Conflux Economic Model – Ecosystem Development Incentives and Governance

The goal of the Conflux Economic Model is to effectively motivate all participants in the ecosystem and to properly distribute the limited on-chain computing and storage resources. Previously, we have introduced the distribution logic and rules of miner incomes on the Conflux Network: block rewards, transaction fees, and rewards for storage and maintaining the network. As the maintainer of the whole system, miners can get reasonable rewards to promote the stable running of the system.

In this article, we will introduce the ecosystem development incentives and governance model.

The issued tokens exist in two forms: liquid and illiquid. In the liquid form, they can be immediately transferred/used on the Conflux network. There are three ways in which tokens can be locked up, making them illiquid. Illiquid tokens cannot be transferred! Locking can take three different forms:

  1. Tokens can be staked to earn interest (staking)
  2. They can be utilized as collateral for storage space on the network (e.g., for running dApps)
  3. Tokens can be locked up for a predetermined amount of time in exchange for voting rights in the network governance

Ecosystem Building Incentive Model

All tokens on the network can get interests at an annual rate of 4%.

For illiquid tokens, the interest will be distributed to users according to the locking methods.

  1. Users who earn interest through staking will get the interest automatically when unstaking the tokens
  2. Users who deposit tokens as collateral for network storage will receive interest on the collateral they deposited for storage space
  3. Users who lock their tokens in exchange for voting rights will get interest on the locked tokens

For liquid tokens, the interest flows into the Conflux Public Fund.

The public fund is set to provide sustainable incentives for the development of the Conflux ecosystem. After the initial Ecosystem Fund and the Community Fund run out, there will be few incentives for community members and projects to continue ecosystem building. The Conflux Public Fund will be taken over by Conflux DAO governance when the DAO is established.

Ecosystem Governance Model

All funds that are used to develop the ecosystem will be governed by the DAO ultimately. All Conflux ecosystem participants can obtain voting rights by locking up their tokens for a certain period of time. The voting rights will be awarded as such:

number of quarters × number of tokens × 0.25

For instance:

  • Locking maturity less than a quarter: No voting rights
  • Locking maturity more than a quarter: One CFX has 0.25 vote
  • Locking maturity more than half a year: One CFX has 0.5 vote
  • Locking maturity more than a year: One CFX has 1 vote

While tokens are locked to obtain votes, users retain the right to staking interest. They cannot withdraw the tokens or decrease the locking duration when the tokens are locked up.

Voting should be based on participation in the ecosystem not wealth…Rewards can be based on wealth but not Voting on a public network. You will see this change over time or the users of the system will revolt or…copy your code since it will become public and create a fair an equal voting system and public permission-less system…I don’t have time to do this myself but there are groups out there that will.

As you proceed with a wealth voting based system it will become centralized which I thought you as a group were trying to avoid.

A better system would be to have weighted voting, Founders having the highest weight ( for a number of years), miners the second weight, Dapp projects third, then retail users…these are just some basic thoughts. You could use not transferable NFTs for something like this also. A miner would hold the NFT as long as they are still mining as so forth…

These opinions are my own…

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