$KWH Utility
Last updated
Last updated
KWH is a digital commodity that fuels the React ecosystem, intrinsically linked to the value the network creates. Additionally, the token serves important roles in governance over the protocol, mitigating the protocol’s market risk, and economic alignment among actors.
Tokens are supplied to the market in return for providing useful services to the network- deploying energy monitors and facilitating distributed energy connections. Token demand is similar to demand for any commodity. As the underlying service fueled by the commodity becomes more valuable, demand for the token increases. Demand-side participants must consume tokens to redeem the underlying services of the network.
Market participants pay the network for the right to use its services. Specifically, market participants pay for 1) network data, and 2) EMS dispatch calls. React offers a decentralized, digital infrastructure for market participants to construct new value streams above.
A few concrete examples of potential network demand:
1) A VPP operator decides to expand its footprint to include React participants. The operator would market its pool to React resource contributors, who could then opt-in. The pool would compensate contributors on a $/kWh basis as described in its pool details. However, to utilize the network's resources, the operator would need to pay React (via Data Tickets minted through KWH burns) for data associated with network state, M&V data for performance monitoring, and the EMS dispatch instruction.
2) A utility is looking to optimize the management of its distribution footprint. Real-time, granular data is prohibitively expensive. The utility could pay React in Data Tickets for data relating to power quality, real-time outage monitoring, and DER visibility.
3) A REP is seeking to expand its portfolio to customers with flexibility resources to limit their short market exposure. The REP would pay React to identify valuable customers, stream their real-time data, and dispatch customers when necessary as a physical hedge.
4) An insurer is looking for better underwriting practices on their homeowners insurance book. The insurer offers cheaper rates to customers by purchasing their voltage data from React to preemptively manage electrical faults that could potentially lead to fires.
Similar to Helium, React utilizes a Burn-and-Mint equilibrium model. However, React incorporates a unique twist on the model in line with preserving the flexibility of the token economy design. Instead of sending KWH to a burn contract to mint Data Tickets, KWH will be sent to the React DAO treasury to mint new Data Tickets.
Token burns can be capital inefficient, while treasury tokens can be reinvested in furthering protocol growth. We believe that allowing the DAO to accumulate a pool of out-of-circulation tokens creates a new source of flexibility in the network's token economy to reinvest in its own growth and success.
The use of treasury funds is controlled by the React DAO. The treasury will be utilized as insurance for market performance, as well as other programs decided by the community through proper governance channels: additional incentives, partnerships, grants, etc.
Staking KWH serves two important roles: governance, and backstopping the risk in the system.
Staked KWH earns boosted governance participation rights. This ensures that the most committed community members, taking a long-term view of the protocol, have the largest voice in network development.
Staked KWH also serves as a backstop for potential risk in the system. In some circumstances, React may be the financially responsible party for power delivery in the markets. React takes multiple steps to ensure it can fully deliver its commitments - continuous, randomized asset testing, reputation scores, and energy resource portfolio management reduce the network’s risk. While we do not expect underperformance to be a common issue, it is possible the network may fall short of its committed dispatch amount, and will need to provide financial settlement for the difference. Staked KWH serves as a risk backstop in the system, as staked tokens can be liquidated to settle network underperformance. Tokens will be liquidated ratably among all stakers. Additionally, if necessary, KWH can be released from the treasury to backstop the protocol.
For their role in governance and taking on the risk in the system, stakers are eligible to earn yield from the staking incentive token pool. As baseline incentives wind down, the community will have the power to decide how best to compensate KWH stakers.
Stakers receive time-based multiplier points for staking (up to 3.0x), which ensures that long-term oriented community members are rewarded more significantly than a community member that jumps in and out of the staking pool. The “age of staked capital” drives how significant of governance and yield multipliers a community member can earn. The “age of capital” multiplier caps out at 548 days (1.5 years). Each day that tokens are staked results in an increase of 1/548th the total available staking multiplier, which maxes out at 3.0x. To illustrate, if a member stakes their tokens for 548 days, their available yield and governance for the staking pool will be 3.0x greater than the amount of token staked; if they have 100 tokens staked, the pool would consider their voting and yield potential worth 300 tokens.
Stakers can un-stake tokens at any time. Un-staking requires a cool down period of 60 days to prevent the ability for stakers to game the system if a liquidation occurs. When un-staking, stakers forfeit all multipliers for governance and yield.
