Tokenomics Overview {part 1 & 2}
The IoTeX ecosystem already had the utility for IOTX coin before the tokenomics announcement. IOTX is used for 4 purposes.
Gas fees - the concept of using the IOTX coin as the currency for the IoTeX platform to incentivize different types of stakeholders including Delegates, stakers, consumers, etc. One thing that’s interesting is we’re now introducing devices into that so devices in the future can also have their own identity and also use gas to transact with the blockchain either to pass data or to receive data and things like that.
Governance - the concept of staking IOTX coins in order to vote for different things in the network. Many people are already staking and voting and getting great annual returns from the staking program by voting for delegates and many have also participated in our network-wide votes. So in order to have a voice in the network, this is where the staking aspect of the coin comes from.
Burn and new stake mechanism - the goals of these is to certify and register that devices and staking service providers are trusted and registered so that all the people in the network can use them effectively.
What’s unique about the IoTeX network as far as gas fees, that not only humans are using IoTeXs gas fees but it’s also different types of devices can use gas in the IoTeX network and have an identity in the IoTeX network as well as businesses.
The next big question is once you have the framework for devices to use gas how do you make sure that they’re trusted? A very big category of tokenomics that we’re excited to announce is this burn-to-certify concept. So in the IoTeX network, we use this concept called decentralized identity which is an identity registered to the blockchain and designed to function without any centralized authority, which is different than the identity you’re used to today right sometimes you use login with Facebook logging in with Google. Those are called federated identity, where you register once and you can use it in a multiple of approved places.
There’s also the concept of centralized and single identity, which is like a webpage that has an account username and password and it’s all stored in a centralized place. Thus, you don’t have control over that identity and that’s really bad because you want to have full control of your identity and you don’t want anyone to be able to take away your identity and that’s what really decentralized identity and DID provides.
IoTeX built a very unique DID framework for both people and devices. There’s a concept within the decentralized identity framework called a verifiable credential {VC}, you can think about a DID as an empty passport and VCs are like stamps in your passport granting you access to specific services and capabilities.
As everyone knows IoTeX has been working on Powered by IoTeX devices for the better part of one year now and in the future, we hope to expand the concept of self-sovereign data privacy and user data ownership to many other different devices. So in order for device manufacturers to access the services that we offer in things like uCam and also future services we plan to build, they’re going to go through something called a burn-to-certify process, where device manufacturers like Tenvis who’s a manufacturer of the uCam hardware will burn IOTX in order to receive this special verifiable credential, which we call a powered by IoTeX certificate.
The identity and credentials are kind of defined by a specific DID and this PBI certificate powered by IoTeX certificate the cost is to burn IOTX and what this also provides is the service level guarantees which comes with things like warranties, a concept of a security and privacy label, zero gas fees.
A lot of people have been asking us how does Ucam and the entire device ecosystem really matter or impact the IOTX coin?
Under our tokenomics design, the most important thing is the total supply of IoTeX that will decrease with every new powered by IoTeX device, while also driving increased activity in the network and value for the IOTX coin.
Another interesting concept we’re introducing is called stake-to-service. In the future a lot of service providers will be part of the IoTeX Network, such as IPFS, Bluezelle or SIA for the decentralized storage, on the peer-to-peer networking side there’s things like BitTorrent and NKN, so how do we make sure all these service providers that are onboarded are trusted? How do we make sure that the services that they deliver are up to par?
In the traditional world there’s this concept of a service level guarantee or a service level agreement, an SLA, which basically defines if I do not deliver my services to you then this is the process and this is how I’m going to pay you back in case there’s a discontinuation of business. So we want to build the same principles to make IoTeX a very trusted ecosystem.
If a device manufacturer chooses to power their device on the IoTeX Network they need certain assurances that the service providers that ultimately service their devices and the follow-up process in case the service halts or fails there’s some kind of remediation benefits. Those things are very important to bring IoTeX into another mass-market device manufacturer ecosystem, so what we’re gonna do is require that service providers stake IOTX in order to obtain the right to provide services in the IoTeX network and they must also define certain service level agreements/SLAs that detail what their quality and availability guarantees are.
IoTeX is becoming the canvas for builders meaning device manufacturers or application builders, service providers and consumers to all interact in a decentralized fashion. We are the platform that brings all these different parties together under a very clear set of rules that are transparent, automated, and decentralized. So carrying that theme into our tokenomics design if you want to have a decentralized network the governance has to be decentralized and the tokenomics has to be decentralized as well.
The fact that radical transparency is a very important first principle for the IoTeX network and it’s embedded into our tokenomics design. So going back to the burn-to-certify process, the way it works is these device builders or manufacturers will interact with a DAO a decentralized autonomous organization and that’s basically a set of smart contracts that are open and verifiable by anyone, which means these smart contracts do their job and that’s all they do right, they are openly verifiable, there’s no backdoor behind the scenes things going on with your data it’s just very purely transparent and it fulfills its purpose.
The basic premise is that the builders will submit their device information to receive a proof of registration and using that proof of registration and some IOTX they’ll burn that IOTX and receive a proof of burn and for any device that has valid proof of registration and a proof of burn they will receive their powered by IoTeX certificate in order to access these suite of services that we described earlier. There will be certain requirements this device information has to be legitimate and there’s going to be kind of a overlay between IoTeX Foundation and potentially some of the third party advisors to ensure that these devices are what they say they are but aside from that, we’re trying to decentralize it as much as possible for transparency.
As far as I know, the IOTX coin is not involved with Ucam in many ways. The coin is not needed to pay gas and it’s not burned when a new device is connected
That last part is not necessarily true, and this question is not accurate. Of course, Ucam will be the first Internet of Trusted Things device that we’re going to have on the IoTeX network and all the tokenomics will be applied. There will be the burn-to-certify for Ucam to be activated on a network. In August, we will have a massive launch for Ucam and we already have everything in the pipeline. At the same time, we’re going to kick-off this tokenomics to make it running in production, so people will be able to see it and I’m so excited to see hundreds and thousands of Ucams get activated on the network while a certain amount of token gets burned. The other part of this question is saying that coin is not needed to pay gas, that’s true, because Ucam uses the blockchain identity from the IoTeX network which, as everyone knows, creating a new identity or a new account is free, but in the future we are thinking about a lot of interesting tokenomics designs where the Ucam or different devices that are Powered by IoTeX can interact with a smart contract for security purposes by sending a transaction or engaging with a smart contract on a regular basis. It can basically declare, that you know, I’m safe and it has an audit trail of these records, that show the device is functioning properly, that the data hasn’t been accessed maliciously. So it’s more of a subscription model, as more devices come on to the ecosystem.
SLAs {service level agreements} will surely improve the confidence of clients but requiring more will deter the growth of the services developed
What’s interesting about service providers is that there’s a really great kind of tech stack development theory, like the app infrastructure lifecycle, right where what you need to create amazing applications is the infrastructure. So without a really robust infrastructure, you can’t power those different types of applications. So the better infrastructure you have, more applications will come to build on your infrastructure and as more applications come on, they’re going to have more unique requirements that will demand more from that infrastructure. As a critical mass of applications comes on the infrastructure, we’ll have to improve the scale to support the larger number of devices and add more native services or bring in more service providers to fuel that. And it’s kind of this ongoing cycle where infrastructure determines the apps, that will be built, the apps will determine what new infrastructure needs to be built, what new services need to be onboarded and then that will also further create new types of apps and so on and so forth, in a cyclical fashion. This whole stake-to-service model refers to that we want people that are serious about providing services to the network, and as we grow this number of devices more service providers like IPFS are going to want to store the data from Ucam on decentralized storage or provide the networking for all these different devices out there. So with more service providers comes higher competition, which will ultimately increase the quality of service and once you have a great quality of service and diverse robust services then that will attract new device manufacturers and the cycle continues.
I would like to know if the Powered by IoTeX certificate that’ll be issued in the future to device manufacturers will be renewable or will have just a one-time issuance, that will serve the manufacturers without expiration?
For now we are working with smart home devices, which usually have just a few years of life cycle, 3 or 5 years at most, that’s why when we designed this PBI certificate we did not consider the expiration, which we should have, but I think later on we are going to probably add it. Ultimately I think it’s all about giving optionality to device manufacturers and it’s gonna take some time to understand the general requirements of these device manufacturers to figure out what type of business payment structures they’re comfortable with. Maybe some of them will want a one-time issuance that was good forever sometimes other people may to rent it or access these services for one year.
While creating tokenomics, did you take into account the experience of other projects whether they were both positive or negative and how has the experience of other projects influenced your decision?
Of course, we did a bunch of research into existing tokenomics on the market, especially the successful ones, MakerDAO is one of them and they are doing really well and there are a few others, which we took into consideration. But we are working on very different variable so I think of course we learn something from the existing ones but what we have is like one of a kind, it’s a new thing and I’m personally very excited about the things we are creating right now since it’s innovative and combines the business model with the crypto token in a perfect way and also integrates IoT devices, sales, e-commerce adoptions together with the concept of privacy preserviness.
Will service providers be required to periodically submit service level reports? How are they guaranteed to be true reports and would it involve feedback or ratings from other users?
For these service level reports the important part is that they’re first registered directly onto that smart contract, they are time-stamped and immutable. For all the arrangements that follow, they will refer back to those service level agreements and they need to be very clear and it’s ultimately up to the device manufacturer to decide whether or not they want to use this service. Maybe one service provider is cheaper in the amount of dollars per gigabytes stored but their service level agreements say you know maybe I guarantee that I will be up 95 percent of the time whereas a more expensive option is saying I’ll be up 99.999 percent of the time, and it’s ultimately up to the device manufacturer which service they want to choose but all of that is transparent, ultimately immutable and persisted on the blockchain. It’s a little difficult to encode this and enforce it automatically but what we want to do is start with the trusted base of having the same information that is unchangeable. And whenever a large service provider breaches a contract the responsibility always falls on the small to medium businesses that can’t really fight in in legal court so actually having all that information guaranteed and transparent is very important to facilitate these kind of trusted interactions.
How does being openly accessible and having the business logic automatically reinforced by programmable contracts protect against errors and external and internal attacks?
We are experimenting with an idea called micro DAOs. We envision that DAO is a big one, which is composed of probably 10-20 micro DAOs each. The micro DAO will just do its job, the same as big services like Google search or Microsoft services. We are experimenting by separating all those logics into different micro DAOs to improve the logic, code, have the ability to plug in/out and it will make it easier in terms of attacks.
The recent announcement of burning 2.65% of total IOTX supply, what inspired you to do that and what will be the impact on the token holders?
When we launched Mainnet GA, we had the Native Staking v2 enabled - which is like a native implementation of this staking mechanism which is super fast, secure, and reliable. But still, we had ~2% of tokens staked in the NS v1 which we wanted to kill probably down the road and have a process to encourage users to take out tokens from their buckets and stake into NS v2. This entire process can take anywhere from 3-6 months and probably some people would never even do it. So we’ve made a decision, in order to excel early the migration process and reduce this limbo state of the chain, we would deprecate 2.65% of the IoTeX tokens and the Foundation would inject tokens into this new staking mechanism. This allowed for the transition to happen overnight, which still made the chain operate very securely and reliably without any downtime or interruption. I think that’s a huge success and part of the reason why Mainnet GA was launched in a very smooth way.
