JKL 2.0 Economics Discussion

Hello Everyone,

I wanted to open up a conversation around an initiative we at Jackal Labs are deeply considering - a thorough revamp of tokenomics for Storage Provider incentives.

While our team is brimming with ideas, we’re particularly interested in understanding what you, the community, think would be the most effective way to incentivize storage providers within the network.

Reflecting on our initial economic model, it’s apparent to me that the incentives provided to storage providers may have been slightly excessive, considering the current demand for data storage.

For your reference, here’s the link to our Genesis economic model:

This post is intended as a springboard for open dialogue about the direction you’d like to see our upcoming proposal on Jackal Protocol economics take. Your perspectives are invaluable to us, and we look forward to your thoughtful insights.


It is apparent that the rewards paid to providers cannot exceed, or meaningfully exceed, network demand. Based on the known value that 8 dollars are paid to Jackal for 1TB of storage, a sum greater then 8 dollars cannot be paid to the providers. Further, if the full 8 dollars are paid to storage providers and none is reserved for Jackal, then Jackal can never reach a cash flow positive state. If Jackal cannot reach cash flow positive, then it is just a matter of time before Jackal is either forced to raise again, or forced to sell tokens to fund further development, neither of which is a viable solution.

This is an incredibly fine line.

The only way to increase cash flow into Jackal is to sell jackal storage, and that means customers. There will always be a speculative element to the token itself, but this is crypto and that speculative element cannot be sustained, it is mercenary capital and it will leave as quickly as it arrived. The lifeblood of this entire chain is the storage providers, with no providers, there is no storage, so they must be taken care of. But how does one take care of the providers with no cash flow?

It is all going to come down to customers…I see no other way. Now there may have been some predictions around interested parties, but I want to say that most of those have not come through yet, at least not enough in volume to really move the needle. We can continue to massage the tokenomics, but THIS issue is very binary. Customers, and we need a lot of em. Lot of customers and we aren’t even having these discussions. Until we get these customers, cut emissions to the point of night sweats, both for storage providers and staking percentages.

Jackal is a product that uses crypto, but it is not a crypto product. We cannot continue to treat it as a crypto first element.


Let’s cut emissions and put jackal at the max supply we were supposed to hit in 10 years. Add a burn mechanism

I agree emissions must be reduced, but we need them to incentivize both validators and the storage network, which is the lifeblood of this protocol.

Without those two peer-to-peer networks, the protocol is useless.

I do like the addition of a burn mechanism.

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I personally do not like burn mechanisms, it’s incredibly difficult to burn you way back considering the diminishing returns of the burn, but in this single case, I would entertain it due to the issues over the last year. The protocol is good, it functions, but entirely too many tokens were produced in an unbalanced environment. The question is, how do you burn? It must be specifically tailored to offset the circumstances that led to the oversupply.

I don’t yet recognise Jackal storage as a market ready product because of the lack of hardware wallet support. So I’m not exactly sure what we are selling.

maybe investing in advertising would be good to get customers

I’m with Scott on this one. This really comes down to selling the product. But there are stability issues that I think need to be addressed first. I think grants are good until we move to the consensus spheres. After that, I wonder if it might be an interesting idea to use the jackal oracle to adjust the storage provider rewards emissions based on the storage demand, which will fluctuate. This will especially fluctuate until there is an Authz or other mechanism setup for automatic storage contract renewals avialable via opting-in. There could also be some sort of adjustment factor to the automatic emmissions that could be controlled via governance vote perhaps? Not sure how plausible these ideas are since I’m not a developer.

I would also entertain a burn, but it needs to be combined with a very aggressive marketing campaign. I know and understand that marketing is being done to bring on enterprise clients, and that will assist. In the here and now? Small businesses run by individuals need to be considered, specifically OUTSIDE of the DeFi, outside of the crypto sphere. Those are literally the boots on the ground for Jackal, and will also assist with bringing on enterprise clients as enterprise clients WANT success stories.
Jackal is a product that uses crypto, not a crypto currency. The value of Jackal is derived from usage. Usage itself is done by people. So go to the people (the independent photographers, videographers, performing artists, theater groups, crafters, locally owned shops) and show this product off. Jackal Protocol is 100% worth the time and effort it will take to do that. Talk about the security, talk about the efficiency, talk about the direction Jackal will go long term. Show it off, get the users on board.
If this is done, the storage providers win. Jackal wins. Everyone wins.

Background: I was following the progress of Jackal Labs since they were building on Secret Network, because I believe in the necessity of privacy and my right to determine who has access to my data. Therefore I would like to start contributing to this thread. Although I studied economics, I do not work as a researcher nor do I currently work on economic models, so please take my comments with a grain of salt.

Problem: At this point the community doesn’t have sufficient information to make informed decisions nor to meaningfully contribute to a discussion regarding a sustainabel economic model. I read through the tokenomics paper and unfortunately it remains a complete mystery how $JKL becomes valuable and how this network can become succesful. As impressive as the technology behind jackal is, this paper is disappointing. It doesn’t seem like anyone has put any serious thought into it. It’s not meant as an offense and somewhat understable. You guys want to focus on your tech and build cool applications. Initially you wanted to launch on SN, so starting your own chain has added complexity and during a bull market few people pay attention to tokenomics, so tokenomics felt like a duty that just had to be done.

The only part where the tokenomics paper gets concrete is the inflation schedule, the initial supply and the airdrop mechanism. Airdrop and initial supply can’t be changed anymore, so let’s take a look at the inflation schedule. It remains unclear, how the writer came up with this schedule and with the split between storage provider (60% of inflation) and stakers (40% of inflation), but in the end the original reasoning does not matter, because the design is not good in the first place. Jackal , like every other company in the world, needs to be able to adjust the available data storage. This is not going to happen with fixed payments. Imagine a market place where the price of an apple is fixed at 1$. If the market price of an apple is 2$, no one is going to be there to sell his apples. If the current market price is 0.1$, you will be swamped with apples. This is the current model to provide incentives for storage providers in a nutshell.

Storage providers are paid with 60% of the inflation, so you can right now calculate the cash flow (in $JKL), which goes to the storage providers over the next 10 years. At a given exchange rate $/$JKL, storage providers can look at their own costs and determine their supply of data storage, they want to offer. If we assume that you magically set the incentives at a level, where the demand of people who want to store data matches the supply of data storage, you can be happy. But in the short term the supply is fixed and the demand can be very volatile. If the demand drops, you have plenty of unused data storage (you are wasting money) and if the demand rises, you would need to provide data storage yourself or you need to put a warning “sorry, we are unable to story your data”. As the $JKL token is very volatile it can be assumed, that during a bull market we end up paying for unused resources and during a bear we are going to struggle with getting a sufficient supply of storage. Right now we overpay for storage not because we are in a bull market, instead because the demand is low and we set the supply too high by using excessive incentives.

Therefore, we need an economic model, where the supply of data storage is dynamic and adapts to the demand. Right now, the model which is described in the paper, leads to a supply which is fixed and varies with the $JKL price - not with the demand.

There is a variety of possibilities to set up a new model for Jackal, but as I pointed out in the beginning, the information we do have is quite limited. I would propose that the jackal team provides an update with relevant data, so we can afterwards try to create a working model. A sustainable economic model should include more than fixing the relationship between users, jackal network and storage providers. We need to talk about the dApps you are building, the relationship with our validators, inflation in general, the revenue model, liquidity on DEX’s etc. Everything together creates a working model, not playing with one part of it.

We should see this as a chance to create a sustainable model for Jackal. Right now, this discussion is going in the direction of reducing emissions and adding a burning mechanism. This would change nothing. I cannot stress how stupid this move would be. I know this is crypto, but for the sake of the argument, think about a startup with a broken business model. Using the little revenue they have to buy back some stocks will only lead to insolvency sooner than later.


Hey Cristiano, first thank you for investing your time and intellect to articulate your thoughts regarding the tokenomic and economic model. Second, welcome to the community.

There is a great Bezos quote, “We are stubborn on vision. We are flexible on details.” This post highlights points where we need to be flexible.

Building an adaptable economic model that responds to real-time demand and supply, rather than being anchored to the volatility of $JKL token, is an idea worth exploring. I know there have been some experiments we have been running regarding what we can do at a technical level to develop a model like this.

In regard to data transparency, I agree that this is a foundational requirement. Right now, all storage payments are sent to this address which is held by the Foundation.


Regarding usage statistics, there are some dashboards in development, but for now, this API displays Jackal usage in bytes.


219 TBs purchased currently, 45% of the purchased storage is currently used.

As for the notion of simply reducing emissions and initiating a token burn mechanism, I appreciate the caution. I for one am here to build a long-lasting, self-sustaining model, not to seek a short-term patchwork solution either.

We shouldn’t shy away from bold decisions but always ensure they are thoughtfully made.

Thanks again for your insights, I am grateful or the intellectual challenge and I appreciate your passion for the mission.

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Burning part of the JKL spent on storage, with the rest going to storage providers seems like an easy step in the right direction.

If there’s a flat subsidy to storage providers while it’s not profitable, but starts declining as more storage is purchased (and organic revenue brought in) it can properly incentivize growth still.

i.e. right now there’s a $350/mo subsidy. If storage providers earn $100/mo from sales, then lower the subsidy to $300, not $250. So they’re still earning more due to the sales.

Thanks for your response and your kind words. If I have the time, I will collect some questions over the next few days, which are relevant to get a solid information basis, so that people can actually make informed decisions and meaningfully contribute to this topic.

Building an adaptable economic model that responds to real-time demand and supply, rather than being anchored to the volatility of $JKL token, is an idea worth exploring.

It’s important that you understand that the current “tokenomics”-paper is not a basis on which to build a network on. It’s not because I am smarter than the rest here, it’s simply because it goes against common logic and the principles of economics. This paper doesn’t even try to explain how $JKL accrues value and even worse, it creates a situation, where the supply of a good (storage) is fixed and the demand is volatile.

Even if you don’t have the time or leisure to create meaningful tokenomics, you need to at least fix this.

Do you believe it is possible to have a variable model with the price of storage being fixed to $8/mo/tb for storage users? Or will this have to change to a marketplace model in your view?

The issue we have specifically is that storage space available on the network has to be self reported which can artificially inflate supply. The variables we have to work with in the model are primarily storage space purchased, storage space used, and unique users with storage accounts.

Hey there! This is a great post and I really appreciate everything you have to say here. I’d like to clarify a few points with you?

I’m wondering how you come to the conclusion there our econ creates a situation where there is a fixed supply of storage? I don’t know what situation could create that. I’m wondering if you can elaborate. There may be an assumption here that isn’t quite right.

sounds like a more clarified version of my initial suggestion, which was to adjust the provider reward emissions based on the storage demand. I know the oracle tracks price, but maybe the oracle module could also be used to track the dynamic storage demand? To start, I suppose it could be done with subscriptions for storage.

Also, the lack of storage contract renewals will also add volatility to the storage demands, as I mentioned before. I’m fairly certain that’s already being worked on though…

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Of course, that’s possible. The price can remain stable. In many markets, the selling price is fixed by the market and companies only react to market price fluctuations by increasing or decreasing their supply. this mechanism is currently completely missing in jackal.

before I answer in detail, I wanted to ask you to elaborate on your next message. you said that the actual amount of storage space cannot be observed, but is based on information provided by the storage providers. What is the reason for this and what mechanisms are there to detect bad actors? Are incentives distributed based on self-reported storage space?

“storage space purchased, storage space used, and unique users with storage accounts” so are we currently observing the demand behavior and at the same time the unverifiable statements of the suppliers?

How well do we know the current storage providers? Do we have contact to almost all of them via Discord, since they are community members? Does Jackal Labs currently act as a storage provider to ensure that there is enough storage? How often do the storage providers adjust the storage space they provide? Do most have hardware at home or do they rent storage space in the cloud?

Thanks for your question. Could you please reread my former posts and clarify, where I lost you? :slight_smile:

  "purchased": "141006000000000",
  "used": "25858191110165",
  "usedRatio": "18.338362275481185200",
  "activeUsers": "32"

One could dynamically adjust the amount of inflation sent to storage providers by using the current parameters. Consider the following:

Iₚ = Inflation to Storage Providers = 60%
Iₛ = Inflation to Stakers = 40%
Îₚ = Adjusted Inflation of Storage Providers based on ratio used
Îₛ = Adjusted Inflation to Stakers
λ = used storage ratio (in this case ~.18)
xₙ = some fixed bonus

You could construct a dynamic storage inflation bonus by setting parameters such as

if λ ∈ (0, .50] then
Îₚ = Iₚ•(λ+x₁),

if λ ∈ (.50, .75] then
Îₚ = Iₚ•(λ+x₂),

if λ > .75 then
Îₚ = Iₚ

where we propose x₁ = .10 and x₂ = .15 and Îₛ = Iₛ + (Iₚ - Îₚ)

We are not economists but have a thorough background in mathematics. A burn mechanism is only a temporary solution to a foundational problem. Burn mechanisms can help, but I think more is needed here than a simple burn to reduce supply. It’s just a bandaid on a large wound.

The formulas above could be even more targeted and stronger constructed if λ represented the ratio per provider instead of the overall ratio, and you targeted larger inflation payouts to the providers who are providing a higher ratio of storage.

These are just some thoughts, we honestly don’t know the overall issues and just read this forum for the first time so take these formulas as you will, but I think it could provide some insight.

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