Analyzing the evolution of the IOST community-first token economic model

Since its establishment, IOST has consistently been committed to building a diverse and prosperous community, viewing it as the cornerstone of innovation and sustainable growth. As we focus on transforming IOST into a leading Layer 2 PayFi solution, this commitment has become even more resolute. The evolution of the token economic model is not just a technical upgrade but aims to build a thriving community-driven ecosystem that creates value for all participants.

Committed to sustainable growth

The decisions for optimizing the IOST token economic model stem from our commitment to the long-term value of the community and our deep reflections on the future development of Web3 payments. IOST has successfully processed nearly a billion transactions and has a continuously growing user base, proving our strong technical capabilities. Now, with the arrival of the Web3 payment era, we deeply recognize the necessity to innovate the economic model to support more critical ecological innovations, broader community participation, and deeper value creation.

The most important aspect of this innovation is our commitment to empowering the community: 97% of newly issued tokens will directly support community development through various channels. This unprecedented token distribution method reflects our belief in the future of IOST — its future is in the hands of community members, developers, and ecosystem partners.

Summary

IOST was initially launched as a high-performance Layer 1 blockchain, showcasing unparalleled reliability and throughput with seven years of outstanding performance, processing over 930 million transactions, consistently maintaining over 10,000 TPS with zero downtime. Building on this foundation, IOST is undergoing a profound transformation: evolving into specialized Layer 2 solutions and utilizing BNB Chain as the settlement layer. At the core of this transformation is the innovative PayPIN ecosystem, designed to revolutionize global Web3 payments, making them more convenient, efficient, and user-friendly.

Reimagining Web3 payments

The global payment landscape is at a critical turning point. While traditional payment systems are convenient, they heavily rely on intermediaries, leading to high fees, access restrictions in certain regions, and long settlement times — especially evident in cross-border transactions. Meanwhile, blockchain-based payments have not achieved widespread mainstream adoption due to their complexity, cost volatility, and sometimes slow transaction confirmation speeds.

Core challenges

How can we ensure that Web3 payments are as intuitive and seamless as swiping a credit card or using a mobile payment app, while embodying the trustlessness, security, and global reach promised by decentralized blockchain?

IOST 3.0 Concept

By deeply integrating BNB Chain and migrating core functionalities to the Layer 2 environment, IOST 3.0 aims to overcome the series of challenges mentioned above. With the PayPIN operating system and payment protocol, IOST as L2 achieves unprecedented scalability, cost-effectiveness, and seamless interoperability. Ultimately, it creates a system and payment experience that enables anyone — from small merchants in remote villages to multinational e-commerce platforms — to enjoy near-instant, low-cost, and globally accessible services.

PayPIN: The core engine of a new payment paradigm

PayPIN is not just a layer on top of the blockchain; it is a completely new conception of how blockchain drives payments. It can be viewed as a 'payment operating system' that sits atop the foundational blockchain layer (BNB Chain) and connects seamlessly with multiple other blockchains and services. Its core design principles include:

PayPIN is not just a layer on top of the blockchain; it is a completely new conception of how blockchain drives payments. It can be viewed as a 'payment operating system' that sits atop the foundational blockchain layer (BNB Chain) and connects seamlessly with multiple other blockchains and services. Its core design principles include:

1. Chain abstraction layer

Traditional Web3 interactions often require users to understand addresses, fees, transaction complexity, and differences between chains. The chain abstraction layer of PayPIN effectively simplifies this process. Users need only operate through intuitive payment requests and confirmations, while PayPIN handles all underlying technical details, connecting multiple blockchain environments.

2. Unified Payment Protocol (UPP)

Different blockchains or payment networks often have their own unique transaction formats, while PayPIN's UPP (Unified Payment Protocol) defines a universal set of transaction instructions. This standardization eliminates barriers between blockchains, enhancing interoperability, and ultimately fostering a more open ecosystem where liquidity, assets, and data can flow more freely.

3. Decentralized Identity (DID)

Identity authentication is the cornerstone of trusted payments. By integrating W3C-compliant decentralized identity (DID) and advanced biometric verification, PayPIN ensures that users can control their identity. This approach simplifies compliance processes, reduces fraud risk, and supports more complex application scenarios such as credit scoring, insurance claims, or regulated asset trading, while fully protecting user privacy and autonomy.

Final outcome

For consumers, this means that paying for meals, purchasing digital goods, or making cross-border remittances will become as simple as clicking a button. For merchants and financial institutions, this means easy access to a global customer base and financial infrastructure while reducing operational costs and simplifying technical complexity.

In-depth technical exploration of IOST 3.0

For those wishing to delve into the technical details, we will unpack the technical architecture that implements the vision of IOST 3.0 and PayPIN. The content will cover key areas such as layered infrastructure, transaction lifecycle, security mechanisms, economic incentives, scalability technologies, and cross-chain communication protocols.

IOST Kernel 3.0: Layered architecture of performance and security

The technical architecture of IOST 3.0 can be conceptualized as multiple layers, each responsible for a set of independent tasks, but they work together in close coordination:

1. Basic settlement layer (BNB Chain)

This foundational layer provides data availability, consensus mechanisms, and finality. By anchoring state commitments to BNB Chain, IOST 3.0 ensures that transactions processed in the second layer (L2) inherit strong security guarantees.

2. IOST L2 stack (PayPIN network + PayFi protocol)

  • PayPIN Network

Responsible for coordinating payment logic, user identity, fee structure, and state changes. It executes standardized instructions from the Unified Payment Protocol (UPP) and ensures seamless interaction with external components.

  • PayFi Protocol Engine

Core of transaction processing, employing OP Rollups and advanced cryptographic proof technology. It batches transactions, executes state changes, and periodically publishes verified state roots to BNB Chain.

3. Cross-chain communication layer

Cross-chain bridging and interoperability modules connect IOST 3.0 with other blockchains, oracle networks (like Chainlink), and identity systems. This layer supports asset transfers, data queries, and multi-chain liquidity aggregation.

4. Application and user layer

Consumers, merchants, and developers interact at this top layer. Through APIs, SDKs, and integration frameworks, building new payment dApps or integrating Web3 payments into traditional platforms becomes both simple and intuitive.

Dual-layer state verification

IOST 3.0 adopts a dual-layer state verification model. The first layer rapidly aggregates and verifies transactions off-chain (L2), while the second layer (BNB Chain) periodically verifies the correctness of these states. This ensures that transactions are both fast and final:

  • Preliminary verification (L2): transactions adopt OP verification, assuming transactions are honest unless someone disputes them. This effectively reduces overhead and delays.

  • Final confirmation (L1 on BNB Chain): periodically aggregates a batch of L2 transactions into a state commitment and publishes it to BNB Chain. If no one disputes the state during the challenge period, it will be considered final confirmation.

Three-stage verification to enhance security

Maintaining integrity without sacrificing speed:

1. Preliminary signature verification: ensuring that all submitted transactions are correctly signed by authorized entities.

2. State change verification: calculating and verifying the impact of each transaction on the global state (balances, contract states, identity credentials, etc.).

3. Consensus-level verification: After transaction batch processing, the state root is published to BNB Chain. Any inconsistencies can be disputed, ensuring that attackers cannot prevail and that the safety of honest participants is guaranteed.

Layer 2 payment engine on BNB Chain

The integration of IOST 3.0 with BNB Chain utilizes OP Rollups and other customized frameworks to achieve high throughput, low latency, and predictable costs:

1. High-speed payment channels

By adopting the OP stack, transactions can achieve near-instantaneous provisional confirmation. Users will enjoy a low-latency interaction experience similar to that of card swiping. Meanwhile, the underlying cryptographic guarantees ensure that even if intermediaries attempt to cheat, disputes can be resolved favorably for honest users.

2. Smart transaction routing and dynamic fees

A network of routers and sorters dynamically directs transactions through the optimal path, reducing congestion and potentially lowering delays by up to 80%. The dynamic fee model adjusts according to network load, encouraging batch processing of transactions during peak times while maintaining a balanced economic model to keep fees fair.

3. Cross-chain payment bridge: optimizing interoperability

Cross-chain asset transfer is key to building a truly global financial system. By combining OP Rollups with selective zero-knowledge proofs (ZK proofs) for sensitive transactions, IOST 3.0 ensures that users can easily transfer assets between Ethereum, IOST L1, or other compatible chains without sacrificing security or privacy.

Cryptographic foundation

IOST 3.0 employs advanced cryptographic techniques to secure communication and state changes:

  • Merkle Tree:

Widely used for state commitments, these data structures allow efficient inclusivity and exclusivity proofs. They form the core of Rollup proofs and cross-chain state verification.

  • Zero-knowledge proofs (ZKPs):

Selective use of zero-knowledge proofs for confidential transactions, authentication, and high-value cross-chain transfers. ZKPs allow the network to prove the correctness of transactions without exposing sensitive information, thus protecting privacy while ensuring compliance.

  • Signature schemes:

Elliptic Curve signatures (such as ECDSA, Ed25519) are used to secure transaction safety. These lightweight, efficient signature schemes ensure the authenticity of transactions without adding unnecessary computational burden.

Network protection: decentralized sorting nodes and fair MEV distribution

A key innovation of IOST 3.0 is the elimination of single points of failure in transaction sorting:

  • Decentralized sorters:

Multiple independent nodes are responsible for sorting transactions into batches, effectively preventing any single entity from censoring transactions or manipulating the sorting for undue advantage.

  • MEV (Miner Extractable Value) mitigation:

By decentralizing sorting responsibilities and implementing fair sorting protocols, IOST 3.0 minimizes the potential for MEV exploitation. Additionally, with a penalty mechanism for malicious sorters, the network creates a fairer environment for all participants.

  • Redundancy and resilience:

If a sorter fails or attempts malicious behavior, other sorters can quickly take over, ensuring the system runs smoothly. This guarantees that the network maintains high availability even under adverse conditions.

Performance, scalability, and efficiency improvements

The architecture of IOST 3.0 has been carefully optimized to enhance performance:

  • Sub-second latency:

Through parallel verification paths and OP execution, the median time for transaction confirmation is reduced to about 500 milliseconds. Over 95% of transactions are completed within 2 seconds, comparable to or exceeding most traditional payment systems.

  • Linear scalability:

As the network expands, performance grows almost linearly. State sharding, load balancing, and dynamic routing ensure that overall capacity increases with the addition of validation nodes or sorters without creating bottlenecks.

  • Resource optimization:

By employing advanced caching and state pruning strategies, we ensure that the size of the state grows logarithmically with transaction volume. This means that even during periods of sharp increases in network usage, hardware requirements remain manageable and stable.

Economic model and incentive framework

The economic model of the network is designed to reward honest participants and punish malicious behavior:

  • Validator and sorter rewards:

Honest validators and sorters are rewarded through transaction fees and periodic staking rewards, incentivizing them to maintain the network's security and integrity.

  • Fee market:

Dynamically adjusted fees change based on network congestion and resource demand. This ensures that the network can scale smoothly, avoiding instability or runaway costs.

  • Punishments and dispute resolution:

Malicious behavior will incur economic penalties. Challengers who detect malicious state commitments or invalid transactions will be rewarded, thus incentivizing participants to remain vigilant and honest, promoting the healthy operation of the network.

Security: multi-layer protective fortress

Security is always a top priority:

  • Consensus-level security:

The powerful consensus mechanism of BNB Chain ensures that once the state root is confirmed, the cost of rollback is extremely high, making it virtually impossible.

  • Transaction-level security:

Every transaction must undergo multiple verifications. Even if dishonest participants attempt to inject invalid states, the challenge mechanism allows honest participants to expose fraud and restore the integrity of the network.

  • Deep defense:

Each layer, from the application interface to the settlement layer, is equipped with independent security measures. Through code audits, formal verification of smart contracts, and continuous on-chain monitoring by independent nodes, the network is designed to have a high level of security.

Empowering payment innovation in the Cambrian explosion

The analogy of the 'Cambrian explosion' highlights the potential impact of IOST 3.0 and PayPIN. Just as the emergence of new biological features millions of years ago triggered an explosion of life forms, the innovations of PayPIN — chain abstraction, unified payment protocol, scalable L2 architecture, and secure DID — lay the foundation for the flourishing of payment application scenarios:

  • Micropayments and microservices:

Low-cost, near-instant transactions open up new avenues for novel business models: pay-per-article, pay-per-second content streaming, or dynamic pricing models in the Internet of Things.

  • Cross-border trade and remittances:

Foreign workers can instantly remit money home, eliminating high fees. E-commerce platforms can easily accept payments from global customers without worrying about foreign exchange issues.

  • Integration of Real-World Assets (RWA) with DeFi:

Traditional assets — such as bonds, real estate titles, and commodities — can be tokenized and seamlessly integrated into the DeFi ecosystem. Asset lending, borrowing, and insurance will become frictionless and globally accessible.

  • Compliance and regulation-friendly transactions:

With robust DID and flexible compliance modules, traditional financial institutions can interact with decentralized finance (DeFi). This bridges the gap between traditional banking and permissionless innovation.

As these application scenarios continue to grow, the entire ecosystem will experience greater development. More participants bring richer liquidity, more accurate price discovery, increased stability, ultimately driving the construction of a more inclusive global financial environment.

Joining the dawn of a new financial era

IOST 3.0 is not just upgrading a chain; it is creating an entirely new paradigm for digital value exchange — a system that balances openness, trustlessness, and user experience. Whether you are a user, developer, institution, or infrastructure provider, participating at this moment means you are joining a transformative wave that will redefine the nature of payments and commerce.

Join us

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This is not an incremental improvement; it is a complete revolution. Join us to witness and participate in the birth of a new paradigm in global finance.

Introduction to IOST

Founded in 2017 and headquartered in Singapore, IOST has received support from top global investment institutions such as Sequoia Capital, Matrix, and ZhenFund. Today, IOST is undergoing a comprehensive upgrade to a decentralized Web3 payment network through PayPIN. With PayPIN, IOST has built a decentralized Web3 payment network aimed at fundamentally transforming the payment experience in the Web3 space.

Based on IOST 3.0, PayPIN utilizes a chain abstraction layer, decentralized identity (DID), and a unified payment protocol to achieve seamless cross-chain payments and multi-chain asset management. To further enhance performance and scalability, PayPIN integrates the Layer-2 solution PayFi, enabling connections to a broader blockchain ecosystem and supporting various payment scenarios.

Official website: iost.io

Block explorer: iostscan.com

Link3: link3.to/iost

Zendesk: iost.zendesk.com

IOST Chinese community X: x.com/IOST_CN

IOST Chinese community Telegram: t.me/IOSTChina

IOST Chinese community Medium: medium.com/iost-cn

‘IOST Brand Reshaping 2/8’ IOST 3.0: Transitioning to the next generation of Web3 payment as a dedicated BNB Layer 2 was originally published in IOST_CN on Medium, where people are continuing the conversation by highlighting and responding to this story.