Economics

This chapter covers the different economic aspects considered in the Polkadot protocol. It explains the fundamental mechanisms of the native token DOT, providing information on inflation, NPoS payments, and calculation of transaction fees. A substantial part of Polkadot’s value proposition is the ability to provide shared security for decentralized applications which can enter the ecosystem by docking onto the Relay Chain. Those Parachains are application-specific data structures that are globally coherent and validatable by the validators of the Relay Chain. The right to participate as a Parachain can be obtained by winning a Blockchain-specific candle auction format, for which we provide a game-theoretical analysis. Another research field is behavioral economics, which focuses on human interaction with the protocol and analyzes situations where the behavior of the users deviate from rational expectations. One such deviation stems from limited cognitive resources of users which complicate the efficient selection of suitable validators. To help the users, we are researching tools to provide an optimal selection based on user’s preferences.