Everything you need to know about Jax.Network economics
by Maryna Trifonova, Head of Content at Jax.Network
For the sake of a better understanding of our blockchain, we would like to give a detailed explanation of the economics behind Jax.Network in a separate paper. Read the article to learn the main provisions of the research or visit the “Resources” section on our website to access the full version.
In this paper, we have briefly discussed general monetary economics, and how it relates to the economics of Jax.Network, the various incentive schemes, and the methods to create a sound and reliable cryptocurrency that retains its purchasing power over the long run.
We have also discussed the various mechanisms in place to help defend the network during times of economic crisis and hinted about the potential future that’s made possible by the utilization of blockchain technology and decentralized stablecoins.
The peculiarities of a two-coin network
Only a handful of projects have two different native coins, including Terra, Themelio, and Jax.Network. We specifically have two native coins to decouple investment motives from transactional motives. Following the work of Jean Tirole, we envision that money has utility if it has a transactional purpose. The objective here is to clearly avoid money bubbles. This is rather new in the cryptocurrency sphere.
JXN coins are coins that are issued in the beacon chain of Jax.Network. They have utility in terms of registering important transactions in the network, registrations, Schnorr-signature aggregation based L-2 DAO creation transactions, serving as a secondary asset to BTC in the merge-mined network, saving the Bitcoin network with regular incentives when the BTC reward drops to zero, and acting as a hedge against inflation of JAX coins.
JAX coins are issued on the shards of our blockchain. They are underwritten by energy thanks to our specific reward function. In other words, the coin’s intrinsic value is the energy spent to produce it. Also, the maximum value of JAX is bounded by the opportunity cost of producing them for miners. Indeed, miners can only mint BTC+JXN or JAX by sending their BTC+JXN reward to an invalid address. This corresponds to a transfer of value from BTC+JXN to JAX, when there is a demand for JAX, thus creating an upper bond for JAX price equivalent to the opportunity cost of selling BTC+JXN. All that makes JAX a very good candidate for creating a stablecoin in a decentralized network.
A decentralized global cryptocurrency
Use cases for JAX are multiple. The first that comes to mind is obviously remittance. We are also implementing Jax.Money, which is a platform for issuing stablecoins backed by JAX that run on other blockchains such as Binance Smart Chain.
Countries that are suffering from inflation and/or poor institutional framework might be also a good use case. Eventually, governments can embrace this single global decentralized currency, i.e JAX, and can start taxing citizens through a transactional tax and this taxation system could be much more efficient, as they make it very easy for the government to collect taxes. In case the government wants to regulate the economy more minutely and tax citizens based on the category of payments, they could always put up JAX as collateral and create their own Layer-2 chains where they can minutely manage the economy and tax goods and services as they see fit.
Conclusion
The economics paper contains an introduction to the new economics that cryptocurrencies bring about, mainly focusing on the need for a two-coin platform housing a stablecoin and an asset coin. It further describes the demand, supply, marginal cost, etc., of the coins and explains the methods of fixing price volatility and avoiding attacks on JAX/JXN exchange rate.
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