A healthy token economy requires multi-dimensional incentive mechanisms to realize a strong network effect. This is especially true for the CommerceBlock network, as all of our software is free and open source. To properly layer these incentives, the economy must be both cyclic and sticky in nature — there must be those who wish to hold the token as well as those who wish to use it as a transactional medium. This premise has been a guiding principle for the design of the CommerceBlock network.

Because the root chain in the CommerceBlock network is publicly accessible, community participation is greatly beneficial to the health of the network. In the event that federated nodes are hacked or otherwise falter, community-operated nodes protect participants from certain classes of failure (historical reorganizations, data loss and double-spend attacks). The expectation that the community will run these services for free is not however a reasonable assumption; while in Bitcoin the incentive to run a node is to ensure the rules of the system are being followed, federated sidechains require trust in the block producers (thus the incentive to run a full node is not quite as strong). To foster a healthy node economy, we are proposing a bonded node scheme.

Transaction fees in the CommerceBlock root chain are denominated in the native token (i.e. CBTs). In the standard operation of a federated sidechain, transaction fees go to the federated block signers. We suggest a different architecture: after placing a pegged amount of CBT in a special “bonded” output, a node operator will receive a portion of the total network transaction fees. Bonded nodes will be required to regularly prove their existence and operation in order to receive the reward.

Additionally, for those who seek to operate leaf chains linked to the root chain, a CBT-denominated bond must be secured. Like the bond for operating a node, the price of the bond can be pegged to a separate asset. The price of the bond is also dependent upon whether or not the leaf chain creator operates the block signing infrastructure. This bond can also act as the basis for closed-membership proof-of-stake consensus processes in leaf chains operated by a multiparty federation.

Finally, we envisage a future with a diverse economy of leaf nodes that provide access to a wide variety of tokenized assets. As users seek to move between leaf chains, a swap market will arise, enabled by chain interoperability tools provided by us. In some cases a direct swap between assets on two leaf chains will be available in the order book. In others, the asset may only have a liquidity in its CBT trade pair; in this case, the user will swap asset A for CBTs and then the CBTs for asset B. Pairing with CBTs in this way allows assets to be swapped without requiring an on-chain Bitcoin transaction.

Together these mechanism act as the foundational layer of the CommerceBlock network, creating incentives for participants to both hold and actively transact in CommerceBlock tokens. The technical details of the implementation of these unique features are described in a new whitepaper that will be published in the coming weeks.

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