Zano is on the path to becoming a deflationary asset: Here's why
A major transformation is about to shake up Zano: With the arrival of the long-awaited Zarcanum hard fork, all transaction (TX) fees will be burned, leading to ZANO being able to become a deflationary asset over time when a certain amount of daily TXs gets reached. Let's dive deeper into what this exactly means.
Understanding Deflationary Assets
A deflationary cryptocurrency is one whose scarcity increases due to a reduction or stagnation in its supply. This makes the coin more attractive as a store of value and can encourage investment. However, not all cryptocurrencies are designed to be deflationary.
The Reason for Burning Zano's Transaction Fees
Following the upcoming hard fork, the entirety of the revenue generated from fees will be allocated towards burning ZANO daily—positively contributing to Zano becoming a truly deflationary asset over time. Zano's model actively reduces its circulating supply, particularly as its blockchain gains traction, further diminishing the coin's availability. The more Zano's blockchain becomes adopted, the more Zano gets burned each day positioning Zano as a trailblazer in the realm of cryptocurrency economics.
Increased Network Activity on Zano
Following the Zarcanum hard fork and the subsequent roadmap, numerous new features will be introduced to Zano's blockchain, each action involving a network fee. These include the Confidential Assets feature, Zano Trade (DEX), and a peer-to-peer trading platform based on Escrow Contracts. These additions significantly expand Zano's ecosystem, likely leading to a surge in network activity as many new projects will launch on Zano's blockchain.
How Can Zano Become Deflationary?
To achieve a deflationary supply, we must ensure that the amount of fees burned exceeds the amount entering circulation from block rewards. Zano follows a low-emission schedule, issuing only 1 ZANO per block with a block time of 1 minute. This means that just 1440 ZANO are introduced daily from PoW & PoS block rewards.
Currently, a flat fee of 0.01 ZANO for all network actions is maintained, but with community approval, this could be increased to 0.05 or 0.1 ZANO per transaction to enhance the daily burning. The fee will remain at 0.01 ZANO until a vote is conducted later on via the upcoming Zano Governance System.
Examples of Fee Impact
With a flat network fee of 0.01 ZANO per transaction, exceeding 144,000 transactions per day would be necessary to burn at least 1440 ZANO daily.
With a flat network fee of 0.1 ZANO per transaction, only surpassing 14,400 transactions per day would be required to achieve the same burn rate.
Actions Requiring a Network Fee on Zano's Blockchain
As with any blockchain, a network fee must be paid for any action on the network to keep the blockchain safe from flood attacks. The following 6 actions on the Zano blockchain require a network fee to be paid in ZANO:
- Sending ZANO
- Sending any Confidential Asset
- Completing a swap on our Decentralized Exchange (DEX): Zano Trade, based on Ionic Swaps
- Completing a transaction on our peer-to-peer trading platform based on Escrow Contracts
- Completing a transaction on one of the future Marketplaces such as the Zano Bazaar
- Creating a Confidential Asset
- Registering an alias
Conclusion
In summary, the Zarcanum hard fork will expand the number of use cases on our blockchain significantly. As 2024 progresses we expect many new projects to launch on Zano's blockchain, leading to a surge in network activity. While the amended fee-burning structure won't immediately make our supply deflationary, it is the start of a significant shift that will make ZANO more scarce than it already is today.
We welcome the community to come and discuss the details of this fee-burning model with us through a dedicated subchannel we have opened on our Discord. Following thorough consideration of all options, we will facilitate a vote via the forthcoming Zano Governance System, ensuring collective decision-making with the involvement of our community.