The NAM economy: token utility, inflation streams and governance
Quote1,063 words
Explains NAM utility (validators, shielded pool incentives, governance, public goods funding), its three inflation uses, genesis commitment of at least 20% to retroactive PGF, and the proposed Namada and Zcash alliance with a NAM airdrop to ZEC holders.
Key claims
At least 20% of initial supply will go to retroactive public goods funding
Shielded pool rewards depend on asset type, amount and holding duration
Zcash FDV cited at USD 650m
The NAM Economy
Namada鈥檚 asset-agnostic privacy solution will revolutionize on-chain privacy. 馃シ
This is basically ZCash (USD 650m FDV) on steroids.
Its core piece of technology, the Multi-Asset Shielded Pool Circuit, is a modified version of ZCash鈥檚 Sapling circuit that allows for multi-asset support on Namada.
Like @zcash, the Namada blockchain will have its own native token.
NAM powers Namada鈥檚 positive-sum economy on top of its public good infrastructure and is distinctly different from Zcash鈥檚 native token ZEC. 馃毀
So, let鈥檚 dive in! 馃憞
馃煛 Token Utility:
While ZCash runs a Proof of Work consensus mechanism and ZCash is used for miner incentives, the main utility of ZEC is moving value around the network privately.
With Namada, the token is also used to incentivize validators. These rewards are part of Namada Proof of Stake security model and the counterpart to the cubic slashing mechanism (penalty).
But since Namada will support any asset on any network including stablecoins, the role of NAM as a medium of exchange is by far not as significant as it is for ZEC.
Instead, NAM plays an important role in incentivizing participation to improve privacy guarantees, governance and funding public goods within the Namada ecosystem.
In summary, NAM will be used for:
馃敀 Security (Validators)
馃シ Shielded Pool Incentives
馃棾 Governance
馃挵 Public Goods Funding
馃搳 Genesis Distribution
The details of the genesis allocation have not been announced.
However, the team has committed to distributing at least 20% of the initial supply towards retroactive public goods funding. The team aims to show appreciation to developers, contributors, educators, and others who have contributed to parts of Namada's underlying tech stack and mission of privacy.
The team is still determining the exact mechanism and list of contributors. They have opened public nominations on their forum from January to March 2023 to identify deserving contributors.
Recently, the Anoma Foundation has proposed a strategic alliance between Namada and Zcash, which includes an airdrop of NAM tokens to ZEC holders and a grants pool funded by NAM dedicated to the Zcash ecosystem.
馃搱 Inflation Mechanism
Inflationary tokens will be minted for three purposes: PoS rewards, shielded pool rewards, and public goods funding. The team will announce the specific inflation parameters for each purpose before mainnet.
馃憠聽PoS rewards: NAM tokens will be distributed to validators in a mechanism similar to Cosmos-bonded PoS. Tokens will be minted at a variable rate to target a specific percentage of the total staked supply.
馃憠聽Shielded pool rewards: NAM tokens will be distributed to users who keep assets in the shielded pool to increase privacy. The rewards will depend on the asset type, amount, and duration of assets held in the pool. This ensures a sufficiently large privacy set.
馃憠聽Public goods funding (PGF): NAM tokens will be distributed for proactive and retroactive PGF. Eligible categories include technical research, engineering, social research, art, philosophy, independent journalism, carbon sequestration, legal advocacy, and more. The funding will be managed by the PGF Council, whose members are elected every two years through governance. The council can allocate funds using a multisig setup within the spending cap. Additionally, the PGF Council will receive a small portion of the yearly inflation as income for their duties.
馃棾聽Governance
NAM tokens will also be used for on-chain stake-weighted governance. Additionally, there will be an off-chain governance protocol to reach general consensus before a governance vote or hard fork, or in case the network cannot produce blocks anymore.
Namada's Governance system is highly flexible, aiming to accommodate most changes through on-chain proposals. It utilizes wasm and ABI payloads for this purpose. The system also recognizes the need for hard forks and includes coordination mechanisms to facilitate them. The governance structure is designed to give users as much ownership of the protocol as possible since they are the ones who contribute to it.
While this governance system is effective when the Namada chain is functioning properly, what happens in the event of a chain halt or other issues that affect consensus?
Namada's governance features include several novel changes compared to other governance models. In addition to introducing an "attention-fee" for governance proposals, Namada allows for offline submission of proposals alongside online submissions. Offline governance proposals provide greater flexibility to governance participants on Namada.
This tool is particularly useful when a hard fork is necessary to resolve an issue, such as in the case of a chain halt resulting from a Byzantine attack, bug, or similar event.
鈿栵笍聽Namada鈥檚 Positive Sum Economy
The vision is that the Namada protocol is basically a benevolent robot orchestrating a positive sum economoy, designed to ensure the happiness of all stakeholders. It takes into consideration a comprehensive list of both measurable and partially-measurable inputs to adjust a range of outputs (variables).
Finding the right balance between competing interests is important. For example, determining whether inflation should be directed towards shielded rewards or staking rewards is an intricate decision and both stakeholder group鈥檚 interests should be balanced. However, often a small adjustment in the right direction can make everyone happier, given the interdependent nature of interests and the feedback loop between stakers, users, and holders. Gearing the system towards attracting more users to Namada appears to be a mutually beneficial strategy and the design of the NAM tokenomics plays an important role here.
Nontheless, the effectiveness of the robot relies heavily on reliable inputs. While data interpretability is straightforward for measurable statistics such as the size of the shielded set and the number of users, certain hidden variables like price, culture, and community require signals transmitted through governance. Only through votes and proposals can the protocol consider the collective interest by taking into account all variables. A mechanism where once again Namada鈥檚 NAM token stands at the center.
The accuracy and reliability of these inputs play a crucial role in enabling the robot to fulfill its purpose of creating a win-win-win situation for every stakeholder involved with Namada.
If you want to learn more about how Namada works on a technical level, have a look here! 馃憞
馃敆 twitter.com/zerokn0wledge_/status/1723986190557474958
That鈥檚 a wrap for today! I hope you enjoyed this post! 馃
Don鈥檛 forget to follow me @zerokn0wledge_ and @namada to stay up to date with all the exciting developments around Namada鈥檚 asset agnostic public good privacy solution! 馃煛 馃シ
Any support (like, comment or repost) of this post is highly appreciated! 馃檹
QUOTING @zerokn0wledge_
ELI5 on Namada鈥檚 Asset-Agnostic Privacy Solution The promise of decentralization, fairness and transparency of public blockchains is great. However, with transparency comes a lack of privacy. That's a problem. The next generation of users will not ask for privacy. They wil
ELI5 on Namada鈥檚 Asset-Agnostic Privacy Solution The promise of decentralization, fairness and transparency of public blockchains is great. However, with transparency comes a lack of privacy. That's a problem. The next generation of users will not ask for privacy. They wil
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What came next 路 since 17 Nov 2023
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This breakdown analyzes the project without making a call on the token, so price moves since publication are shown as market context.
Mentioned for context
No reliable price feed for $NAM.
Since then
Zero has written 5 more pieces on $NAM since this one.
- Namada's free market launch: why a fully liquid day-one token was deliberateBullish call on $NAM
- Namada: the multi-asset shielded pool and its valuation gap to ZEC and XMRBullish call on $NAM
- NAM listing: Namada as Zcash on steroids at a fraction of ZEC valuationBullish call on $NAM
- Namada mainnet phase 5: shielded pool, MASP and selective disclosureCovers $NAM
Daily closes in USD from DefiLlama and Yahoo Finance. Only a bullish or bearish call in a thesis or market take is tracked; explainers, lists, maps and mentions are neutral context. Not financial advice.