On February 17, 2020, the aelf Economic & Governance model was announced on Twitter with a link to the Economic and Governance Whitepaper. This whitepaper provides insight into the financial structure of running a node on the aelf blockchain. It is broken up into 3 main topics: Token Model, Incentive Model, & Governance, covering the rights and collaboration rules of production nodes, candidate nodes, developers, and investors. Since the release of the WhitePaper, the aelf team has updated it several times. The latest version is available here: https://aelf.io/gridcn/aelf_whitepaper_EN.pdf?v=1.6
This article will interpret the economic models and governance mechanisms to help users better understand the aelf ecosystem.
There are 4 types of tokens in the aelf ecosystem: ELF Token, Resource Token (CPU Resources, RAM Resources, DISK Resources, NET Resources, READ Resources, WRITE Resources, STORAGE Resources, TRAFFIC Resources), tokens created by developers, and Voting Token (VOTE token and SHARE token.)
ELF Token: ELF is the main token in the aelf network. It is used for transaction fees, side-chain index fees, production node application deposits, and rewards for block production. The total amount of issuance is 1 billion. After the mainnet goes online, the Genesis Block will release 88% of the ELF token (880 million), which will be used for the token swap in the future. The remaining 12% (120 million) will be used as mining rewards. The aelf blockchain system produces 8 blocks every 4 seconds and releases 0.125 ELF as the mining incentive for each block generated, the amount of which is halved every 4 years.
Resource Token: This token is used by developers to pay for the consumption of resources when chains or DApps are running. Developers need to ensure that there are sufficient resource tokens for their application’s normal requirements. Resource tokens can be bought and sold for ELF tokens. The total distribution of each resource token is 500 million. The transaction fee generated by buying and selling the resource token will all be sent into the dividend pool.
Tokens created by developers: On the aelf platform, developers can create tokens and build their own token models and incentive mechanisms.
VOTE Token: Users obtain voting income by voting for production nodes. After the vote, the VOTE token will be used to redeem the vote. The SHARE token is used to obtain a side-chain dividend.
Inflation and Burning Mechanism Increases the Rare Value of the ELF Token
In the aelf ecosystem, the following two scenarios will destroy a certain proportion of ELF:
- Transaction fee: 10% of the transaction fee is burned, and the remaining 90% of the main-chain goes into the dividend pool. If the fee receiver is set on the side-chain, then the remaining 90% will be sent to the fee receiver address, otherwise, all will be burned.
- Resource purchasing: Purchasing resource tokens incurs a 0.5% fee, 50% of which are burned and 50% enters the dividend pool
In aelf’s ecosystem, there are the following roles: production nodes, candidate nodes, developers, and token holders (users).
- Production Nodes: Any person/organization can apply to become a production node. Production nodes will participate in block production according to the consensus rules and receive rewards for producing blocks.
- Candidate node: Any person/organization who is not a production node according to the vote ranking.
- Developer: An individual or organization that develops applications on the aelf network.
- Token holder (user): An individual or organization that owns any valuable assets on the aelf platform and plans to use the services offered by developers on the aelf network.
For these four roles, aelf designed various incentive models to encourage the participation of all contributors within the industry to promote the sustainable development of the aelf ecosystem.
aelf distributes rewards through a dividend pool
The bonus of the main-chain dividend pools is composed of the following parts: Block Reward, transaction fee, and resource token transaction fee.
The distribution method and proportion of the dividend pool are shown below:
- 75% of the bonus in the dividend pool will be distributed to users as ‘voter income’.
- The number of blocks produced in the previous session is used as the distribution profit weight for the production nodes and the distribution of “Production Node Basic Income” of the dividend pool. (10% of the dividend pool).
- ‘Production Node Vote Weight Income’ is allocated according to the weight of the production node’s votes received in each election round (5% of the dividend pool);
- ‘Production Node Re-election Income’ is allocated according to the number of consecutive terms a production node has been elected, the initial distribution index for all production nodes is 1, and each additional term increases the index by 1. The upper limit of the re-election index is 10 (5% of the dividend pool). If you lose the election, the data will be reset and calculated again.
ELF holders can obtain income by voting for production nodes to represent the will of the community. Meantime, the voter income accounts for a large share of the dividend pool (75%). The incentive proportion is allocated according to the weight of the number of users voting and the lock period specified. To vote for a node, users need to choose the period of time for which they will lock their votes. Users can choose 3, 6, 12, 24, or the maximum lock period of 36 months. The distribution will be based on the principle of longer locking periods for a bigger reward. The ratio weight of the locking period to the number of votes is 2:1. The weight of each vote is calculated in relation to the compound interest according to the number of days locked. Assuming that 8 blocks are produced every 4 seconds, 3 transactions are initiated in each block, the average transaction fee is 0.3 ELF, the weekly block award is 150000 ELF, and 40% of ELF are staked, then the APY of voting users can reach 11%.
If you are interested in becoming a Production Node, you need to meet the requirements below:
Requirements
- The amount of ELF tokens needed to be deposited by a node candidate: ?100,000 ELF.
- Configuration recommendations: 8-core processor, 16GB memory, 500GB hard drive,
- Sufficient bandwidth to ensure block and transaction synchronization.
- Node geographical location: worldwide
Note: Deposited tokens will be locked after a successful election to a production node. The
locked tokens will be returned to the node owner upon them stepping down from
the position of the production node, assuming there is no violation of operation.
According to the aelf Whitepaper, during the Genesis phase, 17 production nodes will be elected from candidate nodes. After the chain operates robustly, 2 new production nodes will be added each year. The maximum number of production nodes will be determined by the community after voting on the mainnet to meet the needs of ecosystem development. Production nodes can get at least 10% of the bonus pool. Re-elected production nodes will receive more dividends. As mentioned above, the Production Nodes Basic Income accounts for 10% of the dividend pool. Assuming that 8 blocks are produced every 4 seconds, 3 transactions are initiated in each block, the average transaction fee is 0.3 ELF, the weekly block award is 150000 ELF, and have 17 production nodes, the APY of production nodes will be as high as 88%, and the APY of re-elected production nodes will be even higher.
aelf’s ‘main-chain + multi-side-chains’ model is central to the overall ecosystem with each side-chain adopting a ‘one chain, one scenario’ design.
For now, the first side-chain ‘shared side-chain’ is also deployed on the aelf mainnet and is open-sourced. This means that after entering phase 2: mainnet improvement, any developer can freely deploy contracts on the shared side-chain to develop various DApps. When developers create an application that requires independent computing resources to ensure operating efficiency, it is necessary to consider creating a separate side-chain for it. When users need to increase/decrease the performance of the side-chain, they can apply it to the system. This process is as convenient as a cloud service provider’s elevator server, avoiding unnecessary waste of resources.
Moreover, aelf has designed a variety of incentive models for side-chain developers, including an exclusive side-chain fee model, side-chain support plan fee model, and side-chain fee-sharing model, etc… This is aimed at attracting developers to create a wider variety of DApps in the aelf ecosystem. aelf also provides governance models based on different governance scenarios. These governance models will play an important role in on-chain governance and will also be a powerful tool for side-chain developers to build governance systems based on their needs. Based on the core design of ‘one chain, one scenario’, aelf can meet the requirements of different business scenarios and high-performance requirements, thus accelerating the landing of blockchain business applications. At the same time, with various developers' incentive models, aelf’s users can also get more earnings and dividends.
We hope this article can help you get a better idea of aelf’s Tokenomics and economical model. Next, aelf will hold the mainnet full function tryout for the community before the token swap. Stay tuned! Looking forward, there are still many milestones yet to be achieved. Let’s work hand in hand to create a better future for aelf.
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