Analysis of Crust Network Economic Model
- Participants in the Crust Network Economy
- GPoS (Guaranteed Proof of Stake) Consensus
- Decentralized Storage Market
- Supply and Demand for Tokens
- Initial economic parameter settings and changes in economic relations after network development
Participants in the Crust Network Economy
The Crust network is divided into different roles according to different methods of participation. “Users” are those who store data and retrieve data in the market and “Merchants” are those who accept orders from users and provide file storage and retrieval services.
The relationship diagram is as follows:
From the method of participation in the blockchain network, it can also be divided into: “Validators”, “Candidates” and “Guarantors”. The guarantor can guarantee the target node by staking tokens. Among the guaranteed nodes, nodes with a large number of valid staking tokens will become validators, and nodes with insufficient valid staking tokens will temporarily become candidates. Those roles will be changed continuously in each cycle, as shown in the figure below:
Another important module in the Crust network is the Council, which is not directly related to the economy, but it is the main method of Crust network governance. The roles in the council include “members of the council”, “candidates”, and “proposers”. The election of members and the governance proposals need to lock a small amount of tokens, therefore the governance system is also part of the economic design of Crust.
In addition, the Crust community is occasionally planning some activities for users to participate, such as “Profit Data”, “Lucky Order”, and other activities. The roles such as “data providers” and “data guarantors” are the identities in those activities. They are not part of the design of the Crust economic model, and they are designed to promote the use of the network and guide the development of the network.
GPoS (Guaranteed Proof of Stake) Consensus
The underlying consensus protocol of the Crust network is the Guaranteed Proof of Stake (GPoS) consensus mechanism, which is a type of consensus derived from Proof of Stake (PoS). The network maintains the security of the network by competing for the number of “valid staking tokens”. The node with the larger number of tokens will win the competition, and the winner will become a validator. The figure below is the principle:
As shown in the above figure, the “valid staking tokens” obtained by the node is equal to the smaller number of the total staking tokens and the staking quota. As a key resource in GPoS, “Storage power” determines the staking amount a node can obtain. For node operators participating in the network, there are two ways to improve storage power: 1. increase the hard disk space of the node; 2. increase effective data. The contribution of hard disk space and effective data to storage power is determined by the calculation formula:
X = Z × β + M × (1 + α) × β
*X: storage power
*M: meaningful storage data (TB)
*Z: remaining storage resource (TB)
When the Crust network begins, we define β=1, which means hard disk space and storage power are linear, increasing hard disk space can directly increase storage power. α has relation with the effective data copies in the network, details are illustrated in the figure above. The number of effective data copies here refers to the number of merchants who store and submit proofs for the files stored by the user through orders in the Crust network. Obviously, as the number of stored file copies increases, the greater the α coefficient, which also means this type of data with multiple copies will increase the power significantly. However, α will be adjusted every year and gradually decrease.
According to the principle of MPoW mechanism, each node may consist of multiple member servers (see Crust node configuration manual), and each member server needs to send work reports to the chain to prove its storage power at a certain time. Sending work reports requires transaction fees. The node operator can obtain a fee reduction by locking tokens through the Benefit module. Every 3 CRU staked can remove a workload report fee in each era, and the node operator can configure it according to its own server scale. Nodes that are configured without locked tokens cannot have free work reporting quotas and will normally consume transaction fees. It takes 28 days to unlock the tokens locked in the Benefit module.
The node needs to send a work report to the chain to prove its storage power. When a node cannot send the report to the chain on time, the member server responsible for sending will be punished — storage power is ineffective in the next 8 hours.
Storage power can grow in the market, but the growth of the total number of staked tokens in the entire network is relatively constant, especially in the mature period of network development, so the total number of tokens is relatively stable. At this time, in order to match the increase in the entire network storage resources, the staking quota that the total storage power of the Crust network can obtain is 35% of the total issued tokens of the entire network. At this time, when a certain node increases its storage power, it can obtain more staking quota, and the corresponding quota of other nodes will be reduced proportionally.
Setting a 35% ratio makes the network share economic characteristics between PoS (Proof of Stake) consensus and PoW (Proof of Work) consensus.
As shown in the figure above, assuming that the set ratio approaches the smallest infinity, the tokens that need to be staked to storage power can be ignored. The economic characteristics of the network is a pure PoW model, which uses storage power to compete for the revenue of the network; assuming the ratio approaches infinity, then only a small amount of storage power is needed to obtain large amounts of staking quota. At this time, the economic characteristics of the network is a pure PoS model, competing for profit by staking tokens. The 35% ratio that Crust set is hoping to obtain the advantages of the two economic models.
After having the storage power, the node also needs to stake tokens to produce “valid staking tokens”. The node can bind its own tokens or accept token guarantees from guarantors. The guarantor also needs to bind their own tokens to guarantee the node. “Bind” is a token state in Crust. Only tokens in the binding state can participate in the GPoS consensus system, but tokens in the binding state cannot be used for other purposes in the network (but can still be used for council governance voting). Unbinding can release the “bind” status, and the unbinding operation will be effective 28 days after submission.
After the “valid staking tokens” competition mechanism mentioned above, the validators who win the competition are responsible for the verification of the blockchain network and will also obtain the profit of verifying the network. A certain percentage of the inflation fund pool of the Crust network is designed to reward validators. In the initial state, 20% of the total pool will be given to validators; when the number of validators exceeds 500, the ratio will increase to 25%; when the number of validators exceeds 1,000, the ratio will increase to 30%; when the number of validators exceeds 2500, the ratio will increase to 40%; when the number of validators exceeds 5000, the ratio will increase to 50%. Please see the table below:
Besides profits for verifying the network, the other part of the inflation fund pool will be used as the reward share of the block cycle. Both validators and candidates can obtain a reward share of each block cycle. This reward share will be based on the numbers of valid staking tokens. Therefore, the more effective staking tokens, the more rewards validators and candidates can obtain. For guarantors, the node needs to distribute the profit to the guarantor as a guarantee fee according to the preset guarantee rate.
Decentralized Storage Market
The Crust network builds a storage market on the chain, where “Users” and “Merchants” can obtain what they need in the market. The basic transaction process is shown in the following chart:
The specific process description can be found in the “Economy Whitepaper”. Here we mainly analyze the impact of transaction behavior on the Crust economy. First of all, the validity period of a user order file in the network is 6 months. The fee paid by the user will be divided into two parts, 80% enters the inflation fund pool mentioned in the previous chapter, and the other 20% is paid to the first four merchants who accept the user order. Therefore, the growth of the storage market not only increases the revenue of merchants, but also increases the revenue of nodes. As the number of tokens in the inflation fund pool declines, the revenue of nodes will also depend on the growth of the storage market in the long term.
The Benefit module of the storage market includes three functions: “Collateral”, “Order Discount” and “Reduction of Settlement Fees”. After locking the token in the Benefit module, you can turn on the corresponding function. “Collateral” is for the merchants, merchants are required to lock a certain amount of tokens to obtain the revenue in the storage market; “Order Discount” is one of the methods for users to reduce the cost, when users lock a certain amount tokens in the Benefit module, they can obtain discounts of their own order; Settlement refers to the settlement of file orders in the storage market. If the token is locked in the Benefit module, a certain amount of settlement fee can be reduced. Please note that the reduction and removal of settlement fees is deducted by 0.2% of each era’s inflation fund pool until this amount is run out. Like the Benefit module mentioned above, it takes 28 days to unlock after the tokens are locked.
The order price of the storage market is calculated by the formula on the chain. Its basic formula is: order price = basic fee + resource dynamic adjustment fee + tip. The tip is determined by the user. The basic fee is calculated by the ratio of the order volume and throughput of the storage network. The resource dynamic adjustment fee is a rate adjusted according to the storage capacity resources of the network,file size and the resource usage of the chain state. Taking storage resources as an example, the principle of adjustment is as the price mechanism principle diagram mentioned above.
In summary, when one or more of the storage resources in the network, the state resources on the chain, and the throughput resources are used in a large amount, the price will rise steadily, until the resource utilization rate drops to the set value, price begins to fall back. If the resource utilization continues lower than the set value, the price will continue to fall.
Supply and Demand of Tokens
According to Crust’s economy whitepaper, the supply of tokens are divided into two stages: One is the initial issuance, the other is the issuance of blocks after the network is launched, which is defined as inflation issuance.
The total number of initially issued tokens is 20 million. The specific issuance ratio is shown in the following chart:
The chart on the right side is the inflation issuance after mainnet launches. 5,000,000 CRU will be issued in the first year. From the second year onwards, inflation will be reduced by 12% each year, and will continue to decrease until the inflation rate of the whole network reaches 2.8%. Among the initially issued tokens, the tokens of seed investors are locked until 6 months after the mainnet launches, and will be unlocked on a monthly basis. 15% of the tokens of private equity investors are already in circulation, and the remaining 85% will be unlocked linearly after mainnet launches for 18 months. The tokens of the technical team and foundation are unlocked linearly after the mainnet launch for 24 months. Tokens used for business development and marketing will be more evenly spent as the project develops. The tokens for community are issued according to the planned community activities, such as the “Profit Ark”, “Maxwell Network Reward”, “Profit Data”, “Kusama Parachain Slot Auction” and a series of activities after mainnet launches. The circulation of the token in the Crust network is roughly as shown in the figure below:
The main purpose for the tokens in the Crust network are:
1. Staking to maintain the GPoS consensus of the Crust network
2. Used to guarantee the selected nodes
3. Serving as contract guarantee and commission for providing resource services
4. Serving as a transaction fee for using the network
5. Used to purchase resource services
6. Used for election and voting of on-chain governance mechanism, and vote on proposals
Among them, part of the transaction fees, order fees and penalties for validators will be regularly burnt by the network, thus forming token deflation.
Initial economic parameter settings and changes in economic relations after network development
With the development of the network, the production relationship of the Crust network will change. In the early stage of the network, Crust designed a reward system in order to incentive resources from different parties, such as tokens and inflation fund pools for distribution to the community. As the network matures, high incentives need to be gradually reduced or even removed. Crust strives to establish a complete network through early incentives, and maintain the normal operation of the network in the mature stage.
The main initial economic parameters and future adjustment mechanisms in the network are listed below: