Cardstack White Paper

Crypto Economics Design

Token Functions

For end users, the project token is a utility token that allows them to mix and match multiple dApps and cloud apps. When users spend a project token, the smart contract forms a retainer agreement between the users and their chosen apps before the token is staked in a reward pool.

Software developers and service providers, whom we collectively call makers, can offer their dApps or cloud apps to users as part of the project’s ecosystem; they register their apps by paying a fee, thus using the project token as a work token. The fees to be paid by makers are determined by the smart contract, so as to balance the goals of inviting new entrants and maintaining quality. Maker fees, once paid, are locked in a toll pool and taken out of active circulation.

Tokens staked in the reward pool by users are periodically distributed to makers as reward tokens, according to a decentralized algorithmic payment and governance model that rests in the hands of the community. This model is driven by anonymized usage data, which is aggregated and tracked by an on- and off-chain protocol called Tally. Analytic miners help calculate the reward function that determines who gets paid out what, while sifting out spam, therefore making the system fair and resilient. The miners’ results compete in a sortition scheme we call Proof-of-Analytics, ensuring that the reward algorithms are never under a single party’s control.

Analytic miners can register to participate in the Proof-of-Analytics scheme, in order to determine how the reward pool is split, by paying a fee for every life cycle of the reward pool. These fees are paid as work tokens and locked in a toll pool as well. If a miner is selected to report the final payment splits, that miner receives a portion of the tokens in the reward pool as mining reward for doing the useful work of number crunching and enforcing the community’s payment and governance model.

The percentage of tokens in the reward pool to be paid to miners is determined by the same decentralized algorithms that aim to minimize on-chain transactional fees in aggregate for end users and makers, yet ensuring protocol security by giving a critical mass of analytic miners incentives to compete.

To increase their chance of being selected, analytic miners can stake additional project tokens in a long-term stake pool called the voting pool. The odds of being selected through the sortition scheme are proportional to the size of a miner’s long-term stake. Miners who have tokens locked in this long-term pool can, however, have their stake slashed by the smart contract, if the results of their analytics are deemed to be fraudulent or out-of-consensus with the community.

Users and makers can also stake project tokens in the voting pool to influence the allocation parameters, smart contract upgrades, analytic algorithm changes, etc. For the purpose of allowing project token holders to influence the governance of the ecosystem, a variant of quadratic coin lock voting, which was proposed by Vitalik Buterin, is implemented in the smart contract. This way, voters who want to wield power through voting must live with their decisions for longer and align their interests with the long-term value of the ecosystem. Staked tokens in the voting pool can be retrieved after the lock-up period has elapsed.

Early on in the project ecosystem’s growth, newly minted tokens are automatically staked by the smart contract, in order to bootstrap the reward pools with a meaningful number of project tokens, so as to attract makers and miners to participate. As more end users arrive, the new revenue these paying customers bring in becomes a major portion of these reward pools, allowing the ecosystem to transition into a sustainable marketplace.