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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

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

  • 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.

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Gas Fees

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.

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In the IoTeX Network, “users” include humans, machines, and institutions.

Burn-to-Certify

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.

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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

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.

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The Ucam Ecosystem of Builders, Service Providers, and Consumers

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

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.

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What’s Next?

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.

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Building the Internet of Trusted Things: iotex.io

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