Jun 10
Why COFFEE Is Necessary in TEA’s Testnet
All contestants participating in the TEA Project testnet must first secure a token called COFFEE. But what exactly is COFFEE, and why did the team design it the way it did? Let’s answer these questions by first examining how COFFEE has evolved from the very first testnet epochs.
Epoch 3 — Introduction of COFFEE
In the earliest epochs, COFFEE began as an asset that user’s had to borrow in order to participate in the TEA mining competition. By receiving COFFEE, users had an agreed-upon valuable asset that could be exchanged for other assets in the TEA ecosystem.
COFFEE was technically introduced in Epoch 3 to test consumer behavior within the TEA ecosystem. Every entrant was given a COFFEE loan with a small interest rate that needed to be paid back. In addition, there was a debt interest rate that rewarded users for holding COFFEE. The rationale for having two separate interest rates is that it mimicked what users would face in the real world:
- When they borrow funds, they have to pay an interest rate on top of eventually paying back their borrowed funds.
- When they deposit funds, they receive an interest payment similar to how a bank savings account works.
- The interest rate for borrowing funds is higher than what’s received for deposits.
Unlike in the previous Epoch 2, nothing is being given to the contest participants. They must take out a COFFEE loan in order to participate in the mining contest and acknowledge that they’d have to pay it back at the end of the epoch. If the user didn’t pay back the COFFEE loan, they wouldn’t be eligible for their percentage of the reward pool dispersed at the end of the epoch.
The next epochs varied between using COFFEE and USDT as the primary exchange currency for mining contest participants.
- Epochs 3–5 continued with COFFEE as an asset that contestants would borrow and repay at the end of the epoch. The rewards for each epoch (2000 USDT) were split among the contestants who finished with a positive balance after repaying their initial TEA loans.
- Epochs 6–8 did away with COFFEE and the concept of COFFEE loans in favor of contestants paying USDT for testnet CML vouchers. Contestants now had to pay to join the contest, and if they wanted any testnet TEA, they’d have to take out a Genesis TEA loan against their CML collateral.
Epoch 9 — the Return of (an Improved) COFFEE
When COFFEE was first introduced, it was offered as a loan out of thin air to contestants. Since it was free to take a loan, there was no penalty for a contestant to register multiple wallet accounts and attempt to game the system. That was partially the reason the team decided to move to a new model in epochs 6–8, where contestants had to pay USDT for testnet CML vouchers. But this meant retiring COFFEE and the initial loan mechanism with it.
The team reintroduced COFFEE in Epoch 9, using what had worked best from previous epochs and rolling it into the updated version.
- Starting in epoch 9, users must exchange USDT for COFFEE to participate in the mining contest.
- There are no longer any loans since USDT is paid upfront instead.
- COFFEE and TEA are freely exchanged within the browser wallet. This allows both currencies to reflect their demand through the prevailing exchange rate.
- Testnet B CML are priced in terms of COFFEE at a constant USDT rate (around $23 per B CML).
- Users interested in participating in the TEA Project mainnet can exchange their TEA for mainnet token vouchers. They can also freely exchange their TEA back to COFFEE, and from COFFEE back to USDT to exit the contest.
We can now get a clearer view of the role of COFFEE and its importance in testing the preliminary tokenomics of the TEA Project. COFFEE represents USDT that has been bridged into the ecosystem. The demand for TEA is reflected in its exchange rate for COFFEE. The sum total of COFFEE bridged into the TEA ecosystem must compete with the everyday demands for USDT outside of it, as contestants can bridge back out at any time. We can see why COFFEE was designed this way — bridgable both in and out versus USDT and exchangeable for TEA — to stress test the TEA testnet tokenomics to be as close to real-life conditions as possible.
Most importantly, we wanted to test how miners and investors would act using real money. The truth of how actors behave can’t be properly deduced when using fake money as no one has any skin in the game. We hope users can forgive the manual onboarding procedure, given that we needed to exchange from outside chains into our ecosystem, but the bridging will be greatly improved in the upcoming epochs.
