1.3.5 Tokenomics

Tokenomics is a term used to describe the economic and incentive systems surrounding blockchain networks and their native tokens. It encompasses various aspects, including token creation, distribution, utility, and governance. Understanding tokenomics is crucial for comprehending the underlying mechanisms that drive digital economies and incentivize participants within blockchain networks.

• Token Creation: Blockchain networks typically create their native tokens, which serve as digital assets within the ecosystem. Tokens can be generated through initial coin offerings (ICOs), token minting, or other mechanisms defined by the network's protocol.

• Token Distribution: Tokens are distributed among network participants, often through token sales, airdrops, mining rewards, or token allocation to developers and early contributors. The distribution model plays a significant role in ensuring fair participation and fostering a broad network of stakeholders.

• Token Utility: Native tokens serve various purposes within blockchain networks. They can act as a means of value exchange, granting access to network services, incentivizing network participation, or representing ownership of assets. The token utility is designed to align incentives and encourage active engagement within the ecosystem.

• Governance and Voting: Many blockchain networks in corporate governance mechanisms allow token holders to participate in decision-making processes. Token holders may have voting rights to propose and vote on network upgrades, protocol changes, or allocation of resources. This democratic approach ensures community involvement and decentralization of power.

• Token Burn and Deflationary Mechanisms: Some blockchain networks implement token burn mechanisms, where tokens are intentionally removed from circulation to reduce the total supply. This approach can create deflationary dynamics, potentially increasing the value of tokens over time.

• Staking and Rewards: Staking mechanisms enable token holders to lock up their tokens as collateral to support network security and consensus. In return, stakers are rewarded with additional tokens or network benefits. Staking incentivizes long-term token holding, network stability, and participation.

• Interoperability and Cross-Chain Tokenomics: With the rise of interoperability protocols, tokens can transcend individual blockchain networks and operate seamlessly across different ecosystems. This enables cross-chain tokenomics, facilitating value transfer and interoperability between diverse blockchain platforms.

• Economic Models and Token Design: Tokenomics involves the careful consideration of economic models, including token supply dynamics, inflation rates, token utility, and network adoption strategies. These factors impact the token's long-term value, sustainability, and ecosystem growth.

Blockchain tokenomics aims to create self-sustaining and efficient digital economies that foster network growth, incentivize active participation, and align the interests of stakeholders. By understanding the principles of token creation, distribution, utility, and governance, participants can navigate the complex landscape of blockchain ecosystems, contributing to the development of vibrant and thriving digital economies. It is worth noting that not all blockchain networks are required to support a native token or coin. Blockchain systems like DGT offer flexibility in their configurations, allowing for token-less modifications (CORE configuration) or modifications with native tokens like the DEC token (GARANASKA).

The inclusion of native tokens in blockchain networks becomes particularly relevant when implementing real-world applications. Maintaining nodes and processing transactions within a decentralized model incurs costs, and a fair network economic model is necessary to ensure sustainability and incentivize participation. By introducing native tokens, blockchain networks can establish mechanisms for distributing value and rewarding participants for their contributions to the network effect. These tokens enable the creation of an economic ecosystem that aligns incentives and fosters a fair and sustainable network. They can be used for network maintenance, incentivizing validators, facilitating transactions, and facilitating the exchange of value within the network.

In the case of DGT, the native DEC token (GARANASKA - see also section 5) serves as an integral component of the network's economic model, promoting the fair distribution of value and rewarding participants for their engagement in the ecosystem. This approach ensures the maintenance and growth of a decentralized network while facilitating the development and implementation of real applications within the DGT ecosystem.