FLOW Token Economics
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flow is the blockchain for loose worlds.
Developed by the team behind some of the most successful crypto applications on the Ethereum network, Flow is a blockchain re-designed from the grind up to be user- and developer-friendly ampere well as modular and future-proof.
Flow ’ s novel four-node architecture achieves massive improvements in travel rapidly and monetary value that scale with hardware capacitance without compromising decentralization or breaking up the network into shards or “ layer two ” solutions. To learn more, visit Primer foliate
The FLOW nominal ( “ FLOW ” or “ 𝔽 ” ) is the native currency for the Flow network and the anchor for a modern, inclusive, and borderless digital economy. If blockchains are digital infrastructure, the Flow token is the fuel that powers the net.
FLOW has several important characteristics that make it the ideal currentness for a new genesis of games, consumer applications, and the digital assets that will power them :
- Diverse use-cases
- Broad distribution
- Low monetary inflation
Each of these is explained in more detail below.
flow is the native currentness for apps, games, and ache contracts built on lead of the Flow blockchain, and therefore is the currentness guaranteed to be available for developers and users to transact with on the network. Developers can well build FLOW directly into their apps for peer-to-peer payments, charging for services, or enabling consumers to earn rewards for the rate they create. FLOW can besides be held, transferred, or transacted by users peer-to-peer.
Token holders can earn rewards by staking their flow as a security lodge and working to secure the network through running validator nodes – or delegating their stake to professional operators to run validator nodes on their behalf. Validator nodes receive staking rewards and transaction fees in exchange for providing the security, calculation, and repositing services the net needs.
Small amounts of FLOW token are besides required for every activity on the network – from modern drug user accounts to storage for assets and smart contracts. As the network matures, FLOW token holders will be able to use their FLOW in an evolve number of ways :
- Payment for computation and validation services (i.e., transaction fees)
- Medium of exchange
- deposit for data storehouse
- Collateral for secondary tokens
- engagement in administration
The arrant requital feel is seamless for all parties : buyers pay in any currency they have ; sellers monetary value and receive in any currentness they want. Applications on Flow can tap into this reality. Flow has high throughput, humble fees, and wide ACID guarantees, allowing developers to implement decentralized exchanges ( DEXs ) that act as a clear sign of the zodiac between tokens. Flow has the ability to use frequent batch auctions to defeat front-running attacks on these DEXs.
FLOW token ’ second ubiquity on the network makes it the obvious “ bridge asset ” for currentness exchanges between thinly traded token pairs. As the number of secondary tokens on Flow becomes large, the count of potential trade pair increases exponentially, meaning that some swaps will require an mediator asset like FLOW.
Importantly, FLOW is required for the creation and use of all early tokens on the network – to pay for storage and/or serve as collateral. These details are outlined in the technical details section below, and will be amply specified in future whitepapers. The economic impingement is that as more value is created on top of the Flow blockchain, more demand is generated for FLOW nominal.
The distribution of the native token is critical to the network ’ s decentralization and long-run success. Centralized restraint over the nominal supply prevents easy access by developers, who require the native keepsake to deploy fresh fresh contracts and pay for transaction fees ( “ flatulence ” ) ampere well as cover repositing and report deposits on the network.
For Flow to achieve its broad likely, a safe and sustainable distribution scheme is critical : we must get FLOW token into the right people ’ s hands. Alongside technical capability and crypto-economic security, we recognize that a healthy and sustainable distribution strategy is essential for making the Flow blockchain successful in the long terminus.
FLOW will be the catalyst for divers new communities to entree blockchain and decentralized applications, build and profit from real use-cases rather than speculation. good user experience invention will make own and using FLOW seamless. ultimately, FLOW will bring all of the communities build on the network together to create and share value.
Flow is pioneering several big scale date programs :
- Cloudburst Partners: organizations or individuals elected by FLOW holders to operate one or more Flow validator nodes and distribute the rewards to developers, designers, artists, community organizers, and entrepreneurs building content for the Flow network.
- Floodplain Validators: developers, infrastructure partners, and other ecosystem participants interested in supporting Flow early and helping bootstrap the critical mass of content and decentralized resources necessary for a sustainable network.
- Decentralized Reputation and Incentive Protocol (DRIP): designed for approachability and helping apps on the Flow find an engage userbase, DRIP distributes FLOW token to end users for purposes of, staking, deputation and active engagement in the Flow economy .
Thanks to robust technology, an amaze residential district, and strong bonus design, FLOW will enable today ’ s early on adopters to build tomorrow ’ sulfur open worlds.
Low Monetary Inflation
Blockchains like Flow are powered by decentralize communities running the calculator hardware ( “ validator nodes ” ) that support the bodily process and secure the rate of assets on the net. other blockchains rely heavily on creating and distributing new tokens ( “ monetary inflation ” ) in rate to attract validator node operators to their networks.
unfortunately, as in all economies, monetary inflation has a cost : the newly-created supply of tokens acts as a tax on holding or daily use by diluting all keepsake holders. This is why Flow has a cap on monetary inflation. In fact, inflation on Flow will go down ampere network fees increase.
In its steady state, Flow guarantees a jell payout to node operators and merely issues new tokens as necessary to make up the difference between transaction fees and that guarantee payment. As transaction fees approach this payout come, new issue approaches 0 %. If transaction fees exceed the payout amount, they are held in an escrow history and used to offset future ostentation indefinitely.
In the inaugural class of operation, monetary inflation will be higher to incentivize greater levels of staking while the collateral, payments, and early complemental parts of the Flow economy suppurate.
Transaction Processing and Computation
As a decentralize network, Flow charges users – or the apps they ’ rhenium using – for services on a per-action footing, like to the way Amazon Lambda charges for processing power today.
There are two types of fees on the Flow network :
- Processing fees cover the fees for a transaction to be submitted and included in a block.
- Computation fees are added for more complex operations that require computation beyond updating balances.
specially in the early on days of the network, transaction fees will be low, starting at 0.001 FLOW, or 1 medium frequency ( milli FLOW ).
Staking Rewards and Inflation
As a proof of venture network, the Flow blockchain requires validator nodes to lock a security deposit denominated in FLOW tokens in order to participate as separate of the infrastructure that runs the blockchain. This is known as venture. Staking prevents low price “ sybil ” attacks ( where one actor masquerades as many individuals to gain undue influence over the network ) and acts as a adhere deposit that can be seized if the validator attempts an attack on the network.
Flow distributes a cook part of the total FLOW token provision each class as rewards to validator node operators through a combination of new issue ( inflation ) and transaction fees ( when combined with inflation, the “ total advantage ” ). The total reinforce will be chosen carefully to be deoxyadenosine monophosphate minor as possible while preserving the security of the network ( presently contemplated to be set at 3.75 % of the sum nominal supply per annum ). excessive inflation can create a range of unintended consequences and makes the token less attractive for non-staking uses.
To ensure that stakers are incentivized to move into the node roles that are most needed at any given meter, the total tax income assigned to each function is adjusted through a determined of multipliers known as the honor coefficients. These values are adjusted by the protocol mechanically : if a particular function is systematically under-staked relative to the others, the protocol will increase the payouts to that node type until the actual venture libra converges on the target ratio. The initial split between node pools ( calculated to optimize security ) on the graphic below :
Flow nodes follow the procedures defined in the protocol ( based on their function ) in order to receive rewards. Any deviation from the protocol can result in decrease honor payments or punishments. This reward and punishment structure is designed to guarantee the security of the protocol and optimize operation over time.
Severe infractions, which undermine the safety of the net, can lead to some or all of the stake tokens being confiscated from the offending node ( mho ) and destroyed. This is known as “ slashing ”. This document outlines the most austere infractions against the protocol which solution in slashing ( “ slashing conditions ” ). Enforcing these conditions is critical to the cryptoeconomic security of the protocol. flow considers only severe threats to base hit and animateness to be slashable conditions and as such, there are no performance-related slashing penalties.
Paying for Storage: Minimum FLOW Balance
memory on Flow can be associated with individual drug user accounts, preferably than to smart contracts : this is a elusive capability with significant positivist shock on the user experience of Flow applications. On blockchains without this capability, any non-payment of “ submit lease ” on behalf of the chic contract developer could cause all users ’ assets to get wiped. On Flow, a drug user ’ s assets can never disappear or be purged without their consent.
Flow covers the cost of on-chain storehouse on a per-account horizontal surface plainly by requiring a minimum balance as a engage down payment ( in FLOW ) : this lodge is never spent, but is held out of circulation, increasing staking rewards to the validator nodes providing the storehouse.
The minimum balance of a Flow account at launch will be a fraction of one FLOW, enough to cover most initial activities. To make onboarding easier, this minimum balance can be provided by developers on behalf of users in cases where the developer has a specify clientele exemplar ( e.g. charging users subscription fees or selling in-game items ). Developers that don ’ triiodothyronine have access to FLOW can borrow from token-holders immediately or through setting up their own secondary token and exchanging it for FLOW from the community : a shape of decentralized, trustless, crowdfunding.
A higher FLOW poise means the drug user or developer has entree to more memory capacity. It is expected that storage capacity per whole of FLOW locked will increase dramatically complete time as validators achieve economies of scale and cost of storage falls.
The Flow Ecosystem Reserve has the mandate to distribute over 10 million accounts in the foremost few years of the network, working with a broad confederation of community organizations. This ensures approachability onto Flow for anyone that wants to use or build on it.
While storage requirements for fungible tokens are very small, the on-chain repositing – and consort minimum counterweight of FLOW – required for NFTs can be significant since every one is unique. power users can maintain their own remainder to access higher storage capacities.
In the hanker term, exploiter agents ( wallets ) and dapps can in turn help their users “ recycle ” storage on the network by deleting resources or, just as well, backing them up to off chain or archival range solutions ( e.g. Filecoin, arweave, or equivalent solutions built on Flow directly ).
An emerging fresh business model for decentralize applications, service protocols ( besides known as middleware protocols ) are bright contracts that provide services that are used by applications across the network. Chris Burniske explains : Others have called these service-layer protocols, as they focus on providing a specific military service to the interface layer, be they fiscal, social, technological, etc. Financial services include things like exchange, lend, and risk-management ; social services offer functionality like voting structures, arbitration, or legal-contract management ; technological services include components like caching, storage, localization, and possibly the grandfather of them all, a unite OS for protocol services to be neatly bundled to the interface layer. Service protocols are open reservoir, so their code is easily to move across blockchains. The prize that ’ s arduous to replicate lies in the state they coordinate : the network effects between all the respective ecosystem participants vitamin a well as the end-users of the service.
On early blockchains, this country will have to be broken up or bridged across shards, adding complexity, cost, latency, and electric potential for errors in applications that use them. Sharding throws a besotted towel on the network effects that give service protocols measure in the first invest.
On Flow, overhaul protocols constantly exist in the same shared, ACID-compliant, country as every user, app, and other ache contract on the net. This makes them much more likely to be built on by other developers, accelerating their network effects.
Infusion: a New Model for Secondary Tokens
On blockchains nowadays, most service protocols use secondary tokens that do not accrue value back to the ecosystem they ’ ra built on. As a result, they have different incentives compared to the blockchains whose security they depend on. On Flow, we incentivize key service protocols to “ infuse ” their tokens through a adhere curl mechanism with the native FLOW token.
Bonding curves were in the first place developed as a mechanism for providing full-bodied price discovery and liquidity to tokens, flush when they are thinly traded. For model, an impregnate token INF would be controlled by a smart contract that allows anyone to mint a newly INF token if they provide the appropriate come of FLOW at the current rally rate, while besides very slenderly increasing the exchange pace for the following trader ( resulting in a price that increases with necessitate ). conversely, that lapp smart narrow would allow an INF holder to redeem their holdings for FLOW at the current price ( minus a little spread ), pushing the central pace slenderly lower. ( these two posts provide a great presentation to bonding curves. )
infuse Tokens take this theme one step further and note that, if the Reserve Token has a security and administration function, the tokens locked under the bond curl can be used to allow the avail protocol to support the security of the underlying chain while directly and actively participating in protocol government.
As such, an infuse token combines four key benefits to its holders :
- Guaranteed liquidity: a bonding curve means that holders of the service token always know there’s a liquid market back to FLOW. This will let service protocols quickly bootstrap awareness and interest because backers know they have liquidity from day one.
- Reduced volatility: in times of changing demand for the token, the bonding curve allows both the price and supply to adjust in response. This decreases the size and probability of boom and bust cycles that frequently plague fixed-supply tokens.
- Contributing to security: by using FLOW as collateral, the service protocol is backing the security it demands from the network. More FLOW locked as collateral means fewer available for staking, allowing market forces to allocate resources accordingly.
- Participation in protocol governance: secondary tokens collateralized by FLOW will be able to participate in Flow protocol governance by voting with their secondary tokens. This is optimal, as owners and operators of service protocols are arguably some of the most important stakeholders in a smart contract blockchain.
menstruate may contribute a large share of its ecosystem fund to bootstrap early serve protocols that benefit the integral network, including at least one decentralized stablecoin. These funds would never be released directly into circulation : alternatively they would be used to backstop and subsidize protocols that themselves generate activity across the network.
Stablecoins on Flow
Stablecoins are cryptanalytic tokens whose prize is stabilized proportional to a given decree currency – or basket of currencies.
The prize of stablecoins in consumer applications and games is that, particularly initially, mainstream consumers ( and the businesses that serve them ) may prefer to transact in their local currency. similarly, businesses that need to make fore commitments will value predictability and the ability to book gross in the same currency as their costs.
Stablecoins are simple to implement on Flow – and respective are already on the way. There are broadly two kinds of stablecoins ; both require flow tokens to pay for their network resources :
- Fiat-backed stablecoins are fungible tokens whose supply is based on an equivalent amount of fiat currency available for redemption, typically in an audited bank account. Like all Flow users, holders of fiat-backed stablecoins still require a minimum balance of FLOW – this can be provided on their behalf by the application.
- Algorithmic stablecoins use FLOW token itself as collateral to create a secondary token whose supply is adjusted automatically to stabilize its value relative to given fiat currencies. Flow has reserved a significant allocation of FLOW tokens to bootstrap the collateral for at least two implementations of algorithmic stablecoins on the network whose security is rooted in the native FLOW token itself.
Over time, as users learn to measure FLOW for its functionality on the network, the native nominal may start being preferable as a average of change based on its built-in fluidity and direct usage.
At launch, the Flow protocol will have informal off-chain government : the exploitation team will operate independently, with the mandate to build for the decentralized community. exchangeable to Bitcoin or Ethereum today, anyone will be able to submit improvement proposals on the Flow GitHub repo, which are then reviewed by a core development team led by Flow ’ second Chief Architects, Dieter Shirley & Alex Hentschel. Protocol upgrades will be proposed to node operators who then make autonomous decisions on borrowing.
Starting in late 2020, driven by community efforts, on-chain vote will begin as a signaling mechanism : votes will not be binding, but they will be visible to the entire community and will guide the development teams ’ efforts.
Additionally, over the first year, respective ecosystem development efforts will be dispersed across decentralized autonomous organizations ( DAOs ) which will require FLOW or ‘ FLOW-infused ’ tokens for voting. Service protocols built on top of the Flow network ( e.g. stablecoins ) will be the first major components of the protocol to be transferred to amply on-chain administration.
Over time, the Flow community will be asked to help define and provide feedback on network upgrades implementing on-chain government. initially, FLOW stakeholders will vote for a representative council that can make daily decisions. The council ’ s vote acts as a “ nonpayment ” that every token-holder can accept by doing nothing – or actively nullification.
Proposals can be brought on a public forum with full transparency to anyone with access to the blockchain. In practice, we expect the majority of decisions to be made by the council, without the want for token stakeholders to vote. That said, all decisions will be made publicly, and any stakeholder will have the opportunity to organize grassroots action by keepsake stakeholders to veto specific decisions or to vote to replace council members.There will be three kinds of decisions made via the administration procedure :
- Ecosystem decisions: Issues relating to the functioning of the network that can not be expressed within the protocol definition: This includes things like choosing the council members and finalizing any grants or prizes set by the foundation.
- Protocol parameters: Some aspects of the protocol (such as the number of seats available for each node type) are set as parameters and don’t require a protocol upgrade (and therefore a new version of the node software). These parameters can be modified by the governance process.
- Protocol upgrades: A protocol upgrade (also called a “hard fork”) can theoretically change anything about the protocol; the consensus algorithm, the low-level network communication structure, modifying or adding a new execution environment. In practice, these kinds of upgrades will be exceedingly rare and require large participation and buy-in from every FLOW stakeholder.
As the establish team, we wish to record in this document a philosophical commitment to several key principles that we intend to vigorously defend, even when the network has transitioned to community government. We encourage future community members to proceed with great circumspection if they consider acting against any of these principles :
- Maintaining the balance of power between node types
- Keeping the inflation rate as low as possible (currently a maximum of 3.75%)
- Ensuring FLOW is used as the primary reserve asset for collateralized secondary tokens
- Ensuring that transaction and storage fees are responsive to market demand over longer time frames (days and weeks), while being highly predictable over short time frames (minutes and hours)
even before plunge, the Flow network, its associated tool and components, and the message being developed on top has been a collective effort by over 100 developers, designers, and product people across multiple companies and countries.
With the merchandise in full loose sourced, the token minted, and the mainnet amply functional, a new generation of entrepreneurs, developers, designers, and creators can get involved in Flow.
Flow is designed for mainstream adoption. The applications already in development on the net serve built-in fanbases in the billions. This presents an opportunity for the community to build new kinds of products and services, experimenting with new business- and financing models arsenic well as community-driven government and eventual ownership.
Flow is a sandbox for rapid experiment adenine well as a dependable and future-proof initiation that can evolve with time.
The FLOW nominal in turn will jumpstart wholly new clientele models for developers and onboard millions of early adopters into their first interactions with dapps. ultimately, FLOW will bring all of the communities build up and using the network together, creating and sharing value.
Flow ’ sulfur mission is to make the earth a more open, diaphanous, and delightful place. Join us !
here are several key resources that can help creators get started :
- Flow Primer: read about the unique Flow architecture, the reason we don’t believe in other solutions to scalability, and why our approach is better for users and developers.
- Flow Playground: learn Cadence, the first high-level resource-oriented programming language, and write your first Flow smart contracts with our awesome tutorials.
- Journey of a Transaction (soon): follow the user journey from account creation to transaction signing to see how Flow differs from existing networks – and why it’s better.
- Developer tools: once you’re ready to start building, get excited because the Flow emulator, SDKs, command line interface, and associated tooling is awesome.
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