Network Tokenomics: Road to the Public Network
Greetings NuNetopians,
With the release of Device Management Service DMS 0.5.x, Nunet has already enabled its orchestration layer. Whilst we continue to add more features and functionalities to DMS, we have already begun work on the design and implementation of Network Tokenomics which is an essential aspect of our public network.
What do we mean by Network Tokenomics?
Nunet is envisioned as a decentralised compute network where services can be exchanged for economic value.
Nunet is envisioned as a decentralised compute network which can natively facilitate peer to peer exchange of economic value. In other words, it is not just a p2p network, but a decentralised economy of compute resources and allied services.
The orchestration layer allows for peers to find each other and securely communicate using the NuActor framework. The addition of Network Tokenomics extends this capability to enable peers on the network to transact with each other i.e. exchange services and economic value without relying on a centralized intermediary using NTX, the native utility token of Nunet.
Contracts as a fundamental building block
In order for any two parties to enter into a business transaction, it is necessary to establish the terms of the engagement. This is what we typically refer to as a Contract. Further, it is also imperative that the execution of the said transaction/engagement adheres to the contract terms.
Nunet’s approach to contracts is based on the concept of electronic rightswhich also leverages the Object Capability paradigm that is the basis of secure messaging between actors on Nunet network. If you are curious to dive deeper into the conceptual framework behind the contract architecture and design in Nunet, check this out.
Simply speaking, on the Nunet network, contracts are the basis on which any transaction is initiated, executed and settled. At this stage, it is important to highlight that Nunet enables two kinds of contracts:
Externally Defined Contract
The promise of Nunet as a DePIN project is to bring real world utility to the Web 3 space using NTX, its native utility token. However, as it stands, there are still many businesses and organizations (and even individuals for that matter) that are wary of using cryptocurrency or digital assets.
To solve this challenge, we are building the ability to leverage the functionality of DMS with pre agreed contracts (on B2B basis for example). Think of this as a bespoke offering built on top of Nunet stack that can facilitate interaction with trusted parties a.k.a permissioned network. We see this as a crucial step towards usage of DMS functionality until we continue to develop the network tokenomics needed for the public network.
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Peer to Peer Contract
In the public network, before peers can transact, they will enter into a contract which will define the terms of engagement including any payments, collateral requirements, proof etc including transfer of rights that are needed for a peer to utilise available compute resources offered by other peers in the network.
It is once again important to mention that the NuActor framework gives the power to each peer to either accept or refuse to transact with another peer on the network. We expect that peers on the network will consciously choose to only engage other peers that they trust.
To summarise, any transaction between peers on the public network will be based on mutually agreed contract terms and all value exchanges will be done using NTX, Nunet’s native utility token.
Other aspects of the Tokenomics Design
It is obvious that to enable economic exchange, we need the provision to make peer to peer payments. We are currently considering that this can be safely executed through an escrow mechanism.
We also understand that peers may want additional security guarantees while transacting over the public network. One of the ways to do that in a decentralised system is to require an economic value as collateral for a specific transaction. One may think of this as a refundable security deposit that you pay while using any service or product.
This requirement is very case specific. Our approach is to enable each peer to specify the exact amount of NTX they want from the other party as a security against possible misbehaviors. We call this Micro Collateral and all the terms around it will be covered in the contract.
Incentive Design
At Nunet we are building a decentralised ecosystem. To prevent malicious usage and align incentives for each participant towards the stability and growth of the network, we will be using a Stake to Access model. We are currently working on a design that can align with Nunet’s vision of distributed compute that can serve the needs of a range of players, both small and big.
To encourage community participation, we are also considering to include the provision for Delegated Staking. This will allow NTX holders to stake their NTX to high quality peers in the network in lieu of some benefits. Attracting stake from the community helps peers to be more capital efficient. It also incentivises them to establish a strong presence in the community as multiple peers will compete to attract community held NTX.
The other areas of focus with respect to network tokenomics design are Rewards and Network Sustainability. Currently we are carefully evaluating both of these aspects and we expect to share with you the Nunet approach in the coming months.
Reputation
Imagine a public network with millions of peers that have joined to either utilize or offer services to other peers in the network. In such a setting reputation plays an important role in peer selection. Higher reputation typically constitutes a higher level of trust and more chances of other peers trusting to engage with the peer in consideration.
Therefore, we consider having a reputation system as an important part of the public network.