Tokenomics: A MANX Case
Consensus Protocol vs. Token Economics
A Consensus Protocol is used in blockchain to create and verify transactions, and to keep the overall infrastructure operating successfully. The Blockchain Mechanism is the component of the Consensus Protocol that creates and verifies transactions using cryptography algorithms without requiring a centralized authority. Token Economics incentivize the services (e.g., mining and validation) provided on the blockchain network. Token Economics are the core to keep the system sustainable in the long term.
Mechanism Design Theory
Professor Eric Maskin, Nobel Prize Winner in Mechanism Design, is one of the advisors of MANX. In a recent communication, Dr. Maskin mentioned “There might be ways of using mechanism design to help stabilize the value of a cryptocurrency….” This is at the core of our vision for MANX Token Economics.
Mechanism Design is generally considered the “engineering” side of economic theory. In mechanism design, there are three key concepts — Outcome, Goal and Mechanism. Goal is the desired objective, Outcome is the actual result of executing the mechanism and Mechanism is “an institution, procedure, or game for determining outcomes.” When the outcome matches the goal, the mechanism is considered optimal or desirable.
Economic Value of MANX Token
MANX (MacroChain Computing and Networking System) is a distributed service platform that supports post-quantum cryptography and high-performance multi-chain cooperation, while facilitating the value-aggregated closed-loop token economy.
The goal of the MANX project is to establish a blockchain ecosystem for small-medium enterprises (SME) and individuals based on third-generation public chain architecture, allowing applications to be developed with ease. Major applications include Websites, Exchanges, Payments, Insurance, Investment Advisory, Social Networking, Games and E-commerce.
Based on these applications, MANX Tokens will support many types of Economic Value. Examples include:
· Transaction Intermediary: examples include straightforward transactions on the blockchain network, payment for mining services and execution of various smart contracts.
· Value Storage of Assets: Investors can store assets in MANX tokens over time, especially for investment and insurance applications.
· Collateral as Stake: MANX tokens can be used as collateral to participate in critical community voting for strategic/operational decision-making. Examples include staking nodes for ranking or voting regarding network operations. These nodes will rewarded in proportion with their corresponding share of the collateral.
· Service Value Unit: Multiple categories of services can be provided on the platform. The value corresponding with each service may vary significantly. Therefore, MANX token provides a measurement unit for the service value, including transaction gas calculations, mining reward calculations and cross-chain transaction pricing.
MANX tokens provide real economic value. MANX Token Economics focus on the mechanism design to support the economic value of MANX tokens in a desirable and sustainable fashion.
An Example of MANX Token Economics
As mentioned in an earlier article, Bitcoin’s Proof of Work (PoW) protocol provides a combination of a deterministic block/token reward rule and the difficulty adjustment algorithm that help stabilize the mining of Bitcoins over time. While this design works fine for Bitcoin, some people have raised concerns about the reasonability and optimality behind this mechanism due to its deterministic nature.
In MANX Token Economics design, transaction token pricing will be dynamic and based on multiple factors. There will be multiple pricing algorithms, including exchange rates of data per token, service per token and transaction per token.
Take Insurance as an example. The sales team can store their token commissions in the insurance reserve pool for a higher token bonus. In general, the bonus will increase as the commissions increase. However, if the insurance reserve pool increases faster than insurance sales, the marginal return to each token in the reserve pool will decrease; therefore the bonus to commissions in the pool will also decrease.
The combined bonus per token for commissions in the reserve pool is dynamic, depending on the growth rate of commissions in the reserve pool and insurance sales. This mechanism helps stabilize the insurance reserve pool and the distribution of token incentives.
In summary, MANX’s Token Economics are highly dynamic in transaction pricing but keep the ecosystem sustainable for long-term growth and success.