Network3 Economic Model Litepaper
Feb 2024 | Network3 Labs | Version 1.0
This litepaper briefly introduces Network3's token economy model, which aims to build a decentralized, efficient, and sustainable distributed machine learning ecosystem.
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1. Introduction
1.1. Summary
Network3 is a platform dedicated to enhancing privacy, security, and distributed computing efficiency for distributed AI, featuring an array of sophisticated mechanisms including anonymous signcryption and anti-tracking measures. With a robust economic model to reward participant contributions, it aims to leverage its existing VPN product's user base to establish a bandwidth-sharing network and a distributed arithmetic-sharing platform.
1.2. Market Overview and Challenges
The rapid advancement of AI technology, particularly with generative models like GPT-3, has led to an exponential increase in the demand for arithmetic power, resulting in significantly high training and application costs. In response to the monopolization of the arithmetic power economy by a few large corporations, the concept of a decentralized arithmetic marketplace emerges as a solution, offering a platform for individuals to share idle arithmetic resources through a token incentive mechanism, thereby democratizing access, reducing costs, and improving resource utilization.
1.3. Decentralized Bandwidth and Arithmetic Market
The decentralization of bandwidth and arithmetic power through Depin networks represents a transformative approach to democratizing AI's underlying infrastructure, breaking traditional monopolies by leveraging idle resources from individuals and organizations to serve broader needs efficiently and privately.
1.4. Network3's Vision and Strategy
Network3 is set to address the arithmetic challenges within AI and blockchain industries by creating a decentralized arithmetic marketplace, incentivizing global participation through a token economy to share arithmetic resources. This approach aims to lower costs, enhance efficiency, and introduce new revenue streams for network participants, striving to democratize arithmetic power distribution and foster the growth of AI and blockchain technologies through a fairer, more efficient, and sustainable computing ecosystem.
2. Network3 Solution
2.1. Mechanisms for the Bandwidth Market
We've developed a rating system for our arithmetic market that rewards participants based on data contribution and incorporates a verification mechanism to ensure data integrity, penalizing misconduct to maintain node reputation and reward allocation.
2.2. Mechanisms for the Arithmetic Power Market
As shown in Figure 1, Network3 has developed a comprehensive decentralized AI system covering data annotation, local training, model aggregation, process validation, and consensus building, detailed in their whitepaper, streamlining the journey from task publishing to community delivery.
3. Token (Network3) Economic Modeling
3.1. Token Issuance and Distribution
Network3’s tokens ($N3) are central to the flow of value in its ecosystem and the operation of the network. Tokens can be acquired in the following ways:
1) Training AI Models: Participants earn $N3 tokens by using their computational resources to support AI model training, with rewards based on their contribution level.
2) Sharing Resources: Users contribute computing power, data, or bandwidth to the Network3 ecosystem and receive $N3 tokens as compensation.
3) Governance Participation: $N3 token holders can influence the network's direction by voting on key decisions, and earning tokens for their governance contributions.
4) Token Release Allocation: 90% of $N3 tokens are distributed for activities like model training and resource sharing, while 10% are reserved for the team maintaining Network3.
3.2. Token Circulation Mechanism
As shown in Figure 2, Network3's economic cycle revolves around the $N3 token, driving the network's vitality by incentivizing participation through rewards, governance, and reinvestment, thereby ensuring its long-term growth and health.
3.3. $N3 Staking and $veN3 Mechanism
By staking $N3 tokens, holders earn a yearly reward based on 75% of the network's Gas fee income, promoting their involvement in maintaining the network's security and stability. Users can increase their rewards by locking $N3 for up to a year to obtain $veN3 which also enhances their governance influence and share in the network's profits. The rewards and $veN3 are distributed weekly, with penalties for early unstaking, encouraging long-term investment and participation in the network.
3.4. Token Distribution
Seed Sale 3.1%
Private sale 14.9%
Public Sale 3%
Team 13%
Airdrop 4%
Advisor 2%
Community Rewards 50%
Liquidity Provision 3%
Ecosystem Dev 7%
4. Governance Structure
$N3 token holders participate in the network’s governance decisions, including protocol updates, reward policy adjustments, and so on. This decentralized governance structure ensures the democratic and transparent nature of the network. Governance decisions are made through a weighted voting mechanism where $N3 holdings determine the voting weights. This encourages long-term holdings and active participation in network governance.
4.1. Actors
1) Local trainers: Responsible for data annotation and local training using local datasets or aggregated datasets;
2) Local Validators: Responsible for evaluating the model parameters uploaded by the trainers;
3) Aggregators: Responsible for task scheduling and aggregating model parameters;
4) Global Validators: Responsible for verifying the validity of the global model and reaching a global consensus, packaging, and uploading the transaction process to Layer 1.
4.2. Regulations and Responsibilities
As for node establishment and its responsibilities, each actor's roles, and management, please review the Network3 Economic Model Whitepaper for details.
5. Incentive Model
Network3 allows participants to mine by sharing bandwidth and arithmetic. Bandwidth mining utilizes participants’ local idle bandwidth to participate in data transmission in the network. Arithmetic mining includes complex tasks such as task scheduling, local training, model validation, and parameter aggregation. Network3’s incentive model includes the design of three main frameworks: the integral system for bandwidth mining, the proof of participants’ contribution, and the game-theoretic in distributed arithmetic.
Under our framework, we provide two examples of FL incentive mechanisms, one on the demand side and the other on the supply side. The proposed Crémer-McLean mechanism and Procurement-VCG (PVCG) mechanism encourage FL participants to truthfully report their type parameters and offer their best datasets to the federation. These mechanisms also provide theoretical guarantees for incentive compatibility, allocative efficiency, individual rationality, and weak budget balance.
6. Network3 Economic Model Whitepaper
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