One of the great benefits decentralised systems brought about are token models. Over the last couple of months, we have seen a multitude of concepts being proposed around it and I want to use this blog to share a little bit more about how we are perceiving Trace utility, its economics and how we see it developing in future.
Trace (TRAC) is a ERC-20 token created on Ethereuem blockchain. It will be used within the ecosystem created by OriginTrail decentralised network to incentivise all stakeholders to carry out actions that deliver value for the ecosystem as a whole.
Utility of the Trace token has couple of levels. The first one is on the (1) protocol level* and is what we look as the basic utility. It is also this utility that is the main focus of OriginTrail team activities. Second layer is (2) derivative use of Trace inside decentralised applications built on top of the protocol. That type of usage can be set up by users of the protocol. Third utility is the one which is inherent to any ERC-20 token. Being a transferable asset, Trace can be used as a (3) medium to exchange value. Let’s look at number 1) and 2) in a bit more detail.
*OriginTrail Decentralised Network is a peer-to-peer offchain protocol that enables efficient way to share data among supply chain partners with integrity.
Protocol level utility
On the protocol level Trace token serves as means of compensation between supply chain data producers and data consumers on one side and the OriginTrail node holders on the other. It provides the incentive to the nodes in the peer to peer network to perform the system functionalities.
OriginTrail nodes are incentivised for performing:
• discover & connect functionalities,
• supply chain consensus checks,
• data quality checks,
• data replication checks,
• data storage & management,
• filtering & delivering supply chain data.
In plain terms, any interaction with the protocol (writing data to it or reading from it) requires the use of Trace to perform those functionalities.
Application level utility
Given that OriginTrail supports a wide variety of supply chain applications to be built on top, it also gives a lot chances to utilise Trace directly in those applications. One such interesting case that OriginTrail team plans to develop as on open-source project is an application that allows seamless sharing of data up or downstream amongst partners in a supply chain and creating compensation schemes for that purpose in Trace. Another could be a consumer-facing application that would be awarding shoppers Trace tokens in exchange for interaction with products and services. There are many other new business models that can spring on top of data sharing foundation.
Following a quick overview of what Trace utility is and can be, let’s turn towards how the mechanics of the token economy that is being created are expected to look like.
Network of nodes
OriginTrail network requires users that wish to write their data in the protocol to run their own nodes through which they perform those data additions. While this is important for ensuring integrity of the source of the data, it also provides an inherent scaling to the network as nodes are being added with every data creator. Having data creators run their own node instances is important also from the point that they will, at the same time, act as data holders for other supply chains that will be looking to store data in the protocol. Each new user that joins the system to write data to the protocol therefore creates not only the demand in the network but also certain supply of the same functionalities for others.
Staking in the network
OriginTrail network is of permissionless nature, it allows nodes to join and leave the network as the opportunities arise so they constantly ensure the optimal compensation for the functionality of the system. However, it is also in the interest of the network to have certain longevity with the nodes to ensure expected data availability. For that purpose staking for all nodes will be implemented, with exact details still subject to analysis, simulation and tests over next few months.
Value of the token
So what do we see as crucial impact to the value of Trace? As with any tradeable asset the price of it is defined by the ancient forces of demand and supply. We envision Trace to have one of the highest usability driven demands in the space. Ensuring users’ adoptions is also something that OriginTrail team is working towards with current and new partners (beta users) that will be a part of the forming Trace Aliance (more on that in a separate piece soon). The secondary demand will come from derivative uses made on the application layer.
The second force in play is the supply. There will never be more than 500 million Trace tokens. This creates a certain scarcity and with the increasing demand, it is expected to drive the value of each Trace up.
It is important to note that increase in value of Trace does not mean that usage of the system will get more expensive as well. The compensation nodes receive for performing the system’s functions is set with an auction mechanism creating a downwards facing pressure on the compensation in Trace if its value increases. Since, by a large majority, nodes will incur their costs in fiat, the presumption is that the compensation for performing the functionalities will be constant in fiat and falling in Trace (as its value increases).
Trace as utility token will be needed for all users that wish to exchange supply chain data using OriginTrail decentralised protocol. It serves as fuel in the system while having the potential to be used for more. We look forward to exploring these possibilities in the near future.
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