Verida Storage Node Tokenomics — Part 1: Storage Node Economic Model Overview
This article is a high level summary of the proposed storage node economic model to support the Verida network self-sovereign database storage infrastructure.
The Verida network is a self-sovereign “user-pays” model, whereby users pay for their own storage needs. In this way, “access to user data” is not the product, rather the product is the “security and protection” of user data.
The design is still in draft form and subject to revision prior to launch. Verida will be working with the community and expert partners to refine the model prior to full implementation.
To progress that work Verida has issued a Request for Proposals (RFP) process for independent parties to bid to provide analysis, modeling, designs, and implementation recommendations for the economic aspects of its protocol.
What is the Verida Data Economy?
The Verida Token (VDA) creates a data economy enabling secure interactions between accounts to facilitate secure data storage, trusted sharing, fast querying and trusted messaging.
Network Participants
End Users
Users interact with Verida by interacting with applications and creating DIDs. If users share or create data, they can earn VDA tokens through interactions with the Verida Network applications.
Applications
Builders create applications that leverage the Verida Network. These applications can earn tokens through end users interacting with the app, through network growth rewards for onboarding users, community incentive grants, and by self-hosting a node on the network.
DBStore Node Operators
The storage provider market works similarly to a normal storage network. Node operators must bond (i.e. through single-sided staking) VDA tokens to make their nodes discoverable. It is intended that the storage market self regulates itself through competitive forces as providers set their own storage prices.
Data Storage Economics
The Verida network has the following storage objectives:
- Create a sustainable economic “user-pays” model
- Maximize the geographical distribution of storage nodes
- Maximize the availability and security of data stored on and across the network
- Incentivize early adoption to bootstrap the network
Users pay a monthly fee to access storage on the network. There are currently no charges for bandwidth.
Storage node operators earn fees, in arrears, for the storage capacity they provide to the network that is utilized by users.
A small transaction fee, similar to gas fees on blockchain networks, is intended to be retained by the Verida network to support its ongoing development and growth.
Building a self-sovereign data network
Verida enables a “self-sovereign” data network, so it’s essential that all stakeholders have control and choice. Users can choose which storage nodes they want to use for storing their data, while storage node operators have the choice to not provide their service to a particular user.
This creates a free market that can evolve as the Verida Protocol matures and the network grows. Storage node operators can differentiate themselves by offering service level agreements, geographical coverage and eventually pricing.
The Verida network requires end users to pay for storage, but they need to be supported by the network and applications to ensure a smooth onboarding experience. Storage of user data in web2 is supported by centralized platforms that pay for the storage on behalf of the user and then earn revenue from other sources (such as advertising).
We are seeking to replicate the web2 model where users can start for free, but then move to a more sustainable user pays model once the user discovers the value of the network and its applications.
The network will sponsor the initial storage of a user when they join the network and then reward the user with VDA tokens as they bring meaningful value and utility to the network. These end user rewards can then be used to pay for storage on the network.
Crypto Economic Modeling for the Verida Network
Verida has issued an RFP to find a qualified independent vendor to provide analysis, modeling, designs, and implementation recommendations for the economic aspects of the Verida protocol and token design.
The RFP process is being managed by Dave Costenaro at Build Well. Dave previously worked at the CryptoEconLab at Protocol Labs, focusing on token incentives, tokenomics, mechanism design, network monitoring for Filecoin.
If you are interested in submitting a proposal to be considered for the engagement please check the following document. This document also contains detailed information about the RFP’s Evaluation Criteria, Timeline, and Submission Instructions. If you have questions about submitting a proposal please get in touch with Dave.
What’s next
We hope this article has given an insight into the design of Verida Network economics. In the following weeks, we’ll be publishing follow up articles which go into further details on the economic model, covering storage fees, payments, claims and storage node infrastructure.
If you have questions or feedback please chat with us in #storage-nodes channel in the Verida discord. If you would like to directly contribute to the discussion of this paper please contact Chris or Ryan to get involved.
