Tokenomics v2 [draft]

[Netherdrake]

Note: The v2 of tokenomics is not finalized and subject to change. Feedback and proposals are welcome.

Introduction

Paralink Network intends to run as a parachain on Polkadot and Kusama networks. Chain native tokens (PARA) will be issued on both respective networks in a ratio as determined by the governance process.

Each Paralink chain has a hierarchy of participants, with the token acting as an incentive mechanism necessary for a well functioning oracle ecosystem.

The tokenomics model as outlined below is intended to provide incentives for all participants and ensure Paralink Network runs smoothly and provides high quality oracle services to the Polkadot as well as other blockchain communities.

Relayer governance and PARA staking rewards

The Relayer quorum is the most important piece of the Paralink Network. Its job is to validate and aggregate the answers provided by the oracle quorums and relay the final answers via xcmp protocol and bridges. The validation and aggregation rules are specified by the oracle requester (the user), and are executed as part of block finalization process. Neither oracles or relayer quorums have any influence on the rules, their job is to just execute the code.

Oracle quorums are rewarded for their service from the users directly trough the fee, which is paid by the user when he issues the oracle job request, and credited to the oracle quorum members upon validation and callback execution.

Relayer quorum members are paid from the Validator rewards basket, similar to how Bitcoin and Ethereum miners are paid for generating block proposals and securing the blockchain.

Relayers are governed by Nominators - PARA token holders participating in the governance process. In order for a PARA holder to become active in the governance process they must do two things:

• Stake their PARA tokens in a governance module. The tokens are bonded for 2 years and cannot be withdrawn during this time. This is to prevent the short term incentives of forming a self-appointed Relayer quorum that would have short term profits at mind. Rather, the nominators need to have long term "skin in the game" to ensure the relayers are nominated based on their reliability, and not for other reasons such as nepotism.
• Be active participants in the governance process. At a minimum the nominators have to confirm the relayer quorum once a week to be eligible for Nominator rewards. This is to ensure that the Relayer quorum does not become stale.

The nominators take a lot of risk for bonding their tokens for such a long time, and should be rewarded appropriately. Similarly to the Bitcoin's difficulty adjustment algorithm, the governance module rewards logic should self-adjust to target a stable APY for active Nominators.

Other ideas / proposals

Early participation subsidy

The Ecosystem basket contains tokens to be distributed as subsidies to early adopters of Paralink Oracle services. This means that the networks and DeFi protocols will receive a token subsidy to partially or fully cover the costs of the oracle service during the first months of operations. This is to ensure sufficient work demand for oracle quorums, whom are only paid from oracle fees. Having a healthy demand for oracle jobs should establish a competitive pressure for competent oracle service providers and help Paralink establish itself as a leading oracle platform.

IPO Staking

Dedicate a portion of token supply from Reserve basket as an incentive mechanism for DOT holders to participate in Parachain Slot auction on Polkadot. The tokens would be released as a pro-rata reward to all supporters in the event that Paralink successfully acquires a parachain slot.