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Network Economics

Introduction

Today's machine economy consists of many siloes. That is to say that systems and processes are isolated from others. The machines, and the liquidity ($) and data they generate, sit behind what have come to be known in the IoT industry as 'walled gardens'. As the name implies, these are digital spaces controlled by centralized authorities, surrounded by high 'walls' which make it difficult or impossible for communication and exchange between different machines, stakeholders and micro-economies to occur. There are little or no incentives to interconnect these different centralized systems and the machines and stakeholders within them. The difficulty and/or impossibility for machines and stakeholders in different siloes to interact has brought about a large misalignment in the machine economy, so much so that as of today, there isn't one machine economy, but a fragmented web of centralized micro-economies competing against eachother instead of collaborating.
In many if not most cases, the result is a zero-sum game. That is to say that there is a winner and a loser in every transaction, and no wealth gain, just transfer. This short-term mindset means that even the winners lose in the long-run because of the opportunity cost of not doing things a better way which generates more wealth for all.
peaq is proposing a better way. peaq is proposing to switch to a positive-sum game, a win-win. peaq is proposing a machine-centric, decentralized economic model that brings all relevant stakeholders to the garden - a garden with no walls - where all everyone is incentivized to build on, use, and engage the peaq network to the benefit, not detriment, of other network participants.

The peaq approach

How do we transform a zero-sum Internet of Things into a positive-sum Economy of Things?
The basis for this is provided by the architecture of Polkadot itself, which allows Layer1s that are part of Polkadot (parachains) to place less emphasis on the security and incentivization of the security of their own network thus enabling new possibilities for incentivization within the network, for example via custom pallets. With custom pallets one is able to, for example, start building an application-specific staking pallet that takes elements from existing Collective and Balances pallets, but includes custom runtime logic required by your application and its staking rules.
peaq aims to achieve the objective of establishing transaction fees that are low enough to be attractive to machines and applications, but that at the same time are high enough to incentivize and reward all participants properly. To get a better overview of the incentive mechanisms, let's first summarize the stakeholders and their roles in the peaq ecosystem.

Stakeholders

  • Entrepreneurs/Builders of dApps (decentralized applications built on the peaq network)
  • Collators: Node hosts of the peaq parachain (once secured)
  • Machines, represented by Self-Sovereign Machine Identities (SSMIs) on the peaq network, as well as Unregistered Machines; machines that are intended to be connected to the network via SSMI after being subsidised/funded.
  • Liquidity Providers/Token Holders. Users that are providing liquidity via their $PEAQ Tokens, such as by providing liquidity to a Liquidity (Mining) Pool.
  • Treasury: Funds collected by the network. The funds held in the treasury can be spent via spending proposals approved by the Council. Treasury tokens are being kept for future parachain auctions to maintain the slot.

Stakeholder Alignment

dApp Rewards

  • To incentivize builders/entrepreneurs to build in the peaq ecosystem.
  • Enables dApps to receive recurring revenues from the network in order to finance operations and further development.
  • Can be seen as a revenue share in the overall network revenue.
  • dApps can be voted for by Machine NFT stakers. dApps can reward their voters with their native tokens.

Collator Rewards

Collators receive recurring rewards for operating nodes (required to run the network by processing its data and transactions).

Machine Rewards

Machines in the peaq ecosystem receive recurring revenues from the network. This idea is one of the ways in which peaq is pioneering the Economy of Things with a long-term view. By rewarding machines they can make a step toward becoming fully self-sufficient, by for example, paying for their own transaction fees, goods, and services, without requiring constant financial support from outside of the network.

Machine Subsidization

New Machines or new Machine Pools that are added to the peaq ecosystem after being voted on are subsidized, meaning they are financed by the network according to the will of the voters. This incentivizes individuals and companies to add new machines to the network by lowering or removing the cost to do so.

Machine NFT Rewards

peaq is working on introducing different types of Machine NFTs. Machine NFT stakers have the ability to vote on the dApps and Machines they want to see and use in the network. As a reward for voting, Machine NFT stakers receive recurring rewards from the network and can receive additional rewards such as a potential native token of the dApps they voted for. 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 into three pots;
  • funds to finance the further development and maintenance of the network
  • funds reserved for future parachain auctions
  • funds of which tokens are being burned
All relevant stakeholders can build recurring revenue streams by performing services that benefit all other stakeholders in the peaq ecosystem while creating value around the multi-faceted $PEAQ token.
NOTE: It should be noted that the concepts outlined above are still being evaluated and tested and are thus subject to change.
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Outline
Introduction
The peaq approach
Stakeholders
Stakeholder Alignment