Prometeus Network — Token economy in detail
We have previously described the workings of the Prometeus Network blockchain-based protocol. This note provides an overview of the Prometeus Network Token (PNT) economy and highlights our innovations in this area. The figure below outlines all of the relationships in the Prometeus economy, as well as token circulation flows.
Proof-of-stake economy
There are two types of Nodes in Prometeus network, blockchain nodes and storage nodes which support the network’s consensus as well. Both types of nodes operate in a proof-of-stake consensus mechanism and receive block rewards proportionately to their stake in the network. Thus the node owners control their staking deposits in Prometeus token and may stake part of their revenue or liquidate part of their deposits depending on costs and market price of the token. Besides, the nodes receive transaction fees from all of the participants of the network. Block rewards are provided through token emission (i.e. minting) during the first mainnet operation stage, which will span over up to seven years with the exact dates to be determined.
Innovation: Storage contests
Storage blockchain nodes, which may be thought of as masternodes, will receive additional rewards. The mechanism of the reward distribution is our first innovation in the token economy. During the minting period, part of the daily emission is assigned to the storage rewards pool. Validators control the pool indirectly. Depending on their data storage requirements, they may run smart contract-managed contests for the storage nodes to prove the availability and completeness of the data. When announcing the contest, Validators set up the total amount of the rewards that is distributed among the winners in a lottery.
This mechanism has two advantages over the conventional storage rewards scheme, e.g. Filecoin. First, it reduces the Validators’ operational costs, and potentially increases the social media users’ revenue, as the network itself, not the data owners or managers, pays for the storage service. Second, it incentivizes the decentralized storage, as small-capacity storage nodes have better costs-benefits ratio due to lottery, compared to the large storage hubs such as data centres.
Security deposits
Each Validator has their own customer rating, based on the time function of data sales amount. While this provides a convenient guide for clients as to data quality, we additionally introduce an economic measure, security deposits for each Validator, to further incentivize long-term involvement with the network, and ensure the overall ecosystem’s reliability by imposing a cost upon attempts of data forgery in a public marketplace. Validators have to lock a certain PNT stock upon entering the network and comply to the deposit requirement in order to be able to sell their data. With the increased consumer rating, the deposit requirement is lowered and the locked tokens may be partially withdrawn. However, bad acting that leads to customer dissatisfaction with the purchased data would require locking additional deposits to stay visible in the marketplace, and thus have both short-term and long-term costs.
Innovation: post-minting deposit taxation
We do not strive for a fee-based economy as this kind of transition would impose additional costs on network participants. On the other hand, the Prometeus Network Token supply and thus minting period have to be limited to avoid uncontrollable inflation and long-term depreciation. To resolve this, we aim to maintain the unchanged mechanism for node rewards after minting has ended. On the second mainnet operation stage, to come in a few years after launch, security deposit taxation will replace minting as the new source of block rewards and storage rewards.
From the Validators’ perspective, this would require reserving a larger share of their token revenues to comply with the deposit requirements. From the Nodes’ perspective this would mean increased liquidity of their PNT revenues, as well as more price predictability due to additional and more diverse demand. The deposits taxation ratio will be as low as possible to cover the daily amount of block rewards.
Market demand
Every participant is able to act as a PNT purchaser or seller in the open market, with an exception of DataMarts who are responsible for a major share of demand. However, additional demand will be generated by network growth due to staking and security deposit requirements for new participants. We shall conclude with another Use Case and give further details on Prometeus Network protocol and token soon. Stay tuned!
A use case: Validator + DataMart
A reputable Validator entity, Quantum Ltd., uploads a fresh data set, recently acquired from their users and enhanced using their AI-powered data analysis, into the blockchain storage, and pays transaction fees. Quantum intend to run a massive storage contest to ensure the new dataset is hosted on most of the available masternodes in the network. During the uploading procedure, Quantum increase their usual access price in PNT, because their contest would release a considerable share of the lottery pool accumulated by the network, and they do not want to face the risks of the resulting token depreciation. To run the contest, they use a pre-written smart contract from the Prometeus library and pay the associated transaction costs, but the contest reward itself is funded by the network.
A DataMart entity, MediaWin Co., discovers the new Quantum dataset when searching the storage, and lists it on their website dashboard. MediaWin have recently set up their own cluster of masternodes to partially cover their needs in PNT. While these nodes most certainly have the Quantum dataset hosted, MediaWin can not access this data due to the Prometeus’ cryptographic access rights management. They even participate themselves in the Quantum contest to win additional PNT, but do not succeed due to large amount of lottery participants. The high access price, together with their regular sales processes, requires MediaWin to buy additional tokens on the open market. To do this, they spend a fraction of the fiat payment received from their Client, who has instantly ordered a part of the new Quantum data.
MediaWin pay the access price to Quantum in PNT and obtain the access rights to the items in the set that were ordered by their Client. Quantum are still able to sell their PNT revenues profitably, because their new high-quality dataset has generated enough demand to justify the access price increase and even withstand the lower PNT rate. The unsold PNT was partially frozen to secure their deposit requirements, and partially transferred to the Quantum’s open market division for future sale. The obtained fiat revenue is used to reward the data owners and cover other operation costs, and further research is funded from the profits.
More information on Prometeus developments will be released soon. Watch this space!
Credits: Dmitry Khodyko Vizhnitsky
