The SEDA token facilitates network security whilst powering governance and data requests.
The SEDA token is the lifeblood of the SEDA ecosystem and facilitates three key utility functions on the network: Governance, Security, and Data Request processing. This blog will highlight the token’s role and inflationary and deflationary mechanics that support protocol sustainability. For more information, including exchanges, token supply, and vesting, please visit the SEDA FAQ or view the SEDA docs and explorer.
Article Layout
- SEDA Token For Governance
- SEDA Token Within The Network
- SEDA Token For Security And Participation
- Tokenomic Structures
SEDA Token For Governance
SEDA created bespoke fork-less upgrades that enable token holders to vote on network proposals surrounding upgrades or via Validators to whom they have delegated their tokens.
Token holders are the decision makers of the SEDA network, as the protocol is building towards complete decentralization. Upon the mainnet upgrade, the SEDA protocol core team will begin including governance votes for network participants, moving towards complete decentralization as the protocol matures. Proposals could include network updates, modifications, consensus updates, and parameter changes, including network inflation or burn rates.
The Importance Of Governance
Community governance is essential in Web3, decentralizing control from a few centralized managers to broader network participants and serving as a fundamental aspect of the SEDA roadmap. Initially, the SEDA protocol core team will oversee the network, transitioning to community-driven governance through delegation as the protocol develops. Details on voting powers and schedules will be shared via SEDA’s Twitter and Discord channels.
SEDA Token Within The Network
The SEDA token is used to incentivize multiple key elements within the network. For each data request issued by a consumer, a value in tokens accepted by solvers to process the data request is created. The value of a request is determined by its complexity and can be issued in any currency accepted by the solver, who will relay the request to the SEDA network. Solvers then keep a portion of the value as a solver fee and burn the same value in SEDA tokens to relay the request to the SEDA network.
The SEDA tokens representing the request’s value are then divided as needed among the overlay nodes, the data provider, and a small portion of the transaction batch relayer. Data providers receive SEDA tokens for making their data available to the network. Overlay nodes then relay the results via a DR Tally to the SEDA network, making the result available to the solver, who can return the result and unlock their reward from the initial value issued by the consumer.
SEDA Token For Security And Participation
Network Participation: Overlay Nodes
The overlay network is responsible for querying data sources and returning data reveals via a DR tally to the SEDA chain. The network is designed to comprise hundreds of thousands of nodes that can be operated by the community. Nodes will be operated via delegation and offer a direct approach for the community wishing to participate in the network. The rewards node operators receive come from the fee paid by the data consumer.
Network Participation: Delegation
SEDA token holders can participate in the network via a method known as delegation. SEDA token holders that delegate with any one or multiple SEDA chain validators on the network will receive a percentage of rewards from their validator of choice. Rewards, commission, and the validator fee can be viewed within the Keplr wallet. Delegation is a vital aspect of the network’s decentralization. The wider the spread of community delegation across the 100+ main chain validators, the more decentralized the network becomes. When delegating, consider spreading tokens across multiple nodes to support the network’s vision of true decentralization.
Securing The SEDA Network — Main Chain Validators
SEDA leverages the CosmosSDK framework to utilize battle-tested proof-of-stake mechanisms to secure the SEDA main chain. SEDA chain validators are economically incentivized with SEDA tokens via inflation rewards for ‘good acting’ on the network. If node operators act maliciously or experience significant downtime, their rewards may be slashed. POS mechanics facilitate an upfront environment where validators are held economically accountable to secure the network.
SEDA Tokenomic Structures
SEDA Deflationary Mechanics
Similarly to Ethereum’s EIP1559, the SEDA Network could become deflationary. Currently, transaction fees are rewarded to the active SEDA Validator Set, but in the future, the gas required to pay for computation for Data Requests and other transactions could be burned instead. SEDA’s deflationary mechanics are triggered when a new data request is issued. Each data request is issued in a token accepted by solvers, such as a USDC. To relay the data request to the SEDA network, solvers receive the token currency from the data consumer, which equals the cost of the request plus a solver fee. Solvers then burn an equal portion of SEDA tokens to the value of the data request when relaying to the SEDA network. Therefore, the more data requests being issued, the higher the rate of deflation pressure on the SEDA token.
SEDA Inflationary Mechanics
Network inflation is a CosmosSDK parameter present in the SEDA Network. The Network Genesis was deployed with the inflation parameter present but turned off. Inflation may be turned on by a Network Upgrade voted on by the community of permissionless validators and token holders. The rate of inflation on the SEDA Network is controlled by the SEDA Token holder community and validators.
Managing Inflation & Deflation On The SEDA Network
The balance of deflation and inflation occurs between the number of data requests issued on the network and the inflation rate present on the network. As more partners integrate into SEDA, the number of data requests and, therefore, burns is assumed to increase exponentially. As the first data requests can be issued to the network, SEDA validators will vote on the initial inflationary parameters.
