Does Midnight’s Tokenomics Reduce the Speculation Problem in Gas Fees?

Gas fees have a reputation problem more than just being expensive. The deeper problem is that the cost of using the network in most blockchain networks is directly linked to the same token that speculators are trading. When the sentiment becomes bullish, the prices skyrocket and suddenly the price of an ordinary transaction becomes unpredictable in ways that have nothing to do with what the transaction requires. For the average user of the system, that’s a pain. For developers building applications on top of these networks it’s a serious design constraint. You can’t build a product with a certain user experience by relying on the fee layer underneath it flopping around 10X depending on what’s going on in the larger market. This is one of those issues that the blockchain space has, for the most part, normalised. It gets treated like a tradeoff decentralisation and open networks come with between tweet volatility and user get to learn to deal with it. But normalising a problem isn’t the same as solving it, and the practical consequences are real. High and variable fees have always repelled users from using on-chain activity just when networks are busiest. They’ve made micro transactions economically unviable. They’ve designed a two-tiered system that is so that only certain sizes of transactions make financial sense at certain times. @MidnightNetwork has a different approach to this. Its tokenomics are based around a two token model $NIGHT and dust. NIGHT is the utility token of the primary network, used for staking, governance and wider economic participation in the network. Dust is the token that is specifically used to pay transaction fees. The reason for the separation is intentional. By separating the fee token and the main value and governance token, Midnight creates an extra layer between the speculative activity of the market and the practical cost of using the network. When NIGHT’s price goes due to conditions in the market, the fee layer doesn’t necessarily follow it like that. The logic involved here borrows from something that is well understood outside of the field of crypto separating the store of value from the medium of exchange creates more stable systems. You don’t take the price of goods every time the price of gold changes. The transactional layer requires predictability to be good. Midnight’s architecture puts that reasoning to work in the context of blockchain infrastructure, where the reasoning has been conspicuously missing in most of the major networks. What this means in practical sense for the developers building on Midnight is significant. Application costs get made more predictable. The fee structures to the user can be communicated without the asterisk of “unless the market does something unexpected.” Privacy preserving applications which Midnight is built to be used for often require many proofs and contract interactions per session. If each of those interactions is priced in terms of a volatile speculative asset, the cost of a single user flow becomes truly difficult to predict. That is dealt with directly by the two token model. It’s worth noting that this doesn’t eliminate all the variability of fees network congestion remains a factor of course, and no tokenomic design is immune to the complexity of a live market. But the separation of concerns is a meaningful choice of structure. It suggests Midnight is thinking about long term usability and not just the launch economics. Networks that survive their first few years are usually ones that made the experience of actually using the networks sustainable. Tying the stability of fees to architecture instead of an expectation that the price of a single token will remain stable is a more honest way of dealing with that problem, and one which the wider ecosystem would do well to pay attention to. #night