# 4.3.2 DEC Token Features

### **4.3.2.1 Definition and Purpose of DEC Token**

**DEC** (short for Decentralized Economy Coin) serves as the white-label token for the DGT network. While the network can support the launch of isolated sub-networks each with their own tokens, DEC remains the core token that underpins the broader DGT platform. If an isolated sub-network is launched, it is advisable to assign a distinct name to its token to maintain clarity and avoid confusion.

At its core, DEC is the native token for DGT's **Main Net**. It is integral to the network's economy, facilitating the flow of value across the system. However, DEC does much more than just enable transactions. Its primary role is to ensure the equitable distribution of the network's value among its participants, particularly the supporting nodes.

The nodes in the DGT network perform the essential tasks of validating and distributing transactions. They form the backbone of the network, making it possible for a wide array of services to be implemented on top of the basic infrastructure. The value generated by these services is shared across the network through DEC, rewarding the nodes for their crucial role. DEC, therefore, embodies the principles of decentralized value distribution. It ensures that as the network grows and evolves, the value generated is equitably shared among those who contribute to its operation. This approach fosters an ecosystem that is robust, resilient, and sustainable, encouraging ongoing participation and investment in the network's future.

The nature of the DEC token is based on the following fundamental theses:

* The DEC token originates (_token emission_) from a consortium of organizations and is subsequently distributed among network nodes in line with their contributions, assessed through the SLA performance metrics. A portion of the tokens may be reserved by the consortium for network operations. The distribution model, customizable during issuance, is constructed to foster network decentralization over time.
* The DEC token serves two main functions. It aligns with the PoS protocol, where validators need a token balance for validation tasks, and it operates as a medium of exchange for network transactions. These roles enable DEC to facilitate various user-centric solutions such as service access, applications, and object tokenization.

In essence, DEC promotes network participation, supports network operations, and provides versatile user benefits, thereby fostering network growth and dynamism. This approach allows for both decentralization and utility, enhancing the overall network experience.

### **4.3.2.2 Why DEC Token**

DEC is envisaged as the native token of the DGT network, representing a fragment of the network's value. It becomes particularly important when we compare the architecture of decentralized networks with and without such native tokens. For instance, let's consider platforms that launch without a native token, emulating the models of private blockchain systems like Hyperledger Fabric. In these cases, the network economy doesn't have a direct tie-in with the system's architecture.

We propose a theorem, backed by non-rigorous theses of its proof, suggesting that without a native token, the costs of redundancy of operations associated with maintaining multiple ledger copies lead to an unclear cost distribution. As a result, the system enters a non-equilibrium state, inching towards centralized systems. Centralized systems, in contrast, tend to have more efficient methods for maintaining integrity and security than BFT mechanisms utilized by decentralized networks.

<mark style="color:blue;">**Theorem**</mark>: For a decentralized distributed system to operate efficiently, it is necessary to be underpinned by a native token. Without a token, the system fails to manage the distribution of costs effectively, becoming less efficient than a centralized counterpart&#x20;

<mark style="color:blue;">**Proof Thesis**</mark>:

* **Economic View**:

\-          In a centralized system, costs and rewards are managed by the central authority, which oversees the allocation of resources and responsibilities. These entities also absorb any related costs, benefiting from any generated value.

\-          In a decentralized system without a token, the burden of costs (e.g., computation, storage, bandwidth) falls on individual nodes. Without a mechanism to incentivize these nodes, it becomes challenging to encourage participation and contribution to the network, leading to an imbalance in cost and value distribution.

\-          A native token serves as a means to distribute rewards and costs equitably amongst participants. It incentivizes behavior that benefits the network, compensating nodes for their contribution (computational resources, maintenance, etc.). Without a token, the system lacks this reward mechanism, leading to free-rider problems and network instability, making it less efficient.

* **Social View:**

\-          Decentralized systems are composed of diverse, independent nodes or actors who may have different motivations and objectives. Without a common incentivizing mechanism like a native token, aligning these motivations towards the collective good of the network can be difficult.

\-          A native token provides a shared goal or value that participants can work towards, aligning individual motivations with the network's wellbeing.

* **Technical View:**

\-          Decentralized systems are composed of diverse, independent nodes or actors who may have different motivations and objectives. Without a common incentivizing mechanism like a native token, aligning these motivations towards the collective good of the network can be difficult.

\-          A native token provides a shared goal or value that participants can work towards, aligning individual motivations with the network's wellbeing.

Hence, without a native token, a decentralized distributed system would struggle to manage the distribution of costs and rewards efficiently, leading to potential economic, social, and technical drawbacks that could render it less efficient than a centralized system. However, while tokens bring numerous advantages, it's also important to acknowledge potential limitations or challenges. Token volatility could impact network stability, and token distribution might lead to centralization risks if not managed correctly.

When examining decentralized systems like Bitcoin or Ethereum, we can see the critical roles that their native tokens, BTC and ETH, play in managing costs and incentivizing node participation. Their success provides real-world evidence supporting our theorem about the importance of native tokens in decentralized networks. This theorem helps in understanding the need and importance of the DEC token in the DGT network.

### **4.3.2.3 Roles and Use Cases of DEC Token in the DGT Ecosystem**

In the DGT ecosystem, the DEC token plays an instrumental role, facilitating various network operations and serving a range of use cases. It forms the basis of the network's economy, ensuring equitable value distribution, enabling participation, and fostering innovation.

The DEC token embodies several crucial roles in the DGT ecosystem:

<table data-header-hidden><thead><tr><th width="175"></th><th></th></tr></thead><tbody><tr><td>Role</td><td>Description</td></tr><tr><td>Network Participation and Governance</td><td>As the native token, DEC ensures the active participation of network nodes and stakeholders in the network's governance processes. It gives them voting rights and a say in network decisions.</td></tr><tr><td>Distribution of Network Value</td><td>DEC serves as a means of value distribution among network participants, such as nodes and users. It rewards participants based on their contribution to the network.</td></tr><tr><td>Access to Services and Applications</td><td>DEC grants users access to various services and applications built on the DGT network. Users require DEC tokens to use these services and execute transactions.</td></tr><tr><td>Medium of Exchange</td><td>DEC acts as a medium of exchange within the network, enabling participants to transact and interact with services seamlessly. It ensures the liquidity needed for efficient network operation.</td></tr></tbody></table>

Beyond these foundational roles, the DEC token enables several use cases, contributing to the network's functionality and versatility:

<table data-header-hidden><thead><tr><th width="169"></th><th></th></tr></thead><tbody><tr><td>Use Case</td><td>Description</td></tr><tr><td>Foundation for Secondary Tokenization</td><td>DEC provides a standardized base value for creating various secondary tokens, such as Real-World Assets (RWA) tokens or Non-Fungible Tokens (NFTs). These tokens can represent unique assets and rights, enabling a plethora of innovative applications.</td></tr><tr><td>Facilitates Token Swapping</td><td>The DGT network supports efficient and secure token swapping with DEC as the base token. Users can trade between DEC and other tokens or execute multi-token exchanges seamlessly.</td></tr><tr><td>Enabling Quick Payments</td><td>DEC facilitates fast, secure, and cost-effective global payments, akin to a SWIFT-like network. This functionality adds to the versatility of the token, making it a preferred choice for various financial applications.</td></tr><tr><td>Base for DeFi Applications</td><td>DEC forms the backbone of the Decentralized Finance (DeFi) applications built on the DGT platform. It can be used for lending, borrowing, staking, yield farming, and liquidity provision, driving the burgeoning DeFi landscape in the DGT ecosystem.</td></tr></tbody></table>

### **4.3.2.4 DEC Token Lifecycle**

The life cycle of the native token in the DGT network starts with its issuance (emission). The network is based on a consortium model, with its initiation and issuance managed by a group of participating entities. While this consortium doesn't fully align with a centralized structure, its role is designed to diminish over time, increasing the influence of other network participants as the ecosystem evolves.

Here are the primary roles within the DGT network:

* **Consortium**: The consortium sets the initial parameters, publishes a whitepaper detailing tokenomics, and conducts the token issuance. It then allocates a portion of these tokens for immediate distribution. This initial token distribution kickstarts the network's economy. Over time, the consortium's role lessens, only surfacing in special operations such as token "burning" and adjusting transaction fees.
* **Nodes**: Nodes participate in minting, a distinct operation involving the distribution of previously issued tokens in exchange for Service Level Agreements (SLAs). By supporting the network and receiving tokens, nodes inject these tokens back into the network. They spend these tokens to support their users and stake them for token reservation operations.
* **End Users**: End users execute transactions involving fees, such as transfers and purchases. They are the primary agents of tokenomics as they acquire or exchange tokens with other participants.
* **Businesses** (DeFi): Businesses launch services on top of the network. These services not only enhance the functionality of the system but also contribute to token reservation (staking) in their accounts.

The network's growth and development are facilitated by maintaining a balance of interests among these various users. This dynamic interplay shapes the life cycle of the DEC token. The lifecycle of the DEC token comprises several distinctive stages, tailored to fit its unique design and purpose within the DGT ecosystem:

* **Creation**: The genesis of the DEC token lifecycle starts with its creation. As per the DGT protocol, all DEC tokens are issued at once and are reserved in a system account called 'DEC\_EMISSION\_KEY'. This account essentially signifies an entry in the registry that bounds the total token supply.
* **Initial Distribution**: A portion of the total DEC tokens are transferred to a designated consortium account named 'CORPORATE\_WALLET', established at the time of issuance. This part of tokens is meant for supporting the network operationally and is generally small. The distribution rules are laid out in a whitepaper which is published during the token issuance.
* **Minting**: Token minting occurs dynamically, driven by each node's Service Level Agreement (SLA) metrics. The network utilizes a Heartbeat Protocol, which links token distribution with the frequency of transaction processing, emulating the network's pulse. Nodes claim their tokens by issuing a special transaction that calculates the heartbeat rate since their last request and subsequently transfers tokens from the reserved sum based on the number of transactions they've processed. This token minting mechanism is regulated by a mathematical coefficient established during the token issuance stage.
* **Circulation**: Once minted, the DEC tokens enter circulation within the DGT network, serving a variety of roles and use cases. They can be used for governance, as a medium of exchange, for access to services and applications, and as a foundation for secondary tokenization. The transaction fee incurred while using these tokens, which is set during the token issuance stage, incentivizes nodes to maintain network operations and contributes to the network's economy.
* **Usage and Utility**: DEC tokens play multiple roles within the DGT ecosystem. They function as the native network asset for PoS validation, allow access to network services, function as a medium of exchange and provide the foundation for secondary tokenization.
* **Trading**: DEC tokens may be traded on secondary markets for price discovery and liquidity provision. Their value is ultimately determined by supply and demand dynamics. Some tokens can also be exchanged with external currencies using the _Token Bridge_. For this, the _HTLC protocol_ is used, based on _ZKP_ with the reservation of part of the tokens on the side of the external network (for example, as _ERC-20_ tokens on the Ethereum side).
* **Token Burn and Fees**: The DGT protocol may incorporate a burning mechanism to control the token supply and increase its value. In addition, a flat fee is levied on each transaction to compensate nodes for their contribution in maintaining the network.
* **Security Measures and Protocol Adherence**: The protocol enforces strict security measures like _multi-signature_ for critical operations. All operations on DEC that don't align with the initial parameters are rejected by the network as protocol violations.

<figure><img src="https://3210145376-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FSvanFNAf6Jf8kwvqcdRQ%2Fuploads%2Fso2sj9mcivLt8Zv1STQi%2Fimage_2023-10-17_013903438.png?alt=media&#x26;token=bb074b03-9e8d-42c5-b71b-4bc2a80d45f2" alt=""><figcaption><p><em>Figure 56. DEC Token Lifecycle</em></p></figcaption></figure>
