Factor's Dynamic Coin Supply is a dynamical system not found on any other PoW project; or any other project for that matter. It consists of two forces working symbiotically to determine whether the coin supply should stay the same, grow or shrink. This dynamic makes it hard to predict the coin supply long term as it is possible for it to be bigger and smaller than the current supply today.

To understand Factor's coin supply we must first talk about the built-in decentralized service on the chain: Integer Factorization as a Service (IFaaS). A on-chain platform that allows the placement of bounties on integers to encourage their factorization and a mechanism to allow solvers to securely claim the bounty.

This service consist of three steps:

  1. Place bounty.

  2. Announce a factor has been found.

  3. Publish factor publicly to claim bounty.

These are the 3 easy steps of IFaaS. Each one of the steps correspond to a new kind of transaction recognized by the blockchain: there is a transaction that takes in an integer N up to 4196-bits in length (step 1), a transaction that takes in a math proof of solution and the amount of coins to be burned (step 2), and finally the claiming transaction which verifies the proof in the announcement and validates that the given number divides the number in step 1.

We enforce a minimum amount of coins to be burned on the announcement transaction to discourage everyone from making an announcement without having a legitimate non-trivial factor to the bounty in step 1. This burning has everything to do with keeping the network secure, reliable and light.

Factor’s supply is the result of two opposing forces:

  1. Mining rewards (new coins minted each block).

  2. Utility burns (coins destroyed when announcing a bounty factor).

When the network’s utility is high enough, burns offset rewards—and if utility gets very high, total supply shrinks.

1) The Mining Force (Block Reward)

For a valid block, the reward depends on the bit-length of a submitted factor. The reward function for a Factor Block is the following:

R( difficulty )=11,178,600×2b64

Roughly speaking we have the following reward schedule base on difficulty:

Difficulty        Reward(FACT)
256                1.78857983
288                2.52943359
320                3.57715967
352                5.05885695
384                7.15430911
416               10.11771391
448               14.30861823
480               20.23542783
512               28.61722623

2) The Utility Force (Burns for Announcements)

To place an IFaaS announcement (step 2), a user must burn at least 0.01 FACT.

  • Only one announcement per integer can be included per block.

  • If multiple announcements for the same integer compete in the same block, the one that burns the most FACT is included by default.

In addition to burning 0.01 FACT, there is a mechanism to allow for competition: to be included in a block the chain gives competing announcements for the same N in the same block a priority where the announcement that burns the most coins for a given N gets admitted for that block.

We will say A is the number of announcements we have in a given block. Then the total number of burned coins as as follows:

μblock=Ablock×0.01

3) Net Supply per Block

Now we can think about the total coin supply at any given block as the total coin supply up to the previous block plus the net change the current block added to the supply.

Sblock+1=Sblock+ΔSblock+1

Where the net supply change is given by:

ΔSblock=R(difficultyblock)−μblock

So, we have that:

If μ<R(d)➜net positive (supply grows).

Ifμ=R(d)➜ equilibrium (flat supply).

Ifμ>R(d)➜ net negative (supply shrinks).

Now, the level of utility and usage we need to reach as a project to offset the coin emission can be described as the Dynamic Equilibrium. That is, the minimum amount of announcements, at the minimum burn amount, we need at a given difficulty to offset the reward function at that difficulty.

Roughly, each difficulty d we have the following three reference points:

  • d = 256: need 178 Announcements per block

  • d = 384: needs 715 Announcements per block

  • d = 512: needs 2861 announcements per block.

If users burn more than the minimum on average then the equilibrium point drops proportionately.

4) Why this design matters

  • Market-driven security: rewards scale with factor size, so mining is paid for useful cryptographic work.

  • Utility-driven scarcity: real demand to place announcements destroys coins; the more valuable the service, the more supply pressure downward.

  • Dynamic balance: the chain naturally moves toward a utility equilibrium. In high-demand periods, burns can outpace issuance, making FACT scarcer.