A brief overview of JXN as a utility token
by Maryna Trifonova, Head of Content at Jax.Network
We have developed a cost-benefit analysis of JXN, elaborating on its utility value. Read the article to learn the main provisions of the paper or visit the “Resources” section on our website to access the full version.
Pros and cons of JXN
We already started describing JXN, its main functions, and use cases here. The paper further researches the nature of JXN pointing out its strong and weak points. The positive sides in the current setting go as follows:
i) Improved security, as JXN moves towards a utility token model with low velocity;
ii) EA registry working as a toll to update the registry through the beacon chain;
iii) Staking, which will lock tokens and remove them out of circulation;
iv) Issuing tokens to finance the ecosystem growth;
v) Burning and supply reduction (we argue that we don’t really burn tokens in our network. It is rather a transfer of value between different tokens that bear different usages or services that require an entry cost for security reasons).
However, we can’t help but mention that we have found some drawbacks of using JXN, namely:
i) Potential high switching costs;
ii) Revenue model: not a fee per unit of the trade like large platforms (i.e. Google), but rather selling a utility token and hoarding it in our company reserves;
iii) Higher velocity for EA registry will affect miners’ compensation;
iv) Information asymmetry risks: the update of the EA registry will help filter better and more reliable information;
v) Non-conventional platform economics due to decentralization;
vi) Low fixed costs of mining can move miners away from JXN tokens at early stages. This is why the coinbase reward is set higher.
How to overcome attacks of dishonest EAs
Having analyzed the utility of JXN and its drawbacks, the paper also proposes a potential solution to correct the issues. The EA registration process can work as a toll fee to avoid misbehavior, where full disclosure always gives an advantage to honest EAs and penalizes dishonest ones. Thus EAs have an incentive to be transparent and play by the rules.
As the true liquidity of EAs is impossible to verify, one needs to introduce a proxy to assess the trustworthiness of the EA, some sort of decentralized reputation system. Make the EA pay for being able to deliver this service and query according to their reputation which is based on transaction fees paid in JXN.
This way the EA needs to constantly update his/her liquidity information on the beacon chain and users simply choose an EA from the latest set of EAs who have frequently updated their liquidity information on the beacon chain.
Conclusion
The utility paper provides a good analysis of JXN, which allowed us to find some positive and negative sides of the token. Certainly, further investigation needs to be conducted and formal analysis set up in order to adjust hardcoded rules. We leave this setting to mining pools, as they have the best knowledge and interest to grow the token value.
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