How does Polkadot’s complex economic model subtly support its steady development?

” Pokadot Knowledge Graph  is our entry-level article for Polkadot from zero to one. We try to start from the most basic part of Polkadot, and provide you with a comprehensive understanding of Polkadot. Of course, this is a huge Engineering is also full of challenges. However, we hope that through such efforts, everyone can correctly understand Polkadot, and people who don’t know Polkadot can quickly grasp the knowledge of Polkadot. Today is the 15th issue of this column, this issue Will summarize our previous popular science articles and systematically summarize Polkadot’s economic model

Before, we have done detailed science on the related knowledge of Polkadot DOT token, so today we will string together all the main lines related to Polkadot’s economic model to talk about the overall picture of Polkadot’s characteristic economic model.

First of all, as Polkadot’s native digital asset, DOT will be issued using the initial issuance + subsequent additional issuance. The earliest issuance volume was 10 million. After DOT has gone through three private placements and public placements, the DOT (old) before the split has issued 5.8 million, and there are 1.2 million unallocated.

After Polkadot’s on-chain referendum, it was decided to split the 10 million DOT denominations at a ratio of 1:100, so the initial total issuance of DOT changed from 10 million to 1 billion. On the basis of the initial issuance of 1 billion, there will be additional issuance every year, and the total amount is unlimited.

Polkadot issuance

In addition to the initial issuance, Polkadot is also issuing additional DOTs through inflation, and then assigning them to specific groups of people through different mechanisms to maintain the ecology of Polkadot.

  1. A part of the additional DOT is used to reward nominators and verifiers under the staking mechanism. Nominators can nominate their trusted verification candidates. When the candidate verifier becomes an official verifier, the nominator can share the verifier as a maintenance network node. The benefits.
  2. The remaining additional DOT will flow to the national treasury. The use of the funds of the national treasury is determined by the council (or called the parliament). The council will decide to use these funds to support the development of the ecology. Anyone can apply for national treasury funds to the council by proposing expenditures. support.
  3. The original design was that when Polkadot’s staking ratio is at an optimal value (currently 75%), all additional issuance rewards will be given to those who participate in staking, and no remaining additional issuance will flow to the national treasury; if it is not optimal When the value is reached, a part of the additional DOT will flow to the national treasury. However, since the staking ratio must fluctuate, a part of the additional DOT is bound to flow to the national treasury.

Circulation of DOT

  1. DOT can be used to support network operations. DOT holders can choose to become nominators and verifiers through staking to support the Polkadot network’s consensus mechanism, promote the normal operation of Polkadot, and enable effective transactions between parachains. Nominators and verifiers can therefore obtain more DOT, and the NPoS nomination proof of equity will ensure fairness in the process of obtaining DOT.
  2. If an improper behavior occurs during this process, the Slash mechanism will punish the verifier according to the severity of the improper behavior, and the amount of Slash will be transferred to the national treasury, and then rewarded to the organizer who reported the malicious behavior.
  3. 80% of the transaction fee for transfers in the Polkadot network will go to the treasury, and the remaining 20% ​​will be allocated to the verifier.
  4. Participate in Polkadot network governance through a referendum. The governance mechanism includes determining network fees, adding or deleting parachains, and some special events, such as upgrading and repairing the Polkadot network.
  5. It is used to support the special functions of Polkadot network. For example, support a new parachain to connect to Polkadot within a period of time.
  6. In addition to part of the inflation obtained because the pledge rate is not the best staking ratio, the source of funds for the national treasury also comes from the funds of the validator being Slash for evil, a part of the transaction fee, and parallel thread auctions.
  7. The funds in the treasury can be used through expenditure proposals. In this process, there may also be deflationary pressure. For example, if the budget funds are not spent within the budget period, the national treasury will destroy part of the funds. This has also effectively adjusted the inflation problem.

How does Polkadot's complex economic model subtly support its steady development?

postscript

The economic foundation determines the superstructure. This timeless truth is also applicable in the Polkadot world. Polkadot uses its tokens and various mechanisms to form a set of economic models suitable for the development of the Polkadot network. It not only enables network participants to independently maintain network security, but also encourages ecological innovation and development on the basis of a virtuous cycle of funds.

Polkadot’s unique economic model design has many bright spots, such as the design of the treasury mechanism, which ingeniously solves the financial problem required for ecological development. The steady flow of funds can support the continuous growth of Polkadot’s ecology, which is worth learning from all public chains. Another example is the design of the optimal staking ratio, which can control the staking ratio of the entire network within an ideal range.

Reviewing our several issues of popular science articles, we will find that Polkadot’s economic model is much more complicated than most public chains, because it involves Polkadot’s treasury, governance, parachain and many other unique functions of Polkadot. It is indeed very difficult for an economic system to link them together. Fortunately, the current operation of Polkadot is still expected.

Of course, we cannot completely guarantee that Polkadot’s economic model will be okay. It is so complicated and there is no precedent. In order to ensure that it is foolproof, Polkadot officially proposed a testnet Kusama with an economic model , which is also an act that almost no public chain will do. With the development of Kusama, it can no longer be regarded as a test network, but as a pioneer network of Polkadot, which eliminates potential crises for Polkadot in advance, and is also becoming a pioneer network with practical value.

In fact, many of Polkadot’s current operating mechanisms have been adjusted more or less accordingly, and the basis for reference is the actual situation after Kusama has run. Therefore, it can be said that Polkadot officials also understand that the development of things must not happen overnight. If Polkadot’s economic model needs to be adjusted, they have also made corresponding preparations in advance (Kusama advance network for testing) and adjustment space (through upgrades) Or governance adjustment parameters and rules).

It has to be said that the Polkadot economic model has many knowledge points, and there is no lack of subtleties and interlocking links. It is a classic example in public chain design. With the gradual improvement of Polkadot, it is believed that with the blessing of such a delicately designed economic model, Polkadot’s subsequent development will surely be smoother and eventually achieve the vision of Wanchain Interconnection.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-does-polkadots-complex-economic-model-subtly-support-its-steady-development/
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