Economic Design Overview

Solana’s crypto-economic system is designed to promote a healthy, long term self-sustaining economy with participant incentives aligned to the security and decentralization of the network. The main participants in this economy are validation-clients and replication-clients. Their contributions to the network, state validation and data storage respectively, and their requisite remittance mechanisms are discussed below.

The main channels of participant remittances are referred to as protocol-based rewards and transaction fees. Protocol-based rewards are protocol-derived issuances from a protocol-defined, global inflation rate. These rewards will constitute the total reward delivered to replication clients and a portion of the total rewards for validation clients, the remaining sourced from transaction fees. In the early days of the network, it is likely that protocol-based rewards, deployed based on predefined issuance schedule, will drive the majority of participant incentives to join the network.

These protocol-based rewards, to be distributed to participating validation and replication clients, are to be a result of a global supply inflation rate, calculated per Solana epoch and distributed amongst the active validator set. As discussed further below, the per annum inflation rate is based on a pre-determined disinflationary schedule. This provides the network with monetary supply predictability which supports long term economic stability and security.

Transaction fees are market-based participant-to-participant transfers, attached to network interactions as a necessary motivation and compensation for the inclusion and execution of a proposed transaction (be it a state execution or proof-of-replication verification). A mechanism for continuous and long-term economic stability through partial burning of each transaction fee is also discussed below.

A high-level schematic of Solana’s crypto-economic design is shown below in Figure 1. The specifics of validation-client economics are described in sections: Validation-client Economics, State-validation Protocol-based Rewards, State-validation Transaction Fees and Replication-validation Transaction Fees. Also, the chapter titled Validation Stake Delegation closes with a discussion of validator delegation opportunties and marketplace. Additionally, in Storage Rent Economics, we describe an implementation of storage rent to account for the externality costs of maintaining the active state of the ledger. The Replication-client Economics chapter will review the Solana network design for global ledger storage/redundancy and replicator-client economics (Storage-replication rewards) along with a replicator-to-validator delegation mechanism designed to aide participant on-boarding into the Solana economy discussed in Replication-client Reward Auto-delegation. The Economic Sustainability section dives deeper into Solana’s design for long-term economic sustainability and outlines the constraints and conditions for a self-sustaining economy. An outline of features for an MVP economic design is discussed in the Economic Design MVP section. Finally, in chapter Attack Vectors, various attack vectors will be described and potential vulnerabilities explored and parameterized.

== Solana Economic Design Diagram ==

Figure 1: Schematic overview of Solana economic incentive design.