Hey Web3 Enthusiast!! It's really nice having you on my blog and i must say this really means a lot to me. On my blog post today, you'll be learning more about MultiversX Economic Flywheel concept as a submission for my entry organized by xAlliance on Peerme.io. I suggest you grab your pop corn and drink as i take you through the journey of this topic.
You would definitely agree with me if i told you sustainability isn’t just about energy efficiency when it comes to the world of Blockchain Technology but it’s more about creating an economic system that can function continously. MultiversX known for it's high performance Blockchain Network came up a brilliant model known as the Economic Flywheel which is designed to ensure continuous development, innovation, and value creation within its ecosystem.
This economic model can be seen as a self-sustaining engine that spins faster and stronger over time, with each part reinforcing other parts. Once it gains momentum, it becomes extremely powerful, pushing the entire network forward.
To achieve a sustainable Economic Flywheel model, there are four required steps involved to make this happen which are explained below;
As we all know, building a great structure would require a strong foundation, if the foundation of the structure is weak, we can expect the structure or building to collapse anytime, but if the foundation is well casted and strong, then we can expect a good lasting structure. This same analogy applies for MultiversX because that foundation is the "economic security" because it is the bedrock upon which all other economic activity is built.
To make this successful, the network adopt a tail inflation model which requires a small, predictable issuance of new EGLD tokens that reward validators who secure the network consistently.
Why does this matter?
Imagine a city powered by thousands of independent power stations. Each one must stay active and coordinated to keep the lights on. Validators play a similar role as they are known for verifying transactions and protecting the network from attacks. The tail inflation ensures they’re always rewarded for their effort, keeping the power grid of MultiversX trustworthy and decentralized.
Without this, a blockchain could face security decay problem in which rewards eventually run out, leaving validators unrewarded which make them lose motivation which directly affects the network’s safety. MultiversX solves this problem by providing long-term economic security as its base layer.
Once the base is secured, the next step is to attract more builders and innovators since they serve as the lifeblood of any blockchain ecosystem.
MultiversX introduces a 90% revenue share for builders. This means developers who build or deploy their applications on the network get to keep most of the funds generated by their project. This is a great reward that shift builders from mere participants into economic partners.
You can think of it like owning a restaurant in a big shopping mall like Shoprite located in Africa where you get to keep 90% of your earnings, while the mall only takes 10% for providing the space and utilities. Naturally, this will drive more more people to own their restaurant or shops (or in this case, dApps) in that mall.
There's definitely no doubt this will lead to more developers and builders utilizing the Blockchain Network and this will expand the ecosystem with different projects like Decentralized Finance (DeFi), Non Fungible Tokens (NFTs), Real World Assets (RWAs), Decentralized Autonomous Operations (DAOs), GameFi, SocialFi and other latest Blockchain trend in the Web3 space you can ever think about. The good news is EGLD will serve as the primary unit of account, collateral, and medium of exchange which directly brings more token utility to EGLD.
As more developers deploy their applications (dApps) on the Network this causes more users to join the ecosystem which leads to increase an in onchain activities such as transactions, token launches, staking, and liquidity operations which directly contribute to the growing stream of the protocol revenue.
This revenue doesn’t just vanish into thin air, it’s collected through transaction fees, token issuance costs, and earnings from protocol owned applications and liquidity pools.
You can picture this like a flywheel that makes torque. The faster it spins, the more energy it makes. This will also enable the Network to generate more income the more people use and build on it, which leads to a cycle of growth and reinvestment.
The last but not the least part is to feed the engine which is done by reinvesting the captured revenue directly into the ecosystem.
Through open market EGLD buybacks and conversion into liquid-staked EGLD, this revenue flows back to the network’s core asset which increase its value and stability.
We can picture this as a company that uses its profits to buy back its own shares as this will help to strengthen investor confidence and reduce supply pressure. As time goes on, this cycle enhances both scarcity and demand for EGLD, creating a reinforcing loop of growth.
Validators are continuously incentivized to secure the network.
Builders are rewarded to create innovative, valuable applications.
Users benefit from an ever-expanding ecosystem of opportunities.
EGLD gains long-term value and stability through continuous reinvestment.
This is the Economic Flywheel, a model where every action fuels the next, leading to compounding economic energy that keeps the network thriving indefinitely.
Hardaeborla is a dedicated Web3 enthusiast committed to driving blockchain adoption and empowering decentralized communities. With a strong passion for innovation and digital freedom, he actively contributes to projects that promote privacy, transparency, and inclusivity in the Web3 space. From creating engaging content and insightful Twitter threads to participating in community campaigns and AMAs, Hardaeborla leverages his creativity and knowledge to educate and inspire others.
Hardaeborla represents the spirit of the decentralized movement—collaborative, visionary, and always building for the future. Connect with Hardaeborla via the link below
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