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The New Hdac Economic EcosystemDec 17th, 2019
With the launch of our new mainnet, Friday, the need for a suitable economic ecosystem has become evident. Building a healthy economic ecosystem where HDAC token holders, validators of the mainnet and DApps can create a virtuous cycle in terms of creating various businesses and added value is crucial in launching the mainnet.
In this post, we will provide an overview of our new economic ecosystem. Our thoughts and the challenges we faced in building this new ecosystem will be shared in the next post so that you can check the entire process, not just the outcome.
The Meaning of PoS and the Importance of Staking
As you are well aware, we are preparing the transition from Equilibrium Proof of Work (ePoW) to Proof of Stake (PoS). Simply put, the amount of tokens held and deposited in the Hdac blockchain, rather than computing power, will dictate the process of participating in the ecosystem and receiving rewards. On the existing mainnet, tokens could not be deposited and the amount of tokens held did not have any influence on the network. However, each token holder’s share will become very important in maintaining a healthy network and building an ecosystem under PoS. With this consensus mechanism transition, current token holders’ HDAC coins will have more meaning and functions.
The transition to the PoS mechanism is a significant matter to the participants of the decentralized ecosystem. Under PoS, as the name suggests, it is important that more people stake more of their tokens on the network. As token holders increase their HDAC deposit, the pie gets bigger, meaning it becomes harder for malicious actors to secure enough tokens to dominate the entire Hdac ecosystem.
As such, our first and foremost goal for the new economic ecosystem is to encourage a high number of token holders to stake much of their share on the network, making it safe and sound.
The Staking Problem and Our Solution
As important staking is for the network, there is an issue with the existing staking model. That is, token holders cannot engage in any economic activities with their tokens after having staked them on the network. The holders have been reluctant to stake their tokens for this reason.
To resolve this issue, we plan to create an environment where the staked HDAC tokens can be used in carrying out economic activities as well as in voting on validators and receiving rewards. One way of doing so is delegating tokens to DApps. Under this system, token holders will be able to delegate their stake to DApps and receive rewards from them. Ultimately, token holders will choose to delegate their share to better validators and promising DApps that generate more transactions in order to enjoy additional economic rewards and further grow the ecosystem.
By adopting this new system, we will enable our token holders to engage in economic activities within the network in addition to receiving rewards for staking and block verification.
Reasonable Transaction Fees and DApp-friendly Environment
DApps are essential for the new Hdac ecosystem as they are the ones that can create added values on the decentralized platform and make the network more valuable. This is why building a DApp-friendly ecosystem is crucial in designing the new economic model.
There will be fees for generating transactions on the Friday mainnet, but we are working on ways to lower the fees significantly. One of them is providing proportional discounts. Token holders with a higher stake will be able to enjoy lower transaction fees, which would encourage them to stake more, and the low transaction fees would vitalize the ecosystem, thereby boosting the entire network value.
One of the main reasons to charge transaction fees on the Friday mainnet is to intensify network security. In an ecosystem without transaction fees, malicious actors may attempt denial-of-service (DoS) attacks, generating endless transactions and paralyzing the network. Case in point: EOS token holders pay no additional transaction fees once they deposit their tokens and receive resources proportional to their share. This resulted in a spam attack last year, overloading the EOS network with the message “we love BM.” Without charging a sufficient fee for network usage, therefore, we are bound to face the “Tragedy of the Commons,” which would be detrimental to the network and the ecosystem.
To prevent such spam transactions and to maintain network security, there will be transaction fees, but proportional to each holder’s stake so that users and DApps can easily participate in our economic ecosystem.
Proof of Profession — Better Alternative to PoS
The Friday mainnet does not employ PoS in the traditional sense. On existing PoS platforms, holders of many tokens or those delegated with a considerable amount have been given corresponding level of authority. However, granting authority and offering rewards based on capital only may encourage moral hazard and inappropriate behavior on the part of validators who have already secured capital.
As an alternative, we have come up with the concept of Proof of Profession (PoP) to distribute both authority and rewards in a more equitable manner. Under the new scheme, the level of contribution to the ecosystem and network stability will be taken into consideration in addition to the amount of delegated tokens.
Under PoP, it will be difficult to exert absolute influence on the network with capital alone. Moreover, validators will be motivated to contribute to the Hdac ecosystem and the network, which will make the ecosystem healthier and the network more sustainable.
Continued Consideration and Open Discussions
In our next post, we will take a deep dive into our new economic ecosystem and share the thoughts and challenges we came across in the development process.
This post has been written based on the research and experiments of the Hdac economy TF.
Written by Hdac economy TF — Steve Kim, Bryan Rhee, Yongwan Ju, Yeon Hwang.