Pocket Network’s DAO Initiates Progressive Inflation Management

Pocket Network’s protocol operates a two-sided marketplace. On one side, infrastructure providers run nodes, or access to blockchain data, for connections to Ethereum, Harmony, and over 37 other blockchains. On the other side, Web3 application developers gain access to a robust and fault-tolerant decentralized system for querying blockchain data and provisioning nodes.

Infrastructure providers (or “node runners”) deliver network capacity and are rewarded by earning the native POKT token in proportion to the number of blockchain RPC calls (or “relays”) they have serviced for application developers. Meanwhile, application developers stake the native POKT token in proportion to the number of relays that their applications require.

The growth of Pocket Network’s economy can be divided into three phases: a Bootstrapping Phase, which has just occurred during which time applications’ service was subsidized and nodes earned attractive  token incentives; a Growth Phase, which we are now entering, where bootstrapping has successfully initiated the flywheel of growth and inflation is managed more progressively managed; and a Maturity Phase, during which application stakes are burned in proportion to the relays they use and the global supply of POKT stabilizes. The recent massive growth in relays has marked the network’s transition from the Bootstrapping Phase to the Growth Phase.

“Pocket Network’s token economics have done a good job of getting us where we want to be,” said Adam Liposky, Chief Operations Officer at Pocket Network. “We are now transitioning from bootstrapping our network to a more progressive managed growth trajectory that will allow us to scale globally. We have set up a powerful system to continue to properly incentivize our community, as well as protect against any unintended consequences of our network’s growing success.”

In order to offset the challenges brought on by inflation, the Pocket DAO (Decentralized Autonomous Organization, the public governing body of Pocket Network) approved a proposal to actively manage the inflation rate of the overall system. Called WAGMI, or “Weighted Annual Gross Max Inflation”, the proposal modified the current system, where a fixed multiplier of 0.01 POKT tokens minted to node runners for each relay was replaced by dynamic adjustments of the Relays-To-Tokens-Multiplier to target an annual inflation rate.