Editor's Note: This article comes fromDfinityFun（ID：DfinityFun）, reprinted by Odaily with authorization.

, reprinted by Odaily with authorization.

Reviewer: Zou Chuanwei, Chief Economist of Wanxiang Blockchain

Written by: Cui Chen, working at HashKey Capital Research

Reviewer: Zou Chuanwei, Chief Economist of Wanxiang Blockchain

Dfinity was conceived in 2015 and completed its seed round of funding in early 2017. In 2018, it also received investment from institutions such as a16z and Polychain Capital and community members. The final announced total fundraising was 195 million US dollars. Although the fundraising went very smoothly, the progress of the project is far from meeting expectations. Dfinity’s planned mainnet launch date in 2019 has been repeatedly postponed. It is finally confirmed that the Genesis version will be launched in the first quarter of 2021 and the ICP (formerly known as DFN) code will be distributed. currency. ICP futures have already been launched. According to the current price, Dfinity is valued at 13 billion US dollars. After the launch, it can directly enter the top ten of the cryptocurrency market capitalization list. As one of the most anticipated public chains in 2021, this article will analyze the design and impact of its token model. ICP mainly involves node rewards, locking in exchange for governance rights, and consumption in exchange for resources.

Dfinity's goal is the Internet computer, making the Internet a public computing platform. Unlike the initial fundraising, Dfinity's marketing de-emphasizes blockchain content and focuses instead on refactoring how software is deployed. Internet computers host software in non-downtime, tamper-proof "containers" (which can be understood as another form of smart contracts), which can improve interoperability between systems and make developers independent of servers and cloud computing companies. However, Dfinity still carries the "container" blockchain on the bottom layer, and its scalability and computing power can be expanded infinitely in principle. In addition, Dfinity's token mechanism refers to the design of the blockchain, including the economic model and governance mechanism.

The startup of Dfinity is divided into several phases, namely copper (Copper), bronze (Bronze), tungsten (Tungsten), sodium (Sodium) and mercury (Mercury). Except for the last Mercury which is a public network, the rest are all testnets. The alpha internal test version of Mercury has been launched, and it is expected to launch the Genesis version and distribute ICP tokens in the first quarter of 2021.

Figure 1: Dfinity Roadmap

ICP (formerly known as DFN) is Dfinity's native token. After it goes online, 469,213,710 pieces will be issued directly, and will be distributed to investors and the community according to the ratio shown in the figure below.

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Figure 2: ICP Allocation Scheme

ICP supply and demand

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supply

Figure 3: Economic Model of ICP (Image source: Dfinity Medium)

supply

In the Dfinity system, ICP inflation is used to pay rewards, part of which is used to reward neurons (governance nodes) to participate in governance, and the other part is to reward data centers, but the amount of ICP distribution is not disclosed, and it may be determined by neurons in the future.

In addition to rewarding neurons participating in governance, ICP will also be used to reward data centers, which refer to nodes that provide standardized operations. In order to ensure that the network has sufficient computing power, Dfinity will have professional equipment requirements for nodes, especially high-performance CPU and RAM. Data centers with professional equipment generally run multiple nodes, so the number of network nodes is much greater than the number of data centers. The Dfinity project expects that the number of nodes in the network will reach millions and the number of data centers will reach thousands in 10 years.

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Data centers can use brokers to exchange ICP for direct cash income. If the value of ICP is stable, this will be a predictable and stable income. In the future, stable coins may also be introduced to reward data centers. It can be seen that the threshold of the Dfinity data center is much higher than that of the validators of Ethereum. The high computing power of the Dfinity network requires nodes to have a certain machine size, and it is difficult for ordinary users to participate in the operation, but there is no threshold for creating neurons to become governance nodes. When the network needs more capacity, more data centers are required to join, and the data centers must apply to NNS for DCID (data center identity), and ordinary users can indirectly participate in the construction of nodes by voting.

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Dfinity's container is transparent, tamper-proof and permanent, including code and state, and the content is uploaded by users. The container runs in a dedicated management program, and the "fuel" required for running is cycles. Container owners need to purchase ICP to convert into cycles, and then fill the container for consumption, thus forming a deflationary model. The conversion of ICP into cycles is one-way, but the conversion ratio is not fixed, and NNS can be changed.

In NNS, the demand for ICP is expressed as a lock. Users need to lock a certain number of ICPs to create neurons, and the locked number will affect the voting weight of neurons. In addition, the "dissolution delay" of neurons will also affect the voting weight. Users need to dissolve the neurons created by themselves to exit the neuron governance system, but the dissolution takes time. The period of time when the neurons are turned off is called the dissolution delay, and the user can set it from 6 months to 8 years, or terminate the dissolution at any time. The purpose of this is to allow users to be deeply bound to the Dfinity network.

Design and influence of multi-layer token

In addition to IPC, there are two more tokens designed in Dfinity, namely cycles and stable coins. Stable coins will not be realized in the short term. Setting multiple tokens is out of the idea of ​​currency stability. ICP and cycles are one-way exchange and the ratio is not fixed, so cycles can be maintained in a stable value range. If the conversion ratio between cycles and ICP can be adjusted in real time, then cycles can also be regarded as a stable currency.

In the future, Dfinity plans to introduce a stablecoin reward data center in the system. The source of the stablecoin is a problem, because the ICP used by the payment terminal is destroyed. If the stablecoins come from the foundation's reserves, then the entire system is no longer a sustainable system. If the payment part is also replaced with stable currency, it may form a model in which container owners pay directly to the data center, reducing the value capture capability of ICP.

Before the stablecoin scheme goes online, the value input of the system comes from the scenario where the container owner purchases and destroys ICP, thus improving the scope and popularity of ICP. The value of ICP will expand with the use of the computing network. Therefore, in Dfinity In the initial stage, the scheme of stable currency will not be used. The stable currency scheme can reduce the impact of ICP price fluctuations on the system, and then the value of ICP can only reflect the governance rights of the network. If the value of ICP is to be maintained, the stablecoin solution can only be implemented after Dfinity develops to a later stage.

Network Neuronal Systems (NNS) and Influence

Design of NNS

Dfinity uses an on-chain governance approach called Network Neuron System (NNS). The neurons in NNS are connected in the form of non-fixed links, that is, neurons can choose to follow other neurons to form a flowing democracy. NNS decision-making content mainly includes modifying system parameters and rules, upgrading clients, freezing and unfreezing accounts, etc. If a neuron cannot judge the content of a decision, it can choose to abstain from voting, or follow trusted neurons to vote. This followership is invisible, thus hiding voting weight. For example, if a community participant wants to publish their personal neuron address, they can publish a neuron A with a small voting weight, and then follow A with a neuron B with a large voting weight. Since the following relationship is invisible, users can avoid mindlessly following big players when they choose to follow them. The neuron following method is different from other public chain delegation voting in that the neuron being followed will not receive additional rewards.

Any neuron can publish a proposal in NNS, and when it comes to certain types, it requires investigation and evaluation by professionals. For example, if someone wants to restore a smart contract that was accidentally locked, the proposer needs to prove the authority of their identity, that is, prove that the proposer is related to this address, accurately describe the problem and upload the repair plan. These materials need to consume a lot of manpower to verify and assess the risk of restoration, so NNS will require the proposer to pay two sums of money, one is the remuneration of professionals, and the other is a security deposit, which will be returned after the proposal is approved.

Compared with other public chains, the governance model of NNS is more democratic and flexible, as all neurons can initiate proposals and be rewarded for participating in voting. Dfinity's governance is more flexible. For example, NNS has the authority to modify smart contracts, which can avoid troubles caused by project loopholes. In order to prevent it from being used by malicious people, the method adopted by NNS is to prolong the neuron dissolution time and create a neuron-locked ICP. It takes 6 months to 8 years to get it when it is unlocked. If someone damages Dfinity in NNS Network, the value of the ICP he holds will be greatly lost, and the ultimate goal of NNS is to increase the market value of the Dfinity ecosystem.

Dfinity's NNS governance is an innovation in mainstream public chains. At present, most public chains still follow the rule of "code is law", and the problem of smart contracts can only be solved through hard forks. The governance methods of mainstream public chains are as follows.

Table 1: Governance methods of mainstream public chains

Thinking and Summary

Open public chains are always considered to be more decentralized in terms of decision-making control, that is, more democratic, but in practice this is not entirely the case. Taking Bitcoin as an example, although Bitcoin has realized decentralized transactions and verification, it is far from decentralized in terms of governance control. First of all, the way the Bitcoin community discusses proposals is very loose, and the Bitcoin mining pool has become a force that threatens the degree of decentralization. The representative democracy of EOS has problems such as bribery, node collusion and solidification. EOS holders are not very motivated to govern due to the opportunity cost of locking positions. The improvement of Polkadot's governance method is that governance voting can be carried out at the same time as the voting of delegated nodes, and technical upgrades will be proposed and voted by professional members of the council. Proposals put forward by the council and the public adopt different schemes in terms of voting statistics, and proposals put forward by the council will be passed more easily. Compared with the above-mentioned projects, Dfinity’s governance method is more democratic. Everyone can create neurons to participate in governance, and the voting weight is only judged based on the number of locked ICPs and the unlocking period.

Thinking and Summary

Dfinity's native token ICP realizes the whole process from creation to destruction in the model. ICP issuance is used to reward neurons and data centers participating in governance, and container owners will purchase ICP in exchange for cycles to support container operation. As Dfinity network users continue to increase, more people will buy ICP to run containers, and the value of the network will continue to increase. In order to allow payers and data centers to avoid losses caused by token fluctuations, stable currency solutions may be introduced in the future.