Waves Deflationary Future.

Layer 2 blockchains seem to be the most promising way to resolve blockchain scalability for the near future, at least in practical terms. By separating execution from consensus, we’re able to essentially multiply the blockspace, pushing the execution of specific Dapps to different L2s and making the Layer 1 blockchain serve as the layer where the consensus is established.

There are a few conceptual problems to be resolved on the way to the “end game” for the Layer 2 scalability narrative, though. One of the most important is the incentive for Layer 1 validators to support all connected Layer 2s since, in the current setups, they do not profit from supporting them directly. It also does not allow the consensus established in Layer 1 to decentralize Layer 2s. Currently, in most setups, Layer 2s are either centralized (running on one server, basically) or have their own economic incentives independent of Layer 1s.

Units.network, an ecosystem of interconnected chains launching on top of Waves Layer 1, resolves this issue. Waves validators also double as the validators of all the connected layers, choosing specific layers they want to support. Consensus established in Layer 1 is “exported” to Layer 2, making them properly decentralized. You can also say that Waves generating balance is re-staked in Layer 2s, and that those layers run on Proof-of-REstaking consensus.

We can also consider this from the perspective of Layer 2 chains. To launch a blockchain, you need economic incentives to provide consensus guarantees. You can either try to establish them from scratch or tap into existing consensus and incentivize its validator community to support your chain. In return, you may reward them with the native token of your Layer 2, for example (which can be used to pay fees in the network).

Layer 1 validators receive a new revenue stream from supporting the connected layers. They may even give up the validator rewards in Layer 1 itself since once the Layer consensus is established, the validators profit from all connected Layer 2s. This allows Layer 1 tokenomics to be fully deflationary (if the fees are burned, for example).

The Waves roadmap is aligned with the Units launch and suggests a sharp increase in Waves inflation during the Units bootstrapping process to attract more validators and stakers to the network. This inflation will be eliminated completely once the Units is in full swing and Waves validators are able to mine multiple tokens of interconnected chains. This setup invents a totally new narrative — Multichain-mining APY, where validators can support multiple chains and profit from all of them. The token of the base layer attains a new utility, allowing access to all the incentives of Layer 2s for Layer 1 validators. There’s a mutually beneficial process of Layer 2 — Layer 1 interaction where Layer 1 validators provide consensus to Layer 2 and Layer 2 provides economic incentives for Layer 1 validators. New economic incentives will allow the underlying base layer tokenomics to be deflationary, which is usually perceived as very beneficial.