Genius Smart Financial Contract 2022.5.

04

Today, the Decentralized Finance market is king for earning yield on blockchain assets.
Traditional as anyone may be, the result of Decentralized Finance still translates (for many) into
traditional money in the bank, and these results are grabbing more people’s attention by year.
For example, the Store of Value industry is a $20+ Trillion industry. This includes Gold, Time-
Locked Deposits (Certificate of Deposits) in the USA and China, Bitcoin, etc. Bitcoin and
Ethereum, the Decentralized Finance king, alone have a combined $1.1 Trillion share of the
industry.

To be financially successful in this market, one must intimately understand the blockchain
assets they are dealing with, and this requires an unusual amount of financial and technological
knowledge. Furthermore, understanding how to use multiple DeFi apps is mandatory. Not
everyone has this knowledge, but everyone is seeking a better way to store their value, protect
it from inflation, and amplify their value when possible. The Genius Smart Financial Contract
was designed to solve this need elegantly, securely, and with simplicity for the end user.

For centuries, Governments and Financial Corporations have sought to create financial products
like this. The new internet created by blockchain technology makes this asset possible, and
many blockchain assets have attempted to create such an asset. This Genius Smart Financial
Contract (“GENI”) has built upon the successes of its predecessors and has learned from,
corrected upon, their mistakes. Imagine that you are holding an asset that pays you passive
income and only increases in value over time. That is Genius.

Genius is like a banking Certificate of Deposit, except it is on the blockchain, in the full control
of the end user, and artificial intelligence (A.I.) operates its reward structure. Furthermore, it is
immune to human corruption and biased bureaucracy. "Genius" is the first hyper-yield A.I.
blockchain Certificate of Deposit designed to appreciate in value. Genius will be used by end
users to generate passive income.

Functionally, and “under the hood” of the software engine, Genius is an Ethereum- and
PulseChain-based smart contract that is designed to regulate and increase in value for its users
over time. Genius is immutable, which means that the code cannot be changed. Genius has no
admin key, meaning that it cannot be exploited by any human or privileged access.
Furthermore, it has no “developer coins” and the users cannot be “rug pulled”. These are
marketing-specific industry terms that mean value cannot be stolen from end users of the
Genius Smart Financial Contract.

Genius is designed to enforce a positive, healthy, and democratic financial market by defending
its value from typical negative market activities. This is done by incentivizing users to “lock
away” their value for a length of time promised by the end user. For users who change their
mind about their promises, or neglect to attend to their promises, their wealth is redistributed
to the smart contract’s good actors over time until they re-engage their commitment. An A.I.
layer continuously monitors the end user market and reevaluates incentives for the benefit of
end users who keep their promises. With Genius, your time and your intentions (promises) are
reflected as value. In other words, Genius’s internal artificial intelligence constantly considers
the end users’ actions, evaluates the likeliness that a user will break their promise(s), and
adjusts the reward incentives to entice users to stick to their original promises. In laymen’s
terms: Genius is also designed to protect its users from the effects of market manipulation,
negative market conditions, and human greed and impatience.

Utility. The Genius Token can be used to store value (save) and generate passive income over a
period of time. This is done by “Genius Mining”. Similar to Bitcoin Mining, the new Genius
Tokens are only paid out to those who are mining for Genius Token. With Bitcoin Mining, you
need to purchase expensive mining equipment, use lots of electricity, and trust a mining pool.
With Genius Mining, all you need is the Genius Token and to create a dedicated pledge
(promise) to generate passive income. Unlike with Bitcoin Mining, Genius Mining has no need
for expensive equipment and useless computations that ultimately burn through electricity.

Important Notes and Definitions:

• Formulas are notated in Excel format.

• The “Genius Token” is a unit of value that is freely transferred by the end user. Genius
Token is also referred to as “Official GENI” or simply “Genius” throughout this
document.
• “PHI” represents the irrational number 1.61803398874989…
• “Incentive Promises” are actions made by the end user that allow them to “mine” for
Genius Token, increasing their share of the Genius ecosystem. In other words, the end
users are incentivized to make promises to the network to lock up their tokens.
• A “Stake” is way to mine for Genius Token by making a pledge. When you create a
Stake, you allocate an amount of Genius Token to lock into the Genius Smart Financial
Contract. During this lock time, the Genius Token is unable to be transferred until the
Incentive Promises are fulfilled or there has been a change to the Incentive Promise.
• A “Genius Miner” is someone who currently holds a stake that is mining for Genius
Token.
• “Reward Shares” are assigned to Stakes and represent, proportionally, how much of the
Reward Pool will be distributed to the holders of Reward Shares. The amount of Reward
Shares you have is similar to Bitcoin Mining processing power.
• “Rewards” are extra Genius Tokens minted or redistributed to the end user.
• This document covers pertinent details for a high-level understanding the Genius
protocol. You must have no expectation of profit, nor expectation of profit derived from
this work or the work of others relating to this document and the tokens mentioned.
This document is not an investment nor investment advice. This document is for
reference purposes only.
Tokenomics 101:

• Initial Supply: approximately 240 Billion (240,000,000,000) tokens. These will all be
airdropped to participants after the Genius Sacrifice, a 28-day event held sometime in
the spring/summer of 2022.
• At the maximum, an additional 14.5% of the Initial Supply, or 35 Billion (35,000,000,000)
can be minted from holders of the Legacy GENI contract token. The Legacy contract’s
Ethereum / PulseChain address is: 0xaac1abdb4fb7a91a0e2e036dfacc45f708ed6a39
• Approximate Annual Inflation: 4.236% (PHI^3)
• Inflation is paid out to Genius Miners on a daily basis.
• Genius will be deployed to Ethereum and PulseChain. Genius may also be deployed to
Binance Smart Chain.
• Deflation Mechanics (“Burning”) are triggered any time the end user modifies an
Incentive Promise: harvesting rewards early, collecting their Stake early or late,
auctioning a stake for value finality, etc. Although the Genius Tokens will be out of
circulation due to burning, those burnt tokens are still considered in the calculation for
new daily rewards.

Initial Token Distribution:

The initial supply of Genius will be airdropped to Sacrifice participants. A total of 240 Billion
(240,000,000,000) Genius Tokens will be distributed at the initial token distribution. For more
information about the Sacrifice Phase, visit the website for the official Sacrifice event:
https://sacrifice.to

Warning: the information contained on the Sacrifice event website is completely independent
and unrelated to the Genius tokenomics explained in this white paper. Any information derived
from the Sacrifice website is not applicable, and should not be considered to be applicable, to
any information contained within this white paper.

Legacy GENI token holders can, and should, participate in the Sacrifice to receive the Initial
Token Distribution. There is a massive bonus for Sacrificing Legacy GENI, and this bonus is in
place to remove Legacy GENI out of circulation in favor of the new Official Genius smart
contract. Every single unit of Legacy GENI that is sacrificed will receive 3.33 times more
sacrifice points than the US dollar value of sacrificing any other token.

Legacy GENI tokens can be acquired from Uniswap. Use this web link to automatically import
and swap for Legacy GENI: https://geni.us/getlegacy

Important Note on acquiring Legacy GENI: you must have no expectation of profit, nor
expectation of profit derived from the work of others.
Genius Contract Guide
Minting from Legacy GENI

Warning: This Minting section will only make sense to advanced cryptocurrency users who did
not or will not participate in the Sacrifice event. This is mainly for Legacy GENI Liquidity
Providers who have a very specialized plan of interaction with Legacy GENI and Genius Token’s
inherent game theory. If you plan to participate in the sacrifice event, feel free to skip reading
this section and continue with the next section, “Mining for Genius Token”.

After the Sacrifice event has completed, and upon the first main network (“mainnet”) release of
Genius, Legacy GENI can be used to mint Genius Token. When you mint the official Genius
Token, your Legacy GENI will be converted to principal in an Advanced Stake, which will begin
mining for Genius Token. By default, 1 Legacy GENI will mint 16.9 GENI into the principal of the
Advanced Stake.

Additionally, during the first 32 days of the mainnet launch there will include a minting bonus.
This bonus is in place to remove the placeholder token (Legacy GENI) from circulation in favor
of the more useful Genius Token. For the first 4 days of launch to mainnet, each Legacy GENI
will mint a total of 1,000 Official GENI. All Legacy GENI holders will want to mint within the first
4 days because this period will mint roughly the same proportion of Genius Token relative to
the total supply, as with Legacy GENI’s total supply. Less Official GENI will be minted per Legacy
GENI every 4 days. Below is a listing of the rate of GENI that will be minted for every 1 Legacy
GENI that is burned using the Official GENI contract’s “mint” functionality:

• Days 1-4: 1,000 GENI

• Days 5-8: 864.4 GENI
• Days 9-12: 728.8 GENI
• Days 13-16: 593.2 GENI
• Days 15-20: 457.6 GENI
• Days 21-24: 322 GENI
• Days 25-28: 186.4 GENI
• Days 29-32: 50.8 GENI

For Days 33 and onward: 1 Legacy GENI will mint 16.9 GENI. The formula to calculate the exact
amount of GENI to be minted is as follows:

Mintable = Legacy GENI * 1000 / (29.5 / (29.5 -

MIN(FLOOR( (GENI Day - 1) / 4, 1) * 4, 29) ))

GENI Days move forward at midnight (00:00:00) UTC time. Day 1 is the day that GENI is
launched to mainnet.
Mining for Genius Token

To mine for Genius Token, you will use the DAPP (Decentralized Application) software to create
a Stake. (The first reference DAPP will be deployed at https://geni.app) You can also think of
the “Stake” as a type of Incentive Promise that gives rewards (via Reward Shares) to the Genius
Miner. Reward Shares allow Genius Miners to receive Rewards of extra GENI every day. When
you stake, the GENI software will invoke a function of the GENI smart contract to commit your
GENI for a period of days. For example, you may “stake” 100 GENI for 30 days, and during this
time you may not access your GENI. You will not be able to transfer or interact with the GENI
that you stake. After the 30 days, your Genius Mining Reward Shares will expire, and you must
end your stake to receive the 100 GENI plus the Rewards for your Incentive Promise. This is like
the functionality of a bank’s Certificate of Deposit product, also known as a “Time Lock”
deposit.

The Rewards are drawn from a pool of Reward Shares, where your number of Reward Shares
relative to the pool will calculate (proportionally) the extra GENI your stake receives when
ending your stake. In other words, the Rewards you receive is based on your shares divided by
the total number of shares.

Note: Although GENI can be staked during launch day, new GENI stakes will always be
applicable to earn rewards starting at the beginning of the upcoming GENI day after the GENI
stake initiated. In other words, Genius Mining does not begin until the new day. For example,
if a stake’s Genius Mining begins on launch day (GENI Day 1), the protocol will wait until the
beginning of the next day (GENI Day 2 at 00:00:00 UTC) before the stake begins mining for
Genius. It will be the following day (GENI Day 3) where the stake is credited its first mining
rewards for GENI Day 2.

Share Price and Reward Shares

The number of Reward Shares you receive upon starting your Genius Mining is determined by a
Share Price. This price, upon GENI’s launch to mainnet, the “Initial Share Rate” will be set to
~2,618 GENI (PHI^2 * 1000).

The number of Reward Shares you receive will be the amount of GENI you put up to mine for
Genius Token divided by the Share Price. However, the amount of GENI you allocate to the
stake will receive a bonus based on how much GENI you stake and how long you stake that
GENI. The bonuses are:

Promise Days Bonus (aka “Longer Pays Better”): this bonus is based on the number of days you
promise to keep your GENI staked. The rate of the bonus, relative to the amount of GENI you
will stake, is (Promise Days - 1) / 1456. This incentivizes you to create longer stakes to enjoy the
most rewards for your GENI savings. The full formula, which takes into account a cap of ~2.18x
the amount of GENI you are staking, is as follows:
 = MIN(GENI * PHI^PHI, GENI * (Promise Days - 1) / 1456)

The figure (below) graphs the Promise Days Bonus when using a principal of 1,000,000 GENI.
The x-axis is the number of Promise Days, and the y-axis is the bonus amount of Genius Token.

Notes:
• The maximum “Promise Days” is 4,444 days, or 12 years and 2 months, depending on
the leap year and number of calendar days in the month J
• Your maximum Promise Days Bonus is a little more than double of the GENI you stake.
The exact amount that this bonus is capped is relative to your GENI multiplied by
PHI^PHI (PHI to the PHI power, or ~2.18).
• To achieve a Promise Days Bonus equal to the principal, create a Genius Mining Stake
for 1457 days.
• For the maximum Promise Days Bonus, set the Genius Mining Stake to 3173 days.
• The benefit of having a stake mine for Genius for beyond 3173 days is that you get to
keep your Reward Shares for an additional 1,271 days (~3.5 years).

Genius Size Bonus (aka “Bigger Pays Better”): the larger the amount of GENI you stake, the
bigger the bonus. This incentivizes the end user to create the minimum number of stakes for
their goals—an incentive to save more GENI to mine for more Genius Token. This is also an
incentive to stake more quantity. The bonus is a percentage of the GENI you are staking, equal
to GENI / 10^9 (1 Billion), but with the bonus percentage capped at PHI/10 percent (~16.2%).

= GENI * MIN(GENI, PHI/10 * 10^9) / 10^9

To achieve the maximum Genius Size Bonus of ~16.2%, create a Genius Mining stake with the
principal amount of ~161,803,399 Genius (PHI * 10^8).
Reward Shares Example:

Let’s say you want to stake 5,000,000 GENI to mine Genius for 1 year (365 days) using the
“Advanced Mining” method.

1. The amount of GENI will be 5,000,000.

2. The Promise Days Bonus is (365 - 1) / 1456, or 25%. 5,000,000 * 25% = 1,250,000 GENI.
3. The GENI Size Bonus is 5,000,000 / 10^9, or 0.5%. 5,000,000 * 0.5% = 25,000 GENI.

These 3 values give you the GENI amount applicable for acquiring Rewards Shares. The total is
5,000,000 GENI (Principal) + 1,250,000 GENI (Promise Day Bonus) + 25,000 GENI (Size Bonus),
or 6,275,000 GENI.

If this stake is created at the first available day to mine for Genius, the total number of Reward
Shares acquired upon creating this Genius Mining stake is 6,275,000 divided by the share rate
of ~2,168 GENI per share, which is ~2,396.837 Reward Shares.

In this example, you will have locked up 5,000,000 GENI for 365 days in what will be referred to
as a Genius Mining Stake. This Stake has ~2,396.837 shares allocated to it and will receive
Rewards every day in proportion to your number of shares of the global share pool. If the
Rewards payout is an average of 1.5 GENI per share per day, this stake will receive 4,341.555
GENI per day for 365 days, or a total of ~1,312,268.104 GENI in rewards at the end of the stake.
(That is a ~26.2% return on your GENI in 1 year!)

Genius Mining Methods

There are 2 types of methods that you can use for Genius Mining:

1. Simple Mining
2. Advanced Mining

Both methods differ in how they accumulate rewards and incur penalties. The Simple Mining
method is meant to simulate a “low risk, low reward” scenario, and the Advanced Mining
method aims to simulate a “high risk, high reward” situation. In both methods, the “risk” is the
likeliness that the Genius Miner must prematurely end their mining for a personal, financial
emergency. Let’s begin with explaining the first method since that is the simplest J

Simple Mining Stakes:

• Can mine Genius for 1 to 4444 days.
• Rewards are only from base inflation.
• Of the ~4.236% total annual inflation, Simple Miners receive at most PHI^-3 (~23.6%) of
the total inflation.
 • Do not earn rewards from Genius Miner penalties.
• Cannot stop mining for the first and last 10% of their mining period by default. For
example, if you create a Simple Mining Stake for 108 days, you cannot end mining on
the first 10 days nor on the last 10 days of the period. This time period will increase to
as high as 38.2% (PHI^-2) depending on a multiplier based on Genius Miners’ incurred
penalties.
• In most situations, only the rewards are penalized. The principal is only ever penalized
when the Genius Miner chooses to liquidate their mining stake or if the Genius Miner
neglects to end their mining stake after the 7-day grace period following the end of the
Genius Mining Stake period.

Advanced Mining Stakes:

• Mine the most Genius rewards.
• Mine extra rewards based on the penalties incurred by Simple Genius Miners and
Advanced Genius Miners.
• Mine extra rewards from large liquidations.
• Can mine Genius for 1 to 4444 days. (During the first 120 days, the Advanced Genius
Mining Stake can only be liquidated: it cannot be ended early!)
• Have severe penalties when you end your Genius Mining early. Penalties can eat into
your Genius rewards earned as well as your Genius Mining principal.
• The penalties are amplified depending on how many Genius Miners have ended early in
a given period.
• Have a larger penalty when you end your Genius Mining late, beyond the 7-day grace
period.
• Allows the account holder of the Advanced Genius Mining Stake to bid on Genius Mining
Stakes that are being liquidated.

Simple Genius Miners and Advanced Genius Miners can elect to “Liquidate” their Mining Stakes
at any time. The Liquidate action creates an auction for the mining stake that allows other
Genius Miners to bid on the mining stake. Note: mining stakes can only receive bids from
account holders who are actively mining Genius using the Advanced method.

Rewards Payout Calculation

Every day, the contract accumulates rewards to be paid out to Genius Miners. The daily
Rewards are:

• ~0.011525% of the Total Genius Supply, including all supply that has been burned. This
amount equates to ~4.236% (PHI^3) annually. (To be more precise, “annually” here
actually means a 360-day cycle.)
• The daily rate of inflation is:
o 11,525 / 99,999 / 1,000, or
 o 0.0001152511525…, or
o ~0.011525%.
• The sum of all penalties paid by miners who ended early.
• The sum of all penalties paid by miners who are past the 7-day grace period following
the Genius Mining end date.
• Excess bids on stake Liquidations.

All miners receive a daily Reward based on the mining stake method (Simple or Advanced) and
each miner’s Reward Shares verse the total global shares. Simple Genius Miners take a
maximum of ~23.6% (PHI^-3) of the global share payout, and Advanced Genius Miners take the
remainder portion of the shares plus accrued mining penalties.

A special note on Rewards granted to Simple Genius Miners: to guarantee that Simple Genius
Miners will never receive more than ~23.6% of the mining rewards per Rewards Share
compared to Advanced Genius Miners, the proportion of Simple verse Advanced methods must
be incorporated in the rewards calculation. The amount of mining rewards granted to Simple
Genius Miners is expressed by this formula:

= Daily Rewards * MIN(PHI^-3, PHI^-3 * Simple Reward Shares / Adv. Reward Shares)

Below is an example of the procedure that guarantees Advanced Genius Miners receive better
rewards.

1. 250,000,000,000 of the total supply.

2. ~0.011525% of the total supply is minted, adding 28,812,788.125 GENI to the total
supply to be distributed to stake holders.
3. Let’s assume that 10% of the total supply (25 Billion GENI) is staked, and let’s also
assume that half of the Reward Shares are held by Simple Genius Miners while the other
half are held by Advanced Genius Miners.
4. Non-Stake Holders receive 0 GENI as a reward (0% rewards, annually).
5. All Simple Genius Miners will receive a maximum of ~23.6% of the minted inflation
rewards: PHI^-3 * 28.8m GENI = ~6,801,776.618 GENI total paid to Simple Genius
Miners. Simple Genius Miners will be paid, proportionally, based on the number of each
miner’s Reward Shares. Since these rewards are paid out to Simple Genius Miners who
are Mining with half of the Reward Shares, the average annual returns for Simple Genius
Miners are ~9.93%. This is calculated by:

= Global Rewards * PHI^-3 / Total Supply * 365 / Total Percent of Supply Staked
= ~28,812,788.125 * ~0.236 / 250,000,000,000 * 365 / 0.1

6. Let’s assume that no miners halted their mining outside of their Promise Date and had
paid zero penalties. The Total Rewards to be paid to Advanced Genius Miners will not
receive an extra payout bonus.
 7. Advanced Genius Miners will receive ~28.8 Million GENI less the Rewards paid to the
Simple Genius Miners, or ~22,011,011.507 GENI. The average annual returns for
Advanced Genius Miners are ~32.14%.

= (Global Rewards - Simple Stake Rewards) / Total Supply * 365 / Ttl Perc Supply Staked
= (28,812,788.125 - 6,801,776.618) / 250 Billion * 365 / 0.1

To calculate the total rewards payout for Advanced Genius Miners, that formula will be:

= Global Rewards - Simple Stake Rewards + Total Penalties Accumulated

For an in-depth analysis on the Rewards Payout Calculation for Genius Mining, see this Google
Spreadsheet: https://geni.us/mining

Penalties and Avoiding Penalties

No one likes penalties, and the GENI contract has flexible means to earn more GENI without
incurring any penalty. Penalties are only incurred when you do not fulfill your promise. There
are 4 ways to avoid penalties:
1. Pay attention to your Genius Mining so that you do not end the miner stake late.
2. When you create a Mining Stake, use the “Simple Mining” method instead of the
“Advanced Mining” method. The principal GENI is not penalized when Simple Mining
ends before its Promise Date.
3. If you have an Advanced Mining Stake, fulfill your promise and do not halt mining
prematurely or after the ending 7-day grace period.
4. Do not “Liquidate” any of your Genius Mining Stakes. More on this later.

Likewise, there are 3 ways that Genius Miners are penalized. Penalties incur when the miner:
1. Sets a Genius Mining stake to be liquidated.
2. Ends Genius Mining before the Promise Day (prematurely).
3. Ends Genius Mining after the 7-day grace period beyond the Promise Day.

For Simple Mining, penalties are only applied to the GENI rewards you have accumulated. Your
principal GENI will only be penalized after some time of not claiming your Genius Mining
rewards once the mining’s Promise Period has matured (i.e., served its time) or if you choose to
liquidate your Genius Mining Stake prematurely.

For Advanced Mining, penalties can eat into your principal GENI. People select the “Advanced
Mining” method when they are absolutely positive that they will fulfill their promise. By
choosing Advanced Mining, you mine extra Genius that cannot be mined by the Simple method.
Penalty Calculations and Mechanics

Penalties are treated differently between Simple and Advanced Genius Mining, and these two
will be separated. With all mining, the total payout for ending the mining will be calculated by:

PAYOUT = Principal + Rewards - Penalties

Advanced Mining – Ending a mining stake before the Promise Date:

PENALTY = Promise Days / PHI / Days Served * Rewards * Penalty Multiplier

Penalties are in place to lessen GENI’s market selling pressure. This can preserve steady market
buying pressure over time. Although excellent price performance is welcomed by everyone,
the more buying pressure means that the mining penalties may no-longer dissuade Genius
Miners from terminating their mining early to realize individual profits. In scenarios like this
where GENI’s price performance outpaces the penalty that Genius Miners must pay to end their
mining early, GENI’s price and liquidity can experience excessive selling pressure. The Penalty
Multiplier exists to guard against negative market impacts such as described above.

The Penalty Multiplier

The Penalty Multiplier exists to protect the market value of Genius after the market has
experienced significant buying pressure, such as during a bull market. The Penalty Multiplier is
one of the mechanics in place to protect the Genius market value. Furthermore, Genius Miners
who consider early ending an existing mining stake to re-engage in another mining stake for
longer periods of time will find it more economical to have mined for significantly longer
periods of time from the beginning of their mining stake creation. In other words, because of
the Penalty Multiplier, Advanced Genius Miners are economically incentivized to keep their
original promise instead of modifying it.

When a Genius Miner ends a mining stake before the Promise Date, the Penalty Multiplier is
calculated using the Penalty Counter, and then upon successfully ending the mining early, the
Penalty Counter is incremented. With the new Penalty Counter value, the Penalty Multiplier
will be higher than it was previously. To calculate the Penalty Multiplier from the Penalty
Counter:

Penalty Multiplier = Penalty Counter * PHI^-5 + 1

At the beginning of every new Genius day, the Penalty Counter decreases by 1 for every 360-
day cycles that the GENI contract has been in place. To calculate the daily decrease:

= INT(GENI Day / 360) + 1

Simple Mining – Ending before the Promise Date:

Simple Mining does not lose mining rewards; however, it is only possible to early end Simple
Mining Stakes between 10% and 90% of the Promise Period’s timeline, and this period is also
variable. The time that is within the first 10% or after the last 10% of the Promise Period is
called the “Blackout Period”, and this is when Simple Mining Stakes cannot be terminated early.
During the Blackout Period, Simple Mining Stakes can only be Liquidated (i.e., sent to Auction).

The Penalty calculation for Simple Mining Stakes does not include the Penalty Multiplier, and it
also enforces that the Genius Miner does not lose their principal:

PENALTY = MIN(Rewards, Promise Days / PHI / Days Served * Rewards)

Simple Mining – Variable Blackout Period:

The Blackout Period will be a minimum of 10% of the start and end of the Promise Period. The
maximum Blackout Period is ~38.2% (PHI^-2). The Penalty Multiplier influences this value. The
Blackout Period is calculated as:

Blackout Period = MAX(0.1, MIN(PHI^-2, 0.1 * Penalty Multiplier / PHI^3.5))

This calculation gives a percentage, and once the percentage is determined, then the number of
Blackout Days at the beginning and end of the Promise Period is calculated as:

Blackout Days = FLOOR(Promise Days * Blackout Period, 1) - 1

It is worth noting that with this calculation, the total number of days where the Simple Miner
cannot be terminated is Blackout Days * 2. Also, a 20-day Simple Stake is the shortest stake
that will have 1 Blackout Day at the beginning and end of the stake’s Promise Period. Simple
Miners of 19 or less Promise Days are an exception and do not have a blackout period.

Ending Genius Mining after the Promise Date:

For each day that an Advanced Miner has not been claimed past its Promise Date, the mining
stake incurs a penalty of ~0.374% ((PHI^2) / 7). The mining stake will exhaust its entire value in
268 days, or just shy of 9 months. This penalty is deducted from the final Principal and
Rewards. For the Simple Mining method, the penalty is ~0.231% (PHI/7) per day, exhausting
the stake’s entire value in 433 days, or in a little more than 14 months.

Penalty Mechanics for both Simple and Advanced Mining:

You will notice that PHI is used in the Penalty calculation. The use of this value ensures that the
Genius Miner will realize net positive Genius rewards after the mining stake has served ~61.8%
(1/PHI) of the Promise Days.
All Penalties accumulated are redistributed as follows:

• 66.18% of penalties are distributed to Advanced Miners.

• 8.82% of penalties are sent to the Origin Address.
• 25% of penalties are removed from circulation.
Both Simple and Advanced Mining also has a 7-day grace period after the Promise Date to end
without penalty.

Liquidations (aka “Auctions”)

Liquidations are typically done without the end user’s approval, but with the Genius Smart
Financial Contract, liquidations are done at the will and approval of the Genius Miner.
Therefore, it may be more appropriate to call a liquidation an “Auction” to transfer ownership
of the Genius Mining Stake.

When the Genius Miner sets their mining stake to be liquidated, the mining stake is put into a
Liquidation Pool where Advanced Genius Mining account holders can opt to bid on the mining
stake. The miner will still earn rewards throughout the life of its mining stake.

Only accounts that have an Advanced Genius Miner, with a Principal amount of at least 1 GENI,
can start an auction to claim ownership of another mining stake. All auctions start at a bidding
price equal to ~8.049% (POWER(PHI^-2, PHI^2)) of the current Principal and Rewards of the
stake (“Auction Principal and Rewards”, or AP&R), and this value is only calculated at the time
of the beginning of the auction (“Starting Bid”). This starting bid is also the minimum amount
of GENI that will be burnt upon the Genius Miner’s transfer of ownership to the winning bidder.

Bidders can bid any amount greater than the current bid, and there is no maximum bid amount.
When a new bid is posted, the GENI for the previous bid is returned to the previous bidder.
Once the auction is won to the highest bidder, the Genius Tokens held aside for the largest bid
are then distributed by the following procedure:

1. ~8.049% of the AP&R was already set aside to be guaranteed to be burnt, and ~91.95%
is the Remainder to Distribute (RTD).
2. The prior Genius Miner (prior owner of the mining stake) will receive ~30.148% (PHI^-2
minus the Starting Bid) of the RTD, but no more than ~30.148% of the mining stake’s
Principal. The remainder is considered the “Excess” Genius.
3. Of the remaining Excess, exactly 66.18% will be burnt, 25% will be redistributed to
Advanced Miners, and 8.82% is sent back to the Origin Address.

The winner of the auction is automatically given possession of the Genius Mining Stake.
NOTES:
• ~8.049% is (PHI^-2)^(PHI^2)
• The original Genius Miner risks liquidating a stake to only 1 bidder. If there is no more
than 1 bidder, the original Genius Miner will receive no GENI for their liquidation.
• Only the owners of an Advanced Mining Stake can start or participate in an auction.
• Auctions last for 24 hours; however, after each bid the contract guarantees that the
minimum remaining time for the auction is 5 minutes.

FOR EXAMPLE:

Let’s say that Mark wants to liquidate his Simple Miner that contains 10,000 GENI Principal and
roughly 200 GENI in rewards. Mark will signal to the Genius smart contract that he wishes to
liquidate, or auction the ownership of, his Genius Miner along with all the Genius rewards it has
already mined and will mine in the future. At this moment, the maximum bid is 0 GENI, and the
Genius Mining Stake is flagged for liquidation.

Only when the first bid is placed will the auction time begin counting down from 24 hours. The
first bidding from another Advanced Genius Miner forces the initial bid to be ~820.96 GENI, no
more and no less. In this example, let’s say that the Winning Bid amount is 12,000 GENI.

1. ~820.96 GENI (~8.049%) of the AP&R was already set aside to be guaranteed to be
burnt, and the remainder of ~11,179.03 GENI (~91.95%) is the Remainder to Distribute
(RTD).
2. The prior owner of the Genius Mining Stake will receive ~3014.78 GENI, which is not
~30.148% (PHI^-2 minus the Starting Bid) of the RTD, but that value is the maximum
amount of ~30.148% of the stake’s Principal. The remaining ~8164.24 GENI is
considered the “Excess” Genius.
3. Of the remaining Excess:
a. ~5403.09 GENI (66.18% of the Excess) is additional Genius Tokens to burn,
b. ~2041.06 GENI (25%) will be redistributed to all Advanced Genius Miners, and
c. ~720.08 GENI (8.82%) will be sent to the Origin Address.

On the next page is a pie chart that illustrates the typical distribution of the Genius Tokens that
won the liquidation auction.
There is an additional, and important, note for when Genius Tokens are “removed from the
total GENI supply (burnt)”. It is better to state that these tokens are removed from circulation,
but they are still considered when calculating the daily Genius rewards that will be distributed
to Genius Miners. The game theory behind this mechanic is so that as the Genius Miner
population grows over time, the proportional rewards distributed to the stake holders also
grows.

Share Price Mechanics

At the end of every Genius Mining Promise Period, the new share rate for Rewards Shares is
either updated to a higher price or it is not updated at all. At the beginning of each new GENI
day, if the share rate value has not been updated, then the share rate will be incremented by
the Minimum Increase.

Minimum Increase = PHI * INT(GENI Day / 360) + 1

When a Genius Miner has ended their mining, the GENI contract will ensure that the new share
rate is increased. The rate increase will be large enough so that the Genius Miner will only be
able to re-purchase the same amount of Reward Shares if they were to dedicate the prior
mining stake’s entire GENI Principal and Rewards earned for a new Promise Period that is
longer. That longer length for the new Promise Period to get the same number of shares will be
at least PHI^-3 longer (~23.6%).
Below is the formula that calculates the new share rate candidate. Note that “GENI” here
represents the Genius Miner’s full payout of Principal + Interest - Penalty, and the Promise Days
and Shares variables represent those values of the mining stake that was just ended by the
Genius Miner.

New Share Rate = ((GENI) +

MIN(GENI * 2, GENI * MIN(4444, CEILING(Promise Days * (1+PHI^-3)) - 1) / 1456) +
(GENI * MIN(GENI, 10^9 * PHI/10) / 10^9))
/ Original Shares

It is important to note that the new share rate calculation assumes that the Genius Miner Stake
ended on the day it was promised to have ended. If the Genius Miner’s payout was less than
their principal, such as in the example of paying early end penalties, then the share rate will not
be updated.

Here is an example process of how the share rate is updated on a continual basis:

1. Is the Genius Miner’s GENI Payout greater than the Genius Miner’s original Principal? If
not, then this process is terminated.
2. The Opening Share Rate will either already be set or the value will start at the Initial
Share Price. (See Share Price and Reward Shares for more information.)
3. Calculate the Next Share Rate using the New Share Rate formula above.
4. If the calculated value is less than the current value of Next Share Rate, then this
process terminates, and the original value of Next Share Rate is not updated to accept
the new calculation.
5. If the New Share Rate is greater than the maximum share rate (to be determined upon
implementation), then the New Share Rate will be set to the maximum rate and this
process is terminated.
6. Set the New Share Rate to the calculated New Share Rate.

At the beginning of the new GENI day, the contract will check whether the value of Next Share
Rate is greater than the Opening Share Rate plus the Minimum Increase. If yes, then the
Opening Share Rate is updated to reflect the Next Share Rate of the previous day. Otherwise,
Opening Share Rate is set to the Next Share Rate plus the Minimum Increase, and then Next
Share Rate is set to the Opening Share Rate.

Future-Proofing Genius

There will be a “Proof of Benevolence” function that allows any number of an account’s Genius
Tokens and/or Genius Mining Stakes to be removed from circulation. This transaction that
removes the Genius Tokens or Miner can be used to “move” the tokens/stakes to another
smart contract or smart chain.