Genfinity met with Alex Brandes, CTO of the Constellation Network, and Ben Jorgensen, CEO, to discuss the organization’s work on a new economic model and fee structure for the ecosystem. They’ve been intensely focused on this project for some time and believe it’s crucial for the network’s future, releasing a litepaper this week for you to explore. We have summarized some of the most important developments for you!
The Constellation Network
Designed for low fees, Constellation strategically uses minimal fees to safeguard the network, optimize resource utilization, and foster a thriving utility exchange. Picture yourself within a seamless network, where information travels freely and securely, unhindered by restrictions or delays. This ecosystem thrives on the DAG token, the lifeblood of Constellation. Functioning as the network’s native cryptocurrency, DAG notably fuels various crucial activities like validating data.
Litepaper Overview
After their first metagraph launch last November, the team has notably been concentrating on implementing and perfecting the fee structure. Here are several key, big-picture observations:
- While Constellation is known for being a feeless chain, operating costs exist and need to be covered. The litepaper clarifies where fees are charged and who benefits.
- The network remains largely fee-free for typical transactions, with optional prioritization fees for specific use cases.
- Metagraph fees are the primary source of network income, as they handle diverse data processing needs with varying resource demands.
- This fee structure aims to incentivize good behavior, discourage resource-intensive actions, and enhance security by making malicious attacks financially impractical.
The announcement focuses on the specifics of how snapshot fees function within this framework. Essentially, the model aims to create a mature ecosystem where projects can launch and businesses can build on top of the network with clear understanding of the Constellation Network fee structures, now and in the future. This transparency is seen as vital for attracting and also supporting future growth within your network.
Web2 | Web3 – Constellation’s Vision Continues
Ben Jorgensen, CEO of Constellation Network, emphasized that the overarching focus is looking at, “Web3 being composable with Web2” within their new model. Their previous launch of metagraphs and SDKs addressed the technological aspect of migrating existing data structures. The recent developments tackle the economic side, figuring out how to incorporate Web2 entities and their builds. This, according to Ben, completes the picture of Web2 and Web3 integrability.
Furthermore, he argues that metagraphs offer a fundamentally different model compared to traditional smart contracts like Ethereum. Unlike relying on speculative utility tokens, metagraphs leverage real data and dedicated sub-networks to monitor and incentivize participation based on specific metrics relevant to the business. This approach enables businesses to go beyond simple smart contract solutions and focus on achieving two key objectives:
- Increased Transparency: Metagraphs provide a transparent view of business operations, fostering trust and potentially leading to higher perceived value.
- Creative Revenue Models: Businesses can leverage cryptocurrency and tokenomics within the metagraph framework to establish innovative revenue streams directly tied to their core activities.
This contrasts with the traditional Web2/Web3 approach where businesses force-fit solutions onto existing platforms. Instead, metagraphs offer a flexible and adaptable tool that seamlessly integrates with existing business models, unlocking new revenue possibilities through the power of blockchain technology.
Constellation Network: A Deep Dive into its Architecture and Economics
This section delves into the unique features of Constellation Network, exploring its architecture, economic model, and future plans.
Alex Brandes, CTO, elaborates on the unique architecture of their system, where metagraphs operate as independent islands, or their own layer-1 networks. Significantly, a lot of data processing can happen on the metagraph because of its ability to scale. This allows for many efficient, on-chain transactions.. Projects can choose the level of data storage on the main network, whether currency transactions or custom data transactions to balance their cost and flexibility.
Two fee structure objectives were highlighted. Firstly, Constellation aims to reward long-term participation through staking by reducing fees for those who contribute to network stability by locking up tokens. Secondly, they prioritize fixed fees, eliminating the unpredictable fluctuations seen in other networks like Ethereum. This allows projects to confidently plan their costs without worrying about sudden spikes in fees.
Metagraphs offer complete control to a project selecting their own economic model and tokenomics. This allows them to design unique incentive structures and scaling strategies. Additionally, the development framework provides open access to the codebase, enabling developers to integrate external libraries, modify validation rules, and build highly customized networks tailored to specific needs. This level of flexibility empowers developers to create innovative solutions far beyond what many other networks offer.
Project builders versus end users
The distinction between builders and end users within their system was also made. Thanks to the metagraph architecture, end users never incur fees directly from the main network. Instead, fees are charged to the metagraph itself when it submits data snapshots. This flexibility allows for innovative fee structures where end users potentially never pay, with the metagraph project finding alternative financing methods like grants or other creative solutions. This clear separation between end users and fee-paying entities within the system is a crucial aspect of their design.
Constellation Network Snapshot Fees
The network currently uses inflationary rewards, distributed at snapshots to validators and other pools, increasing the token supply. This rate halves with each epoch, eventually stopping around 2030. To incentivize validators after that, snapshot fees will be used. These fees currently removed from circulation will act as a brake on inflation. Later, they will be distributed to validators instead, replacing inflationary rewards and sustaining the network. This approach aims to reduce inflation initially and eventually replace it with fees as the primary reward for validators.
We asked the CTO if, essentially, there will be a transfer of value from the users to the actual providers of the resources — would this look like a more self-sustaining network without the need for continued inflation?
He emphasized, “Exactly. So we ended up not needing to continue with inflation, because these snapshot fees can replace the inflationary rewards as incentives for validator nodes.”
Alex further explained, “The big takeaway we want everyone to get is that — the structure of reducing inflation in the short term. Then, eventually, we are replacing that inflationary pressure and acting as the primary method of rewarding participation of validator nodes on the network.”
The economic model
Constellation pointed out that regenerative economics avoids forcing users like you to participate and instead focuses on creating value that society naturally embraces. If a product or service offers a positive impact, it thrives on its own. This applies to Constellation Network as well. Businesses on the network need to be viable and offer valuable data to attract consumers. Just having a lot of data on the network doesn’t guarantee success. Ultimately, the ecosystem rejects what it doesn’t perceive as valuable, ensuring a self-sustaining system. This approach avoids forcing participation and lets society decide what thrives based on its perceived value.
Notably, the “free tier” concept allows projects to try things out on Constellation Network without significant upfront costs. This aligns with the network’s goal of mutual value creation, where projects contribute and gain from the ecosystem. Each metagraph runs three nodes, earning rewards for validating network transactions while paying fees for their own validation. This creates a free tier where early-stage projects can experiment and grow before needing to pay network fees. This lowers entry barriers and allows projects to reach sustainable scale before contributing financially to the network.
Changing the validator configuration
Brandes outlined a two-pronged approach to evolving Constellation Network’s validator configuration:
Part 1: Independent Layer Scaling:
- Current situation: All nodes run both Global Zero (L0) and DAG (L1) layers, but L1 can handle more traffic with fewer nodes.
- Proposed change:
- Introduce L1-specific rewards to incentivize running it.
- Allow most nodes to downscale to L0 only, reducing server costs.
- Run a smaller dedicated set of nodes (12-24) for L1.
Part 2: Increased Participation Opportunities:
- Future vision: Separate layers and metagraphs enable individual node participation in specific layers or metagraphs.
- Benefits:
- Breaks the current 300-node limit.
- Opens up more opportunities for node operators to contribute and earn rewards.
Overall, this plan aims to optimize network efficiency and scalability while expanding participation opportunities for node operators.
In Closing
Constellation Network views software projects, like distributed networks, as having multiple “stable states” during development. Currently, the network is transitioning from a basic state with DAG transactions to a metagraph-enabled state with richer features. Reaching a stable metagraph state notably requires critical mass, where numerous metagraphs launch and contribute to the network’s growth through fee structures and open-source collaboration. This collaborative, win-win scenario is the envisioned future for Constellation Network, achievable through incentivizing quality metagraph projects and also simultaneously fostering a supportive ecosystem.
Brandes stated that further discussion on how these fees integrate with the overall tokenomics will be discussed in a future Genfinity podcast!
Stay tuned for more upcoming details!
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