The dual token economy: explaining CENNZ and CPAY
Translations can be found here:
This article is part of our knowledge hub series. You can find the original here.
CENNZnet uses a unique dual token system in order to help developers, users and token holders get the best from the network. This is a refresher on how the tokens work and the economics behind how it benefits the ecosystem.
CENNZnet has two tokens
CENNZ is the staking token
- The main validation token in the network.
- CENNZ will be required to join CENNZnet as a validator and contribute to securing and governing the network.
CPAY is the spending token
- CPAY will be used to pay transaction fees on the network
- It will also be used as the reward for stakers (validators and nominators)
- The spending token is designed to be stable and predictable for users and businesses who operate on CENNZnet
Why do we have two tokens?
Our intention has always been to make CENNZnet as useful as possible. How do we do this? We build a great network that developers want to use to build awesome applications that users will want to adopt.
Our token economy has therefore been designed with developers in mind. If you’re building an application, you want predictable costs so you can understand how to make a profit. In popular blockchain systems today, the costs of development are very variable and subject to external factors which makes it hard to plan ahead. For example, if you’re building an application and the network gets congested for a reason totally unrelated to your application, the cost of running the app goes up. We want to avoid this costly inconvenience and we think we have a great way of achieving both predictable costs and optimal usage.
To keep our dev costs stable we use 2 separate tokens, CENNZ to maintain the security of the network and keep transactions going, then CPAY as the stable gas token used for transaction costs on the network. By separating these two functions we make it possible for developers to have a consistent pricing model without worrying about the rising price of the CENNZ token.
How does CPAY remain stable?
CPAY can remain at a stable fiat value using some quite simple supply and demand economics.
- When there is more network activity (demand) more gas is used and more CPAY minted (supply).
- Where there is less network activity (demand) less gas is used and less CPAY is minted (supply)
Because the supply and demand are matched the price over time will be stable.
This is true for any product in the market, for example:
If each time someone wanted to buy rice more rice was available the price of rice would stay the same. If people wanted less rice and the production of rice was still high then people would dump rice and the price would go down. But if the amount of rice produced dropped to match lower demand then the price would stay the same.
Now it will take some time for stability to be achieved (like any new market it’s likely to be volatile) but as liquidity builds it will stabilise.
This system benefits both stakers and users:
- Stakers: when network demand is high then more CPAY is minted which means higher CPAY block rewards per CENNZ staked. Ie higher yield per CENNZ.
- Users: the price per CPAY should stay stable even if there is higher demand.
So we can have the best of both worlds. Low fees and higher yield per CENNZ.
