Owner: @Álvaro Castro-Castilla

This document compiles a list of questions and requirements that we need to establish in order to design optimal token economics for Nomos.

• Decentralization

  • How should Nomos be bootstrapped?
    1. Sell / distribute a percentage of tokens to an early investor group
    2. Airdrop from activity in a different chain (complicated, would require the community to trust the process)
    3. PoW from 0
    • The suspected option is (1), but we never really discussed this. The Nomos team should also have some tokens to participate in consensus from day 1 like early investors.
  • How economically costly should be to participate in opt-in Nomos services? (Nomos services are optional for validators, since they incur in higher operational costs than basic consensus participation). Those are (for now): Data Availability, Blend Network; and in the future Executor Network.
    1. Does IFT want these roles to be accessible to foster decentralization?
    2. or instead is better to incentivize high quality of operation
    • The recommended option is (1)

• Fees and value accrual

  • Should the fees prioritize profitability of validators, or cost reduction?
    1. Prioritizing profitability means that we will incentivize value accrual to the token;
    2. While prioritizing cost reduction means that we might attract more usage (with the risk of that usage not being reflected in token value)
    • Personally I would go for (1) since while the chain doesn't have high usage, fees will be low anyway.
  • The question above, should be also considered for the different markets:
    • block space (consensus)
    • blob space (DA)
    • mixing (Blend Network)

• What is the main purpose of the $NMO token? We need a clear message to users and investors of what the token is.

  1. Is it the (private) money for Network States? (ie somewhat like Bitcoin)
  2. Is it a store of value for Network States? (ie somewhat like Bitcoin)
  3. Is it primarily gas for paying for services? (ie somewhat like Solana)
  4. Is it a combination, or some more elaborated concept such as deflationary or ultra-sound money? (ie somewhat like Ethereum)
  5. Something else that IFT stakeholders have in mind.
  • In my opinion, (1) makes most sense long-term. While (3) is going to be always true, is not the main focus of the token. Also, I think (4) is the worst option, and (2) is stepping into the domain of Bitcoin.

• Privacy coin regulatory concerns (@Agata)

  • The regulatory landscape related to privacy coins is fragmented and dynamically changing, but overall, there is an increasing regulatory pressure and trend against privacy coins.
  • EU framework is not friendly towards privacy coins: You can still issue privacy coins, but EU MiCA Regulation prohibits crypto assets service providers (CASPs) operating a trading platform from admitting to trading crypto-assets with inbuilt anonymisation functions, unless they can identify token holders and their transaction history. There is no explicit definition of “inbuilt anonymisation function” in MiCA. EU Transfer of Funds Regulation requires that CASPs to attach identity info to crypto transfers, both beneficiary and originator, so handling privacy coins might be problematic for service providers. AML Regulation prohibits CASPs from maintaining anonymous accounts or accounts enabling obfuscation, including those involving anonymity-enhancing coins. It defines “anonymity-enhancing coins” as the ones that have built-in features designed to make crypto-asset transfer information anonymous, either systematically or optionally.
  • Dubai - there is a comprehensive ban on privacy coins, when it comes to issuance, trading, and all crypto asset activities related to privacy crypto. They define privacy tokens as the ones that have any feature or features that are used, or intended to be used, to hide, anonymise, obscure or prevent the tracing of any of the information related to the transactions or ownership records.
  • Japan - there is a ban on trading privacy coins on exchanges.
  • South Korea and Australia has taken steps to delist privacy coins from exchanges.
  • Note by Álvaro: unless we can operate with an alternative definition of “privacy coin”, it seems clear that $NMO is a privacy coin (anonymous coin owners, confidential coin values, unlinkable transactions). Moreover NMO is foundational to the architecture: everything from consensus to Native Zones depends on these properties. It's pretty much how we have designed Nomos, for privacy, and what makes us special (ie “Ethereum with TLS”).