Introducing: Fee Model, Fee Financing(FeeFi)
Hello, we are Team Protocon.
Did you enjoy the last episode, <What is DID Model?>. If you missed the last article, please read it first and move on! In this episode, we are going to talk about the fee model, which is the core of the ProtoconNet, receiving the most expectations and attention, and the Fee Financing(FeeFi) applied to the fee model.
Blockchain technology has the advantage of enabling reliable transactions between participants of the network without a third-party credit institution, thereby decentralizing digital infrastructure and becoming the basis for horizontal digital business. However, projects like Bitcoin and Ethereum have pointed out problems such as delays in transaction speed and excessive fees when network traders are engaged in transactions at the same time.
Accordingly, various projects are being developed to overcome the technical limitations of the existing blockchain and expand its usability. Initially focused on finance, the industry now has a number of potential applications, including government agencies, healthcare, manufacturing, media distribution, identification, title registration and supply chains, and is striving to integrate blockchain into the business.
According to Fortune Business Insight, the Global market size was USD 2.01 billion in 2019 and is projected to reach USD 69.04 billion by 2027, exhibiting a CAGR(Compound Annual Growth Rate) of 56.1% during the forecast period.
As such, the volume of Fee revenue derived from the blockchain market is also growing at a tremendous rate. The total annual fee revenue for the entire blockchain mainnet is currently approaching $14 billion (as of the first half of 2021). Terra, for example, secured $10 million in annual commission sales, and based on this, it made a sharp rise to 17th place in global rankings by coin market cap. Also, Ethereum generates approximately $9 billion in fee revenue per year. These figures mean that the blockchain fee market is operating as an industry.
Although the blockchain fee market is growing day by day, there are still many problems that need to be solved. If so, let’s look at the problems with the current blockchain market fees.
Typically, to use the blockchain service (dApp), users purchase a mainnet token and pay a fee. However, this caused inconvenience and fatigue to users, giving the public the perception of a difficult and inconvenient technology.
Another problem lies in the extreme volatility and adequacy of prices.In particular, Ethereum’s fee price is characterized by reaching its peak price quickly just like an easily boiling pot.This variability in fees has a feature that depends on the amount of user attraction. High-flying fees will increase the burden of fees to be paid, which will inevitably reduce users’ accessibility. A simple example is that you have to spend $20, which is up to 20% of the $100 which you want to transfer, as a fee to transfer.These problems pose a major obstacle for users to use blockchain-based services.
Protocon presents a new methodology called Fee Financing (FeeFi) to address these challenges. The purpose of FeeFi is as follows.
1. Users pay fees on the dApp token itself without obtaining a separate mainnet token
2. Distribute the added value, such as block compensation and fees, created by the blockchain to the entire ecosystem participants.
3. Enable ‘blockchain as a service’ by keeping fees constant in terms of legal currency (dollar)
To improve usability, the Protocon creates a structure in which dApp users can use the service by paying a fee with only dApp tokens, without mainnet (PEN) tokens. First of all, Protocon creates a fee exchange where PEN tokens are deposited, forming a liquidity pool in which PEN token holders deposit their PEN tokens. At this exchange, fees paid with dApp tokens by dApp users are automatically changed into PEN tokens. dApp users can ease the hassle of exchanging PEN tokens, and PEN holders can earn rewards for participating in fee problem solving through PEN token deposits.
Through FeeFi, ProtoconNet will move away from the existing node-centric economy and create a common economy and a sustainable future where all members of the ecosystem coexist. Please continue to support and support Protocon in the future.
Through the following content, we will cover more details about FeeFi, including various financial models (Defi) developed on FeeFi. See you next time!