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This page describes the various phases of the POKT monetary policy that the DAO may leverage. |
During the bootstrapping phase of the network, it is important to build a strong foundation for the service, securing as many individual entities running nodes as possible. We do this by creating an environment where it is simple and inexpensive for initial Applications to access the network, and significantly profitable for Service Nodes to provide infrastructure.
Application usage and traction dictate the initial rewards that the Service Node pool will receive. By decreasing the barrier to entry for Applications (freemium access, low cost), the demand for Relays should be high during the Bootstrapping Phase, providing the initial pool of Service Nodes with ample opportunities to earn the high rate of POKT (0.01 POKT per validated Relay) awarded for Relays serviced in the bootstrapping phase of the network.
As inflation and revenue increase per Service Node, the potential for competition increases, as rational, profit-seeking agents discover the protocol. This creates the flywheel to spur the network effects of Service Nodes purchasing and using POKT to participate until an equilibrium is found.
As the Protocol Throttling Formula adjusts to market demands, Applications being able to purchase more Relays results in more revenue for Service Nodes, further increasing the incentive for existing Service Nodes to re-stake their earned POKT. Increased participation in Pocket Network from Applications and Service Nodes ultimately benefits all parties by providing new revenue opportunities for Service Nodes and improving the service and resilience of the network for Applications. Due to Pocket Network being a permissionless Proof-of-Stake protocol and Service Nodes having an extremely low marginal cost of operation, the barriers to entry are significantly lower compared to Proof-of-Work mining based protocols. Pocket’s economic primitives incentivize a diverse set of entities and individuals such as data centers, existing infrastructure providers and hobbyists to participate as node operators within the network.
The growth phase is the period from launch which will see the greatest increase in the overall ParticipationRate of the protocol. When Applications stake during the growth phase, they earn more MaxRelays as the network grows (assuming they un-stake and re-stake), and don't pay for anything else until the network has matured and the Application Burn is activated.
If both sides of the marketplace (Applications and Service Nodes) grow, there will be continuous demand for Relays resulting in Service Nodes spinning up new Pocket nodes to increase the number of Relays they can service.
Early Applications will receive more infrastructure throughput as the network grows providing an incentive to early adopters of the network. When both the percentage of POKT staked and Service Node margins begin reaching their equilibrium, the protocol will have entered its maturity phase.
For more information on the Growth Phase, please see:
{% page-ref page="pokt-inflation.md" %}
While the Growth Phase is inflationary, designed to incentivize active participation and supply-side staking for the security of the network, the Maturity Phase is designed to ensure the long-term sustainability of Pocket. The Maturity Phase is defined as the point in which Pocket Network has crossed equilibrium and the growth in inflation begins outpacing growth in the total staked supply of POKT.
This shift to long-term sustainability revolves around burning POKT to ensure the POKT supply is stable doesn’t lose its value as a form of consideration to Service Nodes. In this phase, Pocket becomes similar to traditional Software as a Service pricing models, where Applications must "top up" their stakes periodically to avoid going below their needed Relay limit.
This should result in a decline in the ParticipationRate and Service Node margins due to an imbalance from more supply than demand for POKT.
For more information please see:
{% page-ref page="application-burn-rate.md" %}