Everyone’s Phala Token Economics Whitepaper
Published: 2020-04-02 17:32:26

Phala’s token economics design has been one of the frequently asked questions since 2019. After weeks of discussion, composing and refining, we are proud to announce that we have officially published our Token Economics Whitepaper! [Click to check →](https://files.phala.network/phala-token-economics-en.pdf)

Also, we composed a shorter and simpler version here — containing economic model, token distribution, governance, etc. — for everyone to quickly understand how our token works. Enjoy. :)

### 1. Is mining available on Phala Network?
Sure. All you need is an Intel pc or laptop, and all you have to do is keeping your node online. A detailed mining introduction would be published in June. Follow our Twitter or Medium, or [join our Telegram group](https://t.me/phalanetwork) to receive the latest news!

### 2. What’s the name of Phala’s token?
PHA. The total supply of PHA is 1 billion. 1% (100 million) of PHA will be distributed by the launch of testnest; for the rest, you may [check the full version whitepaper on our website](https://phala.network/en/).

### 3. How does PHA function?
- Network Utility: to trade or exchange network resources such as trusted computing resources, data trading settlement, security, and other services. To be specific, PHA mainly functions for TCPU (Trusted Computing Processing Unit), on-chain computing and storage resources, off-chain storage resources and other data value captured by a series of standardized protocols.

- Governance: PHA works as a crucial identification of Gatekeepers and member of PhalaDAO. To be one of those important roles in Phala community, you have to stake a certain amount of PHA.

### 4. What roles does Phala design in the network?
We have 4 roles in Phala Network: Gatekeeper, Nominator, TEE Miner, and PhalaDAO.
- Gatekeepers manage the distribution of keys and produce new blocks. Staking of PHA and one or more nominators are essential for one to be a nominator.
- Nominators are entitled to nominate one or more Gatekeepers with a certain amount of PHA staked for them.
- TEE Miners provide computing power for the whole network as they keep their mining hardware online (pcs or laptops)
- PhalaDAO is responsible for the growth of Phala Network and open to all kinds of roles: developers, GateKeepers, investors, miners, and normal members.

### 5. What consensus mechanism does Phala apply?
Phala applies NPoS where nominators may nominate Gatekeepers they trust and gain returns from validators’ production by staking PHA for them.
Phala expects 40% of PHA to be staked to NPoS while 60% PHA to be paid and traded in the markets. The annualized inflation rate and the annualized return rate of staking are expected to be 5% and 12.5% (in the circumstance that 40% of PHA are staked).

### 6. How does Phala distribute PHA?
Base on the principle of “fair distribution based on contribution”. We hope the ones who paid efforts and time to our network could be rewarded respectively.
Our distribution system is designed as bellow:

![](https://miro.medium.com/max/1400/1*k-Qj9Gdq9vGMTPJ5FtvY6g.png)


### 7. What is the releasing model of PHA?

![](https://miro.medium.com/max/1400/1*oqnu6DxjxGn3v4LK2JuCwQ.png)


- The diagram of PHA Releasing Model
- The red diagonal line: the release of total PHA supply
- The dark green curve: the release of team PHA
- The light green curve: the release of financing PHA
- The orange & light blue Curve: Test Network Rewards & Target User Airdrops
- The grey curve: the release of Matrix mining rewards


### 8. How will Phala distribute PHA as mining rewards?
Phala will distribute 700 million PHA through Matrix Mining. The total supply of mining rewards will be fixed without extra issuance and mining reward will dwindle as the time passes.

![](https://miro.medium.com/max/1400/1*RuYPsOB6lNdw-rC2U09dgA.png)
Diagram of Matrix mining reward

Participants can attend Matrix mining in 5 different ways:
- to keep your node online
- to contribute your data to Phala Network
- to develop on Phala
- to trade data at Phala data market
- to complete computation missions


### 9. Are there any requests related to Matrix mining?
Though it’s quite easy to start mining, still we suggest you pay attention to the following elements that will affect your mining rewards:
- the performance of the mining hardware
- the length of average online duration
- the length of total online duration
- the number of successful executions
- the recorded penalty rate

### 10. Are there other ways to earn PHA?
Other than mining, we also encourage users to join this fight against data breach by taking their control back on their data. Any app accessed to Phala would have to ask permission before collecting data, and users will gain returns after they authorize the utility of their information.
Also, to realize the vision above, we encourage developers and enterprises to access their products and apps to Phala Network or our product W3A. We prepare rich bounties for the first 10,000 products willing to access.
Or, you can choose to pay for the data others provided at our data exchange market. To pay is to recognize the value of information :).

### 11. Will there be airdrop events?
Yes! We will have 3 waves of LockDrop airdrops, which, we think, will help us identify our believers who value the future of personal data control.
- To stake KSM to Phala nodes to receive KSM interest rewards and PHA airdrops
- To attend the first parachain auction (IPO) (for users holding DOT)
- To lock FIL (or other decentralized data storage protocols) to receive airdrops

### 12. Does Phala apply any innovation on governance?
- Anonymous voting: using confidential contracts to complete voting to guarantee democratic anonymity;
- Liquid Democratic Voting Mechanism and relevant algorithm: to fully increase the voting participation rate;
- Introduced DAO instead of Committee: to increase openness and combine staking with community and decision making.

Besides, all amendments to Phala protocol require a referendum to be validated.

### 13. How does Phala realize secret voting?
As a confidential smart contract platform, Phala Network can make each election verifiable and trusted in system design as trust relationships could be calculated confidentially.

### 14. What is Liquid Democracy? How to implement it?
Liquid democracy originates from Bryan Ford’s paper “Delegative Democracy” published in 1884 — for a certain issue, one can vote directly, or to delegate the right to a representative.

![](https://miro.medium.com/max/1400/0*QGMmO9Q-Gx6foO5G)


In liquid democratic DAO, the delegation relationship is progressed as a dendrogram. To calculate and update the number of votes, it is necessary to process preorder traversal for postorder traversal when each vote occurs. The complexity of the time cost would be O(n).
It is hard to achieve in traditional blockchains but achievable on Phala Network. Liquid democracy calculation requires a large pack of data which might not fit in one block; gas fee could be expensive as well. Yet with TEE technology, we can perform liquid democracy with efficiency and confidentiality.
### 15. What’s the function of Phala DAO?
Phala’s governance will be managed through DAO instead of a representative committee system or the House of Lords system.
The voting right of DAO is defined as “Share”. Share is non-transferable and can be issued indefinitely though, the total proportion is always fixed as 100%. DAO’s decision-making system follows the majority rule and output results as “approve” or “disapprove”.


#### About Phala
The 1st [Substrate-based](https://substrate.dev/) confidential smart contract platform on which you can develop secret-preserving and privacy-protecting blockchain apps. Member of [Parity](https://twitter.com/ParityTech) Builders Program starting lineup. Winner of [Web3 Foundation Grant](https://web3.foundation/grants/).