Economics

Today's machine economy consists of many silos: the machines, their liquidity and the data they generate, all of which sit behind closed, centrally-organized gardens, not able to easily communicate with one another. There are few incentives to interconnect the centralized systems, their machines, and their stakeholders, which leads to a major misalignment between the stakeholders of the machine economy.

In many cases, the results are zero-sum games, which might create some short-term winners, but in the long run, many more losers. peaq aims to change exactly that and create a win-win scenario for all stakeholders with its network economics providing a machine centric and holistic economic model in order to have all relevant stakeholders incentivized to build on, use and engage in the peaq ecosystem.

peaq’s approach

To achieve the goal of a win-win scenario for all stakeholders, various aspects of the architecture of the network mechanism are required. The basis for this is provided by the architecture of Polkadot itself, which allows Layer 1s (existing as parachains on Polkadot) to place less emphasis on the security and incentivization of the security of their own network and to enable new possibilities for incentivization within the network - enabled, for example, through custom pallets. With custom pallets, you are able to start building an application-specific staking pallet, as an example, that uses the types exposed in existing Collective and Balances pallets, but includes custom runtime logic required by your application and its staking rules.

peaq aims to make use of these two described points to achieve the overall development and implementation objective. This will be accomplished by establishing a fee that is low enough to be attractive to machines and their applications, and at the same time high enough to incentivize and reward all participants - in order to set the right incentives and conditions for their sub-participants as well. To get a better overview of the incentive mechanisms, let's first summarize the stakeholders and their roles in the peaq ecosystem that participate at the peaq network macro level. These are the following:

• Builders of Decentralized Applications: Decentralized Applications built on the peaq network.
• Collators: Node hosts of the peaq parachain (if peaq secures a parachain slot)
• Machines: Machines, represented by Self-Sovereign Machine Identities (SSMIs) on the peaq network
• New, unregistered Machines: Machines that are intended to be connected by their stakeholders to the network via SSMI after receiving financial resources via crowdfunding campaigns or other methods
• Liquidity Providers/ Token Holders: Users that are providing their PEAQ tokens for Liquidity purposes such as providing liquidity to a Liquidity (Mining) Pool
• Treasury: Pool of funds collected through network mechanics. The funds held in the Treasury can be spent by making a spending proposal that can be approved by the Council. In the peaq network, a certain amount of all treasury tokens is kept for future parachain auctions in order to maintain the slot.

After the implementation, the following stakeholders should be aligned on in the following manner:

• dApp Rewards: To incentivize building in the peaq ecosystem. Therefore dApps enable other dApps to receive recurring revenues from the network in order to finance operations and further development. This can be seen as a revenue share in the overall network revenue. The dApps can be voted for by the Machine NFT stakers while voted dApps can reward their voters with their potential native tokens on top.
• Collator Rewards: Collators receive recurring rewards for operating nodes which are required to run the network processing its data and transactions.
• Machine Rewards: Machines operating in the peaq ecosystem receive constant recurring revenue from the network, so that they can make a step towards becoming more self-sufficient and can pay for transaction fees when performing transactions.
• Machine Subsidizations: New machines or machine pools that have been voted on and added to the peaq ecosystem get subsidized. This is done so that individuals and companies have an incentive to add new machines to the network.
• Machine NFT Rewards: peaq is working on the introduction of different types of machine NFTs. Machine NFT stakers get the ability to vote on dApps and machines. dApps that get voted on and achieve a certain traction receive recurring revenue streams from the ecosystem. Machine types that get votes receive subsidization from the peaq network. As a reward for voting, machine NFT stakers receive recurring rewards from peaq’s economic mechanism and can receive additional rewards such as a potential native token of the dApp. These types of machine NFTs will include LP NFTs to additionally reward liquidity providers for providing liquidity.
• Treasury/Burn: The funds that are received by the treasury are split in three pools- funds financing the further development and the maintenance of the network, funds that are reserved for future parachain auctions and tokens allocated for burning.