to release a full CNR from the quarantine.

Remember Peg? You remember her attitude, of course. But in case her “rule” didn’t make much of an impression on you, here it is again:

1 CNS is hardcoded to $1 USD of CNR value.

When the price of CNR goes up each hour, it creates an imbalance in the protocol.

Suddenly, there’s more CNR value held in the quarantine than necessary. If we were to burn those 100 CNS tokens we’d get our fair share released from the protocol, but there would be a small amount of CNR left in quarantine, as a result of the price increase.

Well, we kind of alluded to something about Peg earlier. If there’s one thing she won’t tolerate, it’s an imbalance in the protocol. (She’s particular like that. When the Protocol goes out of balance, Peg gets…well, imbalanced).

When the price of CNR increases, the Protocol goes out of balance, and Peg throws her hourly fit. She’s quite a stickler, a believer in strict justice, so her approach might sound a bit extreme. What does she do? She gathers up the excess CNR responsible for causing the protocol imbalance, and burns them at the stake. How heartless!

I know, I know, it sounds awfully harsh. Understand, from Peg’s standpoint, it’s all in the name of justice.

But what Peg doesn’t know is that CNR tokens actually love to be burned. It’s true!

Look, CNR tokes are more than happy to hang out in a wallet.

And they are pleased as rum punch to go on holiday to the CNR quarantine.

But their real joy and fulfillment is found in the burn.

You’ll be relieved to know, it doesn’t even hurt them—not a bit! As vindictive as Peg gets about the whole thing, what she doesn’t know is that the burn immediately transports the CNR to an even more magical place of eternal blockchain bliss. And to think, Peg believes she’s exacting vengeance. Shhh…let’s not tell her, okay?

“Get that flame away from my tokens!”

This is a good time to make an important clarification.

The only CNR subject to the burn is the CNR locked in the quarantine.

And how did it get there again?

When the holder decided to mint CNS, the smart contract locked the equivalent amount of CNR in the quarantine.

“Will the protocol burn the CNR sitting in MY wallet?

If you’re following us here, you’ll know the answer is an obvious “no.”

If you’re holding CNR, that CNR is in your wallet.

Which means it’s not held in quarantine.

Which means it is not subjected to the burn.

So you can relax about that.

…But Why Is the Burn a Good Thing?

Congratulations on hanging in there. If you’re tracking with us until this point, you really should be proud of your effort. Let’s review some of what we’ve learned so far.

In Episode 1, we met Mr. SmartBot. He helped us understand how smart contracts execute “if X, then Y” all day long.

We then saw how the smart contract converts CNS to CNR, burning the CNS in the process.

We looked at the reverse case of minting CNS (in exchange for our CNR), which sends the CNR on an all-expenses getaway to the CNR quarantine.

And then in today’s Episode, we studied the Centric Protocol. We met it’s angry custodian, Peg. We saw how she burns excess CNR every hour to ensure the protocol stays balanced.

All that makes sense, right?

But there’s still a missing piece to the puzzle.

Namely, we still haven’t answered the burning question. That is, why is burning CNR something to celebrate? (Other than the whole eternal bliss for the burned tokens thing.)

That, my friend, is precisely what we will take up in next week’s episode of our epic Trilogy.

If you need to, take some time to re-read and assimilate today’s episode.

When Episode 3 drops, we’ll have a festive bonfire ready to welcome you to the last stage of your initiation into The Burn.

Ready to discuss what you’re learning? Have any brain-busting questions? Fire away on Telegram or Twitter (#burntrilogy).

Operators are standing by.