Optimal Friction and Consensus Mechanism for Scalability and Its Dependence on Mobile Computing based Node Validation (What will scale Decentralised Ledger Technology?)
Consensus Mechanism
With the introduction of Decentralised Ledger Technology (DLT) and its introduction in smart contracts to execute agreements, transactions or scripts; consensus mechanism plays the role of validation and updating the state once a consensus has been reached.
I will not go into the types of consensus mechanism as there are plenty of knowledge base on the internet that mention it. In this article I will focus on the correlation on the consensus mechanism and token health in terms of the monetary value of that token. We will also look into how the two mentioned affect inflation in the token.
Tokenomics Paradox
First, lets get some fundamental flow with regards to token and its associated components where Friction is the transaction cost that is associated with the token and Velocity is the number of times the token is changing hands.
The goal is to reduce the friction (incentives) to enable higher transaction throughput which is one of the key to mass adoption of Decentralised Ledger Technology where it can be Blockchain, DAG or any other form of DLT.
The paradox behind decreasing friction is with its decrease; there is an impact in the decrease in the dollar value of the token. With the increase in Friction, there is an increase in dollar value but there is also an increase in the inflation.
For example, FLOW tokens distribute the inflation to stakers and this will decrease the value of the token if it does not go through the process of burning.
So How does Consensus Mechanism play a role in Token Health?
Consensus Mechanism with correlation to Tokenomics and its health depends on two factors,
- Incentive Design Scheme
The nodes on the network are a part of the consensus mechanism that come to a conclusion with a certain form of work, stake or participation to validate a transaction and update the global state on the network. The some form of something needs something in return to achieve consideration.
This consideration is the friction that the network has to undergo in order to be viably accepted and added to the global state.
- Ongoing Distribution of tokens
The ongoing distribution of tokens is based on technical and service module such as the cost to use the network from the developers perspective which ultimately falls on the application user. The correct metric helps the system to reach a common objective that the application is set to achieve.
The paradox table implicitly takes two factors into consideration, once being the supply of the resource and the demand to use the resource on the network.
I will not go in-depth of the Layer-One.X solution but give a primer on how it is trying to solve the problem of Friction and its correlation to the consensus mechanism.
What is Layer-One.X?
“Layer One” is a truly decentralised ledger solution that offers scalability and interoperability at its base layer with its innovative Proof-of-Participation based consensus mechanism powered by handheld and everyday computing devices.
It offers the first of its kind interoperability (cross chain and cross blockchain) with its innovative custom atomic swap technology that can facilitate the growing need of Transactions per second and enable micro based payments and value transfer (through tokenisation).
X is the variable for its technology and it represents the component of the solution i.e. I for Interoperability and S for Scalability.
Some features of Layer-One.X
- Scalability through para threading at mobile computing level of node operations such as validation and authentication.
- Interoperability, security, and privacy built into its base layer enabling custom layer two development such as DeFi Hubs and Data Crowdsourcing.
- Innovative “Proof-of-Participation” based consensus layer enabling the everyday application participants to be the nodes on the network and get incentivised through layer two protocols.
- To enable security and privacy, the consensus mechanism differentiates in between the transaction/smart contract initiator, validator, and the constructor.
- The right API governance and SDK model to enable layer two developers to build on top of the layer one solution leveraging its nodes, validators, and custom DAG and blockchain based data structure for instant finality.
- Decentralised Wallet to enable a single user authentication and Identity Management to reduce the cost of smart contract deployment.
- Custom smart contracts that are binary based for faster network connection, validation, and response time.
- Block finality and transaction initiation synchronous and enabling para threading through horizontal scaling.
- Enabling its tokenomics to be controlled through the supply of the nodes velocity on the network to keep friction at an optimal level.
How is it solving the paradox?
Layer-One.X is trying to solve the paradox by the last pointer mentioned in the feature which is Enabling its tokenomics to be controlled through the resource supply of the nodes and its velocity as its innovative Proof-of-Participation (PoP) allows developers to leverage mobile computing / mobile devices to act as nodes on the network.
Their innovative mathematical equation is based on the network contributing participants.
I will not go into the equation in this article as it exceeds its depth. In the follow up articles I will be using the equation to mention about the importance of mobile based node validation, consensus mechanism and its relevance on tokenomics.
