Token Economics


PhronZero presents a pioneering approach to the integration of blockchain and artificial intelligence (AI), offering a layer 0 infrastructure designed to empower Layer 1 blockchains with unprecedented AI capabilities. The model aims to ensure the sustainability, growth, and decentralized governance of the ecosystem and is constructed to incentivize participation, secure the network, and facilitate a vibrant economy centered around AI and blockchain synergy.

Purpose of the Token

  • Transaction Fees: Used to pay for transactions and services within the PhronZero ecosystem, including smart contract deployments and AI service calls.

  • Staking: Required for participating in network consensus as validators, securing the network, and earning rewards.

  • Governance: Grants holders the right to vote on proposals concerning the network’s development, feature integrations, and use of the ecosystem fund.

  • AI Services Access: Enables access to advanced AI capabilities and services provided by PhronZero, acting as a payment mechanism within the AI marketplace

Deflationary Mechanism

Transaction Fee Burns: A portion of transaction fees (e.g., 0.5%) is burned, reducing the total supply over time and creating deflationary pressure.

AI Service Fee Burns: Similar to transaction fees, a portion of the fees paid for using AI services within PhronZero will be burned.

Staking and Validator Incentives

Dynamic Staking Rewards: Adjusted based on network participation levels, total staked amount, and overall network performance to ensure attractive yet sustainable reward levels [14]

Dynamic Gas Fee Model

Optimizing for network efficiency and user experience, we employ a dynamic gas fee model, drawing inspiration from Ethereum’s EIP-1559 [15], formulated thus:

  • BaseFee(t): Dynamically adjusts based on block space utilization, ensuring adaptability to network demand.

  • Tip: An optional incentivization for validators to prioritize transactions, enhancing throughput during peak times.

  • ∆C(τ ) and ∆N (τ ): Represent the rate of change in transaction complexity and network congestion, respectively.

  • ϵ: A sensitivity parameter for the token price stabilization mechanism.

  • PtargetP_{target} and P (t): Target and current token prices, guiding fee adjustments to market conditions.

Storage Fee Formulation

Reflecting considerations of data size, redundancy, and depreciating storage costs over time:

  • StorageBaseFee: Cost per unit of data storage.

  • D: Size of the data stored.

  • R: Redundancy factor for data reliability.

  • λ: Reflects decreasing storage technology costs over time.

Fee Distribution Mechanism

Encouraging a collaborative network through a model that rewards validators based on performance:

  • F : Total transaction fees collected.

  • α: Base coefficient for fee distribution between layers.

  • β: Adjusts distribution based on validator performance.

  • P : Performance metric for validators.

Staking Rewards Dynamics

Enhancing network security and stakeholder engagement via a dynamic staking rewards model:

  • I: Inflation rate for reward distribution.

  • S(t): Total amount staked.

  • γ: Validator performance coefficient.

  • θ: Token price stabilization coefficient.

These mechanisms are crafted to ensure the blockchain remains adaptable, efficient, and economically sustainable, fostering a robust ecosystem conducive to long-term stability.

Dual Token Architecture

A dual token architecture in blockchain refers to a system where there are two distinct types of tokens operating within the same ecosystem, typically with one token serving as the default base currency and another as a customizable token specific to individual layers or chains built on top of the base protocol. In this scenario, let’s explore the architecture with Phron Zero as the default token [1, 16].

Phron Zero Token (Default Token)

Phron Zero token serves as the default base currency within the blockchain ecosystem. It is used for various purposes, such as transaction fees, rewards, and value exchange within the network. Phron Zero token is the foundational token upon which the entire ecosystem is built. It ensures interoperability and consistency across different layers and chains within the ecosystem.

Layer 1 Custom Tokens

Any Layer 1 blockchain built on top of Phron Zero can opt to incorporate a custom token specific to its chain. These custom tokens can have their own unique features, use cases, and economic models tailored to the specific requirements of the layer or chain. Custom tokens can be used for various purposes, including governance, utility, incentivization, and more within their respective chains.

Interoperability Between Layer 1

The dual token architecture ensures interoperability between the default Phron Zero token and the custom tokens. Users can seamlessly transact and exchange value between different chains and layers within the ecosystem, irrespective of the specific tokens being used. Smart contracts and protocols are designed to accommodate both Phron Zero and custom tokens, facilitating smooth interactions between them. Think of it as the reserve currency of the global monitor system.

Integration and Development

Developers building on top of Phron Zero can choose to integrate the default token or create custom tokens specific to their applications or layer 1 blockchains. Development frameworks, APIs, and toolkits are provided to simplify the process of token creation and integration, enabling developers to focus on building innovative solutions.

Economic Model and Governance

The economic model of the ecosystem may involve mechanisms for governing the issuance, distribution, and utilization of both Phron Zero and custom tokens [17]. Governance structures ensure that the interests of token holders and participants are aligned with the overall goals and sustainability of the ecosystem. In summary, a dual token architecture in blockchain, with Phron Zero as the default token, allows for flexibility, customization, and interoperability within the ecosystem. It empowers developers to build diverse applications and layer 1 blockchains while maintaining a cohesive network supported by the foundational Phron Zero token.


An initial rewards curve for a newly launched protocol focuses on encouraging the use of a higher proportion of trusted Layer-0 (L0) nodes during the critical early stages of development and operation. This approach is strategically advantageous because it ensures a more secure and stable launch by leveraging the established security and reliability of L0 nodes. By incentivizing the utilization of these nodes through a reward structure that makes it more cost-effective to use more L0 nodes rather than fewer, the protocol can maintain integrity and trustworthiness in its nascent phase.

As the project matures and gains stability, trust, and a wider validator base, the rewards curve can transition. This change reflects the growing confidence in the protocol’s own Layer-1 (L1) validators and a deliberate shift towards encouraging a more decentralized model. The upsloping rewards curve now incentivizes a gradual reduction in dependency on L0 nodes, rewarding the protocol for diversifying its validator network. This evolution in the incentives curve aligns with the project’s development trajectory, from relying on the foundational security of L0 nodes to fostering its autonomous, decentralized security apparatus as it matures.

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