A Preliminary Analysis of the Economic Model in Privacy Computing Network PlatON from an Accounting Perspective
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A Preliminary Analysis of the Economic Model in Privacy Computing Network PlatON from an Accounting Perspective
In PlatON's economic design, from an accounting perspective, the main economic activities include initial issuance, additional issuance, rewards, penalties, transaction fees, and miner fees.
Navigating Web3 tides with focused insightsPreface
Accounting is an essential component of economic management (in essence). It is an economic management activity aimed at improving economic efficiency, using money as the primary unit of measurement and specialized methods to account for and supervise the economic activities of entities such as enterprises and institutions (its basic functions).
Specifically, accounting核算 refers to the comprehensive, continuous, and systematic recording and reporting of economic transactions that have occurred or been completed within enterprises and institutions. Supervision involves reviewing and inspecting the legality, compliance, and effectiveness of these recorded economic activities.
Likewise, we will analyze PlatON's economic model from an accounting perspective, comprehensively, continuously, and systematically recording and reflecting relevant economic activities within the system. This article is the first in a series, with subsequent articles providing modular interpretations of accounting items within PlatON based on this overview.
PlatON Economic Model
One of the core issues studied in economics is the rational allocation of scarce resources. As an open, free, and universally accessible distributed system, a well-designed economic model for a public blockchain can ensure the rational allocation of blockchain resources while aligning participants' interests with the overall interest of the chain—maximizing participant benefits and enabling individual pursuit of economic gain to simultaneously contribute to the entire blockchain network, thus ensuring long-term, stable development.
From an accounting perspective, the key economic activities in PlatON’s economic framework include initial issuance, inflationary minting, rewards, penalties, transaction fees, and miner fees. Each economic event involves token transfers (where tokens serve as the primary monetary unit in the blockchain).
Furthermore, according to the principles of accounting equations, any economic transaction within the PlatON network does not disrupt the balance of the accounting equation. By applying the accounting equation along with double-entry bookkeeping methods, PlatON’s various economic activities can be clearly and intuitively represented.
Corporate economic activities:
Economic activities on PlatON:
From the comparison above, we can observe that if the entire PlatON system is viewed as a large-scale commercial enterprise, its economic model drives various economic activities. Every entity interacting with the system undergoes changes in tokens—indicating corresponding economic events have taken place.
Accounting in PlatON
In accounting, accounts must be established before recording transactions. The setup of these accounts should be defined in conjunction with accounting elements. In accounting, elements are simple classifications of accounting objects, primarily including six categories: assets, liabilities, owner's equity, revenue, expenses, and profit. Specifically:
Assets: Resources formed by past transactions or events, owned or controlled by an entity, expected to bring future economic benefits. In PlatON, assets mainly refer to tokens held by various entities.
Liabilities: Obligations borne by an entity that can be measured in monetary terms and require settlement through assets or services. In PlatON, tokens yet to be issued are defined as liabilities.
Owner's Equity: The residual interest enjoyed by owners after deducting liabilities from assets, or investors’ claims on net assets of the enterprise.
Revenue: Total inflows of economic benefits arising from ordinary activities such as selling goods or providing services. In PlatON, block rewards received by miner nodes constitute part of their revenue.
Expenses: Outflows of economic benefits incurred during regular operations such as selling products or providing services. In PlatON, transaction fees consumed when an entity sends a transaction are considered expenses.
Profit: Operating results realized by an enterprise over a given period. In PlatON, staking rewards generated by validator nodes providing services represent profits for those entities, as do delegation yields earned by users.
Every accountant knows this fundamental rule—the accounting equation: Expenses + Assets = Liabilities + Owner's Equity + Revenue
Through analysis of accounting elements, we see striking similarities—and slight differences—between traditional accounting theory and economic activities in PlatON. In conventional accounting practice, the economic entity is typically a single enterprise. However, in PlatON, multiple economic entities exist (including enterprises), engaging in mutual economic interactions.
To clearly track economic activities of each entity in PlatON, verify the correctness of the economic model, ensure system stability and data accuracy, and enhance economic efficiency, we introduce the principle of the accounting equation into PlatON’s economic model by setting up accounting accounts from different entities, leveraging the double-entry bookkeeping theory from accounting.
This approach flexibly applies the two fundamental functions of accounting: accounting核算 and supervision. Since no economic transaction alters the balance of the accounting equation, this principle enables monitoring and verification of the entire PlatON economic system. Integrating accounting knowledge allows comprehensive validation of the PlatON system, further strengthening safeguards for its economic model.
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