3.3. Market-driven governance

Sequentia block producers must have a direct stake in the blockchain, and their role is open to market competition in a public and transparent way.

Any blockchain network is exposed to grave security risks if the entities with the capacity to govern over block production do not have a significant interest in the network’s normal state of operation. The selection of entities with the power to issue blocks must be open to the market with publicly transparent economic incentives to participate. For example, in a Proof of Work system, miners have a considerable investment in the hardware and, in general, in their business model, from the most efficient way to supply energy to the vast amount of capital required for the set-up and maintenance of the business (including human capital, effort, aspirations). All of this capital represents a “stake” in the network.

Sequentia blocks are proposed based on a PoS selection algorithm that weights the stake of each participant (in terms of SEQ tokens at stake) to determine the right to issue a valid block. A PoS selection is chosen to avoid the security threats any new PoW intrinsically faces at its genesis, being at risk of malicious attackers borrowing hashrate power. However, to prevent the perception of being an alternative or competitor to Bitcoin, SEQ tokens are not intended to have a monetary purpose, as made evident by the open fee market described in the previous section.

Any network participant staking at least 0.01% of the total token supply has a chance to be selected by the algorithm as a blocksigner or block producer. 0.01% of the total token supply corresponds to 40,000 SEQ tokens. Participants with SEQ tokens locked at stake earn network transaction fees from the blocks they produce; therefore, the value of SEQ tokens mirrors the actual usage of the blockchain.