The concept of crypto tokenomics and native tokens is fascinating. Tokenomics, a blend of "token" and "economics," refers to the economic principles behind a cryptocurrency token. It involves the design, distribution, and behaviour of native tokens within a blockchain project. Understanding tokenomics provides insights into a project's legitimacy and long-term value, making it crucial for potential investors and network participants.

Several factors influence tokenomics, including scarcity, market demand, token velocity, and inflation or deflation mechanisms. Meanwhile, native tokens are the primary digital assets built into a specific blockchain. Just as money is vital to traditional economies, tokens are essential to blockchain ecosystems. They serve various purposes, such as paying transaction fees, participating in governance, staking for rewards, and providing utility within the network.

Understanding the Autonity Network’s Tokenomics

The Autonity network is a public blockchain based on the Ethereum Virtual Machine (EVM). It is designed as a decentralised platform for trading various risk factors. What sets Autonity apart is its innovative approach to tokenomics, featuring a novel dual-token model. This system is meticulously designed to serve distinct functions within the network, providing the same benefits and utilities as other blockchain ecosystems.

The Dual-Token Model: Auton (ATN) and Newton (NTN)

As noted earlier, Autonity employs a dual-token model, consisting of Auton (ATN) and Newton (NTN). Auton (ATN) is the network's utility token, offering low volatility, while Newton (NTN) functions as the network's staking token. This separation of roles between the tokens ensures a stable and efficient operation of the network, enhancing user experience and functionality within the decentralised infrastructure

Auton (ATN): The Utility Token

Auton (ATN) is a stable value token designed for trading on exchanges and earning staking rewards through Newton staking. This utility token can be used to pay transaction fees, like gas fees, within the Autonity network and can be traded on both decentralised (DEX) and centralised exchanges (CEX).

Every account on the Autonity network holds and uses Auton, making it the primary coin of the network. The value of each account is measured in Auton, meaning the amount of Auton you own reflects your account's worth.

To maintain price stability, Autonity uses the Auton Stabilization Mechanism (ASM). This mechanism determines the target value for Auton tokens and guides the market price towards this target by managing the supply of both Auton and Newton tokens.

Auton tokens can be earned through staking Newton tokens or minting via Collateralised Debt Positions (CDPs). When users deposit Newton tokens as collateral, they can mint Auton tokens with interest. New Auton tokens are generated when users take out CDPs by depositing Newton tokens, while tokens are burned when users repay CDPs by depositing Auton tokens into the ASM's smart contract, returning the Newton collateral to circulation.

To ensure the debt is adequately covered, CDPs have specified collateralisation and liquidation ratios. This stability allows Auton to be a reliable foundational asset for creating additional applications and services on the Autonity blockchain.

Newton (NTN): The Staking Token

Newton Token and Its Role in Autonity's Proof-of-Stake Mechanism Newton (NTN) is the native staking token used in Autonity's proof-of-stake (PoS) consensus mechanism, which secures the network and distributes rewards. Newton can be traded on both centralised exchanges (CEX) and decentralised exchanges (DEX). Notably, the Newton stake token can exist in three states: unbonded, bonded, or unbonding.

1. Unbonded State: The token is unlocked and can be transferred by the stakeholder.

2. Bonded State: The token is locked and cannot be transferred.

3. Unbonding State: The token is locked and non-transferable until the unbonding process is completed, after which it returns to the unbonded state.

Bonding and Unbonding Process

The bonding process involves staking the Newton token to a validator, changing its state to bonded. If the validator belongs to the token owner, the token is self-bonded; otherwise, it is delegated. The total amount of stake bonded to a validator determines its voting power. Bonded tokens can earn staking rewards, paid in Auton, if the validator is part of the consensus committee.

To initiate unbonding, the staker starts a process that eventually reverts the token to the unbonded state after a delay period. Once completed, the staked Newton tokens are transferred back to the owner's account.

Liquid Newton (LNTN): Autonity Liquid staking Model

When Newton tokens are bonded and then redeemed, a corresponding amount of Liquid Newton (LNTN) is minted and burned in the staker’s account. Liquid Newton is created when Newton tokens are delegated to a validator in the Autonity network, following the liquid staking model. Each validator has its own ERC20 contract for Liquid Newton, automatically deployed by the Autonity Protocol Contract.

If a validator bonds its own tokens (self-bonded stake), Liquid Newton tokens are not minted according to Autonity's Penalty-Absorbing Stake model. Each registered validator has a unique Liquid Newton ERC20 contract, making these tokens validator-specific and representing the holder’s share of the total delegated stake. Liquid Newton holders are entitled to staking rewards when the staked validator participates in the consensus committee. The market price of Liquid Newton is unique to each validator and is not fungible across validators.

A Liquid Newton token can be in one of two states: unlocked or locked. In the unlocked state, the token is transferable.

• Unlocked State: The token is unlocked and can be transferred by the stakeholder. • Locked State: The token is locked during the unbonding period and cannot be transferred.

Additionally, the validator’s Liquid Newton contract autonomously governs the minting and burning of Liquid Newton tokens. This contract maintains a conversion rate between Liquid Newton and Newton for bonding and unbonding operations, ensuring fungibility over time.

When bonding, the amount of Liquid Newton minted matches the value of the bonded Newton. Upon unbonding, the Liquid Newton is burned, and Newton is redeemed according to the conversion rate, reflecting the holder’s share of the Liquid Newton pool. The redemption value of Liquid Newton may vary across validators due to potential slashing penalties, which impact the conversion rate based on the validator’s history.

By understanding these processes and states, stakeholders can effectively manage their Auton, Newton and Liquid Newton tokens within the Autonity network.

Conclusion

Autonity's tokenomics is designed to be both user-friendly and efficient, leveraging it’s distinct tokens: Auton (ATN), Newton (NTN), and Liquid Newton (LNTN). Auton serves as a low-volatility utility coin for gas fees and transactions, providing stability and reliability. Newton is the native staking token, essential for securing the network through proof-of-stake consensus, while Liquid Newton enables flexibility and liquidity in staking. By implementing a detailed and well-structured tokenomics model, Autonity ensures a robust and scalable system that rewards participation and maintains value over time, making it a strong contender in the blockchain ecosystem.

References:

Andrew, Mamus. Autonity Protocol: A Layer 1 Blockchain Built for Decentralized Finance. Medium, 2024

Autonity Documentation - Protocol assets

Autonity Documentation - Glossary