As the 0Chain network nears its launch, many people have been wondering how economic protocols and inflation will impact the value of ZCN. 0Chain has implemented a brand-new token reward protocol that uses a locking and staking approach.

How does the network function?

When using 0ChainNet, both clients and service providers (miners, sharders, and blobbers) are required to use their ZCN. Clients will lock their tokens while service providers must stake their tokens, which includes a risk. By requiring staking, service providers are not only encouraged to engage in proper activity, they also risk losing part of their staked tokens if they misbehave and intentionally disrupt the network. For clients, this interest can be used to pay service providers to store data.

Here’s a look into how the rewards are distributed to miners, blobbers, and sharders based on the information provided in the service provider brochure:

In the graph below, you can see the payouts for the each type of service provider. There are miner rigs (M rig), miner and sharder rigs (MS rig), and miner, sharder, and blobber rigs (MSB rig). The graphs compare payouts when ZCN is valued at $0.10 and $1.00 in that respective order.

How does interest correlate to time?

Upon locking/staking tokens, the tokens will be unmovable for an agreed upon period of time. For instance, a one-year locking term will result in a 10% interest rate while a 3-month term (likely the minimum length) may result in a 2–2.5% interest rate. While locking/staking reduces the number of available tokens from the current supply for a period of time, the total supply increases.

How is the interest paid out and what is its impact on the supply of ZCN?

Locked and staked tokens automatically yield interest. If a client locks 1,000 ZCN for one year, they would be rewarded with 100 ZCN, a 10% interest. Since these interest-generated tokens are provided upfront, the clients can then do whatever they want with the new tokens, including sell them, lock them, or use them for network activity.

For another example, a service provider wants to stake 10,000 ZCN. By agreeing to stake their tokens, 10,000 ZCN is removed from the available token supply for one year and replaced by the interest. While these staked tokens still exist, they are no longer able to be unlocked nor moved for the whole year. These service providers are then able to re-stake the interest-generated tokens, sell them, or use them for services on the network, like storage.