IoTeX Tokenomics — Part 1: Utility of the IOTX Coin
Welcome to the IoTeX Tokenomics series. In Part 1, we focus on the utility of the IOTX coin. In Part 2, we will introduce the underlying technical principles. In Part 3, we will share how the IoTeX Network will be bootstrapped.
Introduction
IoTeX is a decentralized ecosystem fueled by the IOTX coin, which is native to the IoTeX Network. IOTX has multiple uses (or “utility”) with the goal of enabling trusted and transparent interactions between various entities in the IoTeX Network, including Delegates, stakeholders, product builders, service providers, and consumers. Ultimately, the IOTX coin and complementary tokenomics establish economic and reputational incentives that ensure the IoTeX Network is maintained in a decentralized fashion and “Powered by IoTeX” products are effectively serviced.
In the IoTeX Network, entities spend, stake, and/or burn IOTX in order to access and utilize various network resources. As the utility of IOTX grows, the demand and value of IOTX will also grow, providing continued incentives for network participants to support, maintain, and service the network. As IoTeX begins to power the world’s first blockchain-secured devices, we are excited to share this complementary tokenomics design that will drive value and network effects to the IoTeX Network.
Utility of the IOTX Coin
IoTeX’s mission is to empower the Internet of Trusted Things — an open ecosystem where humans and machines can interact with guaranteed trust, free will, and privacy. This mission cannot be achieved alone — it requires the concerted efforts of many diverse entities. As such, IoTeX’s tokenomics design effectively balances incentives across multiple profiles:
- Delegates that maintain the network (i.e., produce/verify blocks)
- Stakeholders that stake/vote to secure and govern the network
- Builders that power their devices/apps via the IoTeX platform
- Service Providers that offer services to IoTeX devices/apps
- Consumers that ultimately enjoy IoTeX devices/apps
In this rest of this article, we explain each category of IOTX utility — gas fees, governance, burn-to-certify, and stake-to-service — as well as how they ensure the growth and decentralized operation of IoTeX.
Gas Fees
Similar to other blockchain platforms, IoTeX employs a gas fee model, where “gas” refers to the value required to conduct a transaction or execute a contract on the IoTeX platform. Gas is paid by users in proportion to the computational capacity required to process their respective transaction/contract. As an analogy, operating a car for ‘X’ miles may require ‘Y’ gallons of fuel — in this case, ‘X’ represents the computational capacity, while ‘Y’ indicates the gas fees required. For more information, please see this gas fee overview.
Unlike other blockchain platforms, IoTeX is unique as “users” of our platform are not limited to only people. In the IoTeX Network, the ability to send payments, access smart contracts, and even charge for services is shared by both humans and machines. This is an extremely powerful concept that will enable unique human-machine economies — machines will be equipped with wallets (just like a human user) and execute automated payments, data transfers, and more based on pre-programmed smart contracts.
Burn-to-Certify
An important prerequisite to enabling trusted human-machine interactions is that all humans and machines must have a trusted identity. Specifically, IoTeX utilizes decentralized identity (DID), which is registered to the blockchain and designed to function without any centralized authority. This ultimately enables self-sovereign people and devices to “discover and be discovered” in the IoTeX Network.
Although DIDs for people are being broadly explored, IoTeX has implemented a first-of-its-kind DID framework for both people and devices. Creating a new DID on the IoTeX Network for a person or device is free — you can think of a new DID as an empty passport. A stamp for your passport is similar to a Verifiable Credential (VC) for a DID — a VC is a digital credential issued to a DID that grants access to specific permissions and network services.
“Powered by IoTeX” devices like Ucam utilize various IoTeX capabilities, such as DID, private storage, wallet, and more. In the future, device manufacturers will burn IOTX in order to obtain a “Powered by IoTeX” (PBI) Certificate for each of their devices. This PBI Certificate is a special type of VC that is issued to a device DID, which ultimately allows the device to access specific “Powered by IoTeX” services and capabilities. As detailed in the table below, “Powered by IoTeX” devices appreciate service level agreement (SLA) guarantees, decentralized warranties, security/privacy labels, zero gas fees (up to a certain limit), and more. This burn process will be further detailed in Part 2 of this IoTeX Tokenomics series.
Under this tokenomics design, the total supply of IOTX will decrease with every new “Powered by IoTeX” device (e.g., Ucam), while also driving increased activity in the IoTeX Network and value for the IOTX coin. We will share additional plans to bootstrap this “Powered by IoTeX” ecosystem in Part 3 of this IoTeX Tokenomics series.
Stake-to-Service
The IoTeX platform offers robust infrastructure and a wide array of capabilities for developers; however, full-stack IoT solutions are complex and may require additional capabilities from service providers that specialize in a specific service. By facilitating connections with service providers, IoTeX greatly enhances flexibility and functionality for developers — example services include decentralized storage (e.g., IPFS, Sia), decentralized connectivity (e.g., Helium, Nodle), distributed P2P messaging (e.g., NKN, BitTorrent), off-chain sequencing (e.g., Hedera Hashgraph), AI-powered analytics, and more.
To ensure service providers deliver consistent and reliable services to IoTeX products, it is important for them to have “skin in the game”. Service providers will be required to stake IOTX to obtain the right to provide services in the IoTeX Network and must define service level agreements (SLAs) that detail their specific quality/availability guarantees. Just as Delegates are penalized for failing to produce blocks, service providers that fail to meet their SLAs will have some or all of their stake slashed and reputation damaged.
Let’s take Ucam as an example. Ucam utilizes the IoTeX platform as a foundation, but also utilizes third party services for P2P content delivery (for livestream) and Cloud storage (for saved clips). In the future, decentralized service providers, such as IPFS/Sia for storage and NKN/BitTorrent for P2P content delivery, can fill these roles if they “stake-to-service”. Service providers will self-define their own services, fees, and SLAs — the choice of which service providers to use is ultimately up to the builders. The minimum stake requirement for service providers will vary by the type of service offered and will be disclosed in a later article. As the number of IoTeX products increases, the number of service providers interested in servicing these products will also increase, leading to higher overall quality of service due to competition.
Governance
The IoTeX Network is a decentralized ecosystem that is not owned or governed by any single entity. To facilitate decentralized governance, all IOTX coin-holders are able to stake (“deposit”) their IOTX in order to elect Delegates and participate in network-wide votes. Those that stake IOTX effectively increase the security and fairness of the network — the more IOTX that is staked, the harder it is to attack the network.
Delegates perform the important task of managing consensus on behalf of the entire IoTeX Network — a process commonly called “mining”. IoTeX uses Roll-DPoS, an in-house consensus mechanism where 24 of the top 36 voted Delegates are randomly selected to produce blocks every hour. There are currently 60+ Delegates from around the world that are elected by IoTeX stakeholders (1 staked IOTX = 1 vote, with bonus votes for pre-defined stake durations). Ultimately, Delegates receive IOTX rewards for managing consensus, which they often pass on to their voters. For more information, please see our Voter Handbook.
While producing blocks is reserved only for Delegates, anyone that stakes IOTX is able to vote on IoTeX proposals, such as protocol upgrades, network parameters, and more. Similarly to voting for Delegates, 1 staked IOTX = 1 vote, meaning the weight of one’s vote is directly proportional to their holdings. The IOTX token is critical to facilitate decentralized governance, both to elect Delegates and vote on proposals.
What’s Next?
The IoTeX platform is a canvas for builders, service providers, and consumers to engage in a trusted and decentralized fashion; as we detailed in this article, the IOTX coin and our tokenomics design play an important role in the growth of the IoTeX Network. While IOTX for gas fees and governance are already active in the IoTeX Network, IOTX for burn-to-certify and stake-to-service will be implemented in the future.
With this foundation, we are ready to welcome more “Powered by IoTeX” that will transform the way we interact with our smart devices. The privacy-preserving technology we have built-in to Ucam and Pebble Tracker can now be applied to other types of IoT devices and we are now one step closer to our vision for the Internet of Trusted Things — join us!
This concludes Part 1 of our IoTeX Tokenomics series, where we focused on the utility of the IOTX coin. In Part 2, we will introduce the underlying technical principles that support our proposed tokenomics. In Part 3, we will detail how our proposed tokenomics will be bootstrapped via reserved Ecosystem funds. For any questions, please contact an Admin on Telegram.
About IoTeX
Founded as an open source platform in 2017, IoTeX is building the Internet of Trusted Things, an open ecosystem where all “things” — humans, machines, businesses, and DApps — can interact with trust and privacy. Backed by a global team of 30+ top research scientists and engineers, IoTeX combines blockchain, secure hardware, and confidential computing to enable next-gen IoT devices, networks, and economies. IoTeX will empower the future decentralized economy by “connecting the physical world, block by block”.