Qredo Releases QRDO Tokenology Framework and Summary

Published Jun 22, 2023
By Qredo Team

Tokenomics are designed to evolve, adapting and transforming as the dynamic landscape of digital currencies shifts and matures. As we begin this pivotal stage of Qredo's evolution, we are excited to provide a preview of QRDO Tokenology’s fundamental pillars.  

Qredo is advancing its economic model with key enhancements designed to strengthen network security, foster active community participation, and ensure an equitable distribution of network costs and rewards. Here is a more detailed summary of these forthcoming proposed changes. 

Community Governance

Community governance will become the first key pillar in shaping the QRDO Tokenology. Going forward, we intend to launch a Qredo Governance Forum to facilitate discussion and debate around protocol improvements, as well as open a dedicated space on Snapshot, a tool that will enable QRDO holders to vote on formal Qredo Protocol Improvement Proposals (QPIPs). Our aim is to gather community feedback and draft and submit the first QPIP on QRDO Tokenology in the governance forum for an up-or-down community vote in Snapshot.   

Decentralized Consensus

As we chart our course towards a more decentralized consensus system, we plan to implement a progressive approach. Initially, we will establish a Federated Proof-of-Stake model, which is a vital first step in this journey. Our ultimate goal, however, is to transition to the Delegated Proof-of-Stake consensus mechanism. This phased approach allows us to robustly address any potential security or operational risks, ensuring the continuous, safe operation of the network for our community as we advance towards decentralization. 

Our journey will start with the Federated Proof-of-Stake model, where a group of reputable, pre-selected nodes, known as Federated Validators, will engage in the consensus process forming a validator pool and ensuring the security of the network. They will be chosen by the network based on trustworthiness and experience in running validator nodes, with protection mechanisms in place to avoid misbehavior.   

Meanwhile, QRDO token holders will be able to stake their tokens with these validators to earn rewards. These tokens will be locked for a set bonding time, ensuring that staked tokens i.e., tokens that have already been vested, serve as a deflationary mechanism as they will be less likely to be sold off during volatile markets. The first part of this transition towards decentralization underscores our commitment to building a trustworthy and equitable network.  

Following the successful implementation of the Federated Proof-of-Stake model, we will begin working towards our long-term goal of fully transitioning to Delegated Proof-of-Stake, a system where the network, via staking, democratically elects a fixed number of delegates to create blocks and confirm transactions, thus determining their voting power.

Protocol Fees

The launch of protocol fees is a major development for Qredo, establishing a direct connection between the usage of the Qredo Network and the QRDO token. This marks a strategic step towards putting QRDO at the heart of Qredo, which will help to ensure network sustainability and growth.   

Understanding the distinction between Qredo Protocol and Qredo Platform is crucial to appreciate the transformative QRDO Tokenology that we're unveiling. At its heart, Qredo Protocol is the foundational layer that powers everything. It is the blockchain technology built on Tendermint that secures all transactions and data. The Qredo Platform, on the other hand, is the user-facing application where traders and institutions can interact with DeFi. It is a practical application of the foundational Qredo Protocol, presenting a user-friendly interface for clients to access their assets and perform transactions.  

Every transaction, whether initiated through the Qredo Platform or directly via the Qredo Protocol, will result in a fee payable in QRDO tokens. This new structure will be put in place so that any business built on Qredo Protocol (the first of which being the Qredo Platform) will directly add value to the protocol.  

Importantly, we intend to propose that all Qredo Protocol fees are also then burned. The burning of all protocol fees will create deflationary pressure on the token supply, which we see as a meaningful step towards establishing sound money principles. 

Service fees will also continue to be collected by the Qredo Platform based on a user’s transactional activity using the pay-as-you-go model. However, an important development here is that all services fees will contribute to Qredo Protocol revenue via a tipping mechanism that will provide more incentives for staking users and validators. 

Public Goods and Validator Rewards

Rewards within new Qredo's economic model originate from two primary sources: the Public Goods Fund and the Validator Reserve Fund.     

The Public Goods Fund, composed of unallocated token reserves and a proportion of service fee tips collected by the Qredo Protocol, serves as a source of yield for users staking their tokens in the QRDO staking pool.  

Qredo will also incentivize and finance activities that add value to the growth and adoption of the Qredo Network out of the Public Goods Fund, a portion of which will be held in reserve for just that purpose. Over time, some of these public goods will also be made widely available to the community as a reward for adding value to the network – think of quests and challenges. With this our aim is to align Qredo with its user base and reward positive-sum activities. Importantly, long term loyalty and usage will be rewarded for Qredo’s existing users and supporters. 
The Validator Reserve Fund, built up from a portion of the remaining service fee tips, is designed to create an extra incentive for the validators beyond earning a commission for providing services to the staking pool. As Qredo is built to secure many different types of assets beyond its native token, robust validator incentivization serves as a protection mechanism for the protocol so that in high activity times, validators are sufficiently rewarded for the role they play in supporting the independence and security of the network.  

Both funds establish a predictable supply using a bespoke algorithm, thereby controlling the quantity available for distribution to strike a balance between network growth and token value. Rewards serve as an incentive for active participation in the network, further enhancing the security of the protocol and utility of QRDO tokens.

QRDO utility

Qredo's revised QRDO Tokenology is set to enhance value, utility and demand drivers for all network participants. Token holders can influence protocol decisions via discussion and voting in the Community Governance Forum and Snapshot, respectively, as well as benefit from the deflationary pressure of protocol fee burns. Qredo Platform users will see their QRDO token use tied directly to network activities via service fees and receive potential rewards from staking. Validators are incentivized to maintain network integrity through commissions and additional rewards from the Validator Reserve Fund, with increased roles in network operations as we transition to a Delegated Proof-of-Stake consensus mechanism. Altogether, this fosters a more participatory, secure, and democratic Qredo ecosystem, enhancing the value and utility of QRDO tokens. 

Progressing towards a new QRDO tokenology

Overall, these proposed enhancements to the QRDO economic model offer a radical change in both the utility and value of the QRDO token and will mark a crucial step towards creating a more balanced, secure, and participatory network. We are in the final stages of drafting and modelling a proposal. More detail will follow in the upcoming final QRDO Tokenology report.  

The Qredo Governance Forum is scheduled to launch towards the end of June. At that time, we will post this interim summary for community feedback. Our aim is to publish the final QRDO Tokenology report by mid- to end-of-July, both here on the Qredo blog as well as on the governance forum, where we eagerly anticipate another round of community feedback in advance of a formal protocol improvement proposal and vote. The Snapshot voting tool will go live and open for registration approximately one week prior to the vote. 

Stay tuned for our upcoming announcement around the Qredo Governance Forum and we look forward to participating in meaningful discussion around the future of the Qredo Network with you all.