A large majority of the tokens coming out of the crypto space right now are absolute garbage. What’s worse, they’re polluting the space and drowning out the teams with really promising work. In an attempt to make said tokens look less like securities, these jabronies are claiming their tokens have utility.
As we build out Concurrence, I find myself wondering if we could operate without the token. We need a utility token for rewarding the efforts miners and punishing bad actors, but maybe it could run directly on Ether. I want to explore this idea, but first let me lay the ground work by explaining the mechanics of the system.
Concurrence is a decentralized oracle network. DApp developers reserve tokens behind a generic request for off-chain data. Miners gather the requested resources, write responses to the smart contract fleet, and stake tokens on the validity of their results. Finally, on-chain combiners aggregate the results, reward the good actors, and distribute the consensus.
Could we establish a currency backed consensus without creating our own token?
The first part is easy. Instead of a token being reserved in favor of a request, DApp developers could easily use Ether to incentivize miners to gather results.
The second part might be a little more complicated. As miners return results to the blockchain, they would stake Ether instead of a token in favor of their results.
In essence, this system works exactly the same whether the driving currency is Ether or some other token. But, a problem arises when we look at how Proof of Stake governs the network. If any miner can stake any amount of Ether on a result, the stake is not in the Concurrence network but Ethereum itself.
If a miner is staking its ownership in our network, not Ethereum as a whole, it has a more direct incentive not to corrupt the Concurrence. On the other hand, a bad actor with plenty of Ethereum could easily sway the consensus. It’s almost like the liquidity of the token works against its utility in terms of stake.
This leads me to a really interesting conclusion. First, by abstracting the ownership and governance to the token, it weakens external attacks from the greater Ethereum network. If an attacking party can purchase a large amount of the network ownership on an exchange, local Proof of Stake breaks down. A staked utility token only works if the token can only be earned from participation in the network and not purchased in bulk.
Token sales are a very powerful way to raise funds to build out new technologies. It’s important that solid projects continue to get the backing they need for the crypto ecosystem to flourish. The problem is we run into a chicken-or-the-egg scenario if we say that a project must first have a fully established, incentivized network before they can raise the funds to build said system.
With Concurrence, I think we need a utility token to properly incentivize and empower our network. Perhaps DApp developers could spend Ether to power their smart contracts with off-chain data instead of a token. However, the token staking mechanic only works if the token represents utility loss or gains within the local system and can’t be manipulated by external whales.
I would love feedback on this. How do other projects incentivize local systems using a utility token? I think the Concurrence token is a utility token because it is used to purchase the services of miners, but perhaps the local staking of a token (and how it can be acquired) is what makes it so important.
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