Stablecoin and Transaction Fees
While nearly all POS blockchain projects place considerable emphasis on the tokenomics relating to network ownership and control, far fewer, if any, place substantial effort into determining and tuning the tokenomics of their transaction fee mechanism. This decision is extremely counterproductive because while it may deliver strong and comprehensible token dynamics for project backers, actual blockchain users are given no such considerations and subsequently face volatile and appreciating costs.
Beyond this simple neglect of users, many blockchain designers neglect one central economic fact, not all monies are created equally. If you attempted to convince people to use shares of Coca-Cola as money, it would be immediately obvious that shares in a company were designed to have neither the micro-level properties nor the macro-level dynamics to be an effective currency. While those developing blockchain-based stablecoins separate from the protocol token of the underlying blockchain recognize this distinction, it is important to remember that the payment of fees to make transactions is inherently an activity that forces the protocol token to act as a currency regardless of how poor a fit this may be.

The forcing requirement that a POS blockchain include a token acting in the role of currency, presents a unique opportunity in the development of innovative stablecoins. The key issue faced by any currency creator is ensuring that at inception the currency provides utility. Currency adoption represents the epitome of network effects. A single individual (or even a small or disconnected group) obtains no utility from a currency if they are the only one who has adopted it or if the currency has not yet generated trust. Thus far, cryptocurrencies have solved this problem by either pegging their value (through some method of collateralization) to a fiat currency or commodity, as in the case of stablecoins; or by establishing dynamics of investment opportunities where the primary utility, and thus price support, is derived from an expectation of price appreciation.
Fiat currencies meanwhile establish a baseline level of utility (and price support) from their exclusive role in being the means of payment for tax liabilities. In developing a blockchain, we are perhaps surprisingly presented with an identical opportunity. In establishing a stablecoin as the exclusive means of payment for the blockchain’s fees, we can bootstrap a new currency free from bounds to other currencies and without the required expectation of appreciation.
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Last modified 9d ago
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