Friction on the Network

Friction 𝐹 on the network determines the excess the transaction initiator is willing to bear to conduct a transaction on the network. The goal of the 𝐹 is to be at its optimal. Three situations emerge out of Friction as follows.

When 𝐹 < 0 (not ideally possible)

Where the number of transactions must be recorded on the network in a time interval, the number of transactions should not have latency time and cost associated. Where 𝐹 < 0, validation compensation will be less than zero which is not economically feasible as there is a positive correlation in between validation compensation and the time required to record a transaction.

If the network uses its resources to conduct transactions, the market cap of the total volume will go down, which will drain resources on the network. This will not provide a scalable mechanism of conducting transactions.

When 𝐹 = 0 (no growth in the token)

This will lead to no growth in the value of the tokens as the friction cost will increase on a constant basis if the supply and demand increase on a constant basis. If there is an imbalance between the supply shift, the impact will be on the friction and, hence, this model is not suitable for an imperfect marketplace for transactions.

When 𝐹 > 0 (Inflation, Mint and Burn)

Where the friction for 𝐹 > 0, PoS and PoW based consensus mechanism will create ways for an accumulation problem. Velocity will be lower. This has a direct correlation with the transaction cost increasing.

When the friction is set by the network based on the Proof of Participation, it will adjust the friction curve based on the supply and demand of the transactions on the network. The goal is to keep the velocity of the token at an optimal network acceptance level.

Where 𝐹: Friction 𝑆: Supply 𝐷: Demand 𝑛 : Number of nodes 𝐺 : Groups of (i) smart contract accounts, (ii) transactions, (iii) receipts, and (iv) others 𝑇𝑟 : Transactions 𝑡: Time 𝑟: Resources

𝑣 : Velocity

The friction is paid by the initiator and the allocation of the friction is put back into the pool, which is distributed to adjust the supply curve into the system. The more transactions that are processed on the network by an initiator, the more resources the initiator will pass on to the network to maintain the pool.