Pocket Economics for App Developers
The mission of Pocket Network is to provide reliable, blockchain-agnostic, decentralized API access to web3 applications at a fraction of the cost of centralized competitors. To fulfill this mission, we must rethink how developers pay for infrastructure.
To solve for this, Pocket Network is designed with a unique economic model based on the POKT token that benefits all participants. To gain access and benefit from the protocol, POKT is purchased and staked by both developers and node providers, but due to the unique incentives on each side of the market, staking differs between the parties.
This article will focus on the application developer components of the economic model. For a high-level introduction to the entire economic model, please see our Economics Brief. For a full picture of the economic model, see our Economics Paper.
Developers running DApps stake POKT a single time for a guaranteed amount of API requests (relays) per session for the life of the stake. Developers pay for a given number of recurring requests, rather than on size or overall data consumption. This means that developers are paying a one-time, upfront fee in the form of POKT for a consistent amount of infrastructure access. This model has unique advantages eliminating recurring or micro-payments to infrastructure providers, vastly reducing the cost of infrastructure over the lifecycle of an application. Additionally, the POKT purchased and staked for an application can be unstaked and used on an entirely different application on any blockchain or sold to another participant at a later time if the service is no longer required.
The amount of POKT required to be staked is directly proportional to the number of relays required. Initially, 1 POKT staked allows for 1.67 relays each session (a session is 60 minutes long). For example, a developer seeking 10,000,000 relays per day (or 416,666 relays per session) would purchase and stake 250,000 POKT.
Being a tradable token, the price per POKT will vary over time. In order to stabilize access fees for developers, the DAO will implement governance mechanisms to ensure low-cost access. To do this, the DAO can dynamically adjust the number of relays per POKT. This type of intervention will keep the USD price per relay consistent during POKT price fluctuations, pegging the price of a single relay to a USD price.
Interestingly, governance actions open up opportunities for developers to benefit from changes in relays per POKT. In a scenario where governance adjusts the relays per POKT upward, developers have the opportunity to unstake and re-stake their POKT to take advantage of the increased number of relays. In a large swing, the developers may be able to sell off a portion of their POKT to help cover other costs of their business or to pass on the savings to their end-users.
POKT is minted in proportion to the number of relays served on the network. This means that developers pay for access to Pocket Network through dilution over time, as their proportion of POKT held in comparison to the overall number of POKT is reduced. Regardless of what happens to the value of POKT, this model provides an opportunity for application developers to recover some, if not all of the value of their stakes.
To learn more or discuss economics with our team, please join our Discord.
1 Until Application Burn Rate is activated by the Pocket DAO. The Application Burn Rate is initiated upon network maturity and burns the stake of applications’ equivalent to the amount of POKT minted by nodes. Application stakes will need to be replenished to maintain the same level of relays.
2 Relays per session are subject to change based upon DAO resolutions in order to stabilize access prices.