Quai Network co-founder on fixing the Proof-of-Work economy and the launch of Quainance

 The simple answer is that TVL, users, and volume are easy to observe and easy to grow with incentives. They aren’t useless metrics. They can tell you whether people are trying a product, whether capital is present, and whether the system is active. But the problem is they’re easy to game, and they don’t always tell you whether the network is creating durable value.

Revenue asks a more direct question. Did someone pay to use the system because it produced something valuable? That’s why we think it deserves more weight. Revenue isn’t perfect, but it’s harder to manufacture than deposits or volume, which can be inflated with subsidies or the promise of an airdrop. That kind of mercenary capital is liable to vanish once the subsidy ends.

The point is not that TVL, or users, or volume should be ignored. The point is they should support the revenue story, not replace it. If activity only exists while incentives are high, that is customer acquisition. If usage produces revenue after the incentives fade, that’s a much stronger signal of real demand.

 The problem SOAP is tackling is that Proof-of-Work mining creates sell pressure, since miners have real operating costs in the form of hardware and electricity. That is normal, and the point is not that miners should hoard. The issue is that the network's token has to absorb recurring sell pressure while the protocol has no matching source of recurring buy pressure. For example, Bitcoin does roughly $30 million a day in mining rewards with greater than 80% of that typically sold into the market. 

SOAP was designed around a different question: can the network capture the benefits of Proof-of-Work while mitigating miner sell pressure? With SOAP, Quai offsets these emissions through subsidies from Bitcoin Cash, Litecoin, DOGE, Ravencoin, and eventually Bitcoin itself.

These mining subsidies from other networks become protocol-funded demand for QUAI. The miner still gets paid for useful work, but part of the value created by mining is converted into buy-and-burn for QUAI holders and the long-term security budget. That was the core insight behind SOAP.

 The key point is that a Proof-of-Work blockchain is already going to pay emissions for security. Those rewards are the cost of getting miners to do work and produce blocks. In the normal model, the chain pays that cost, miners receive the reward, and if miners sell, the network's asset absorbs the sell pressure without a matching revenue source.

Merge-mining changes the accounting. It lets the same mining infrastructure produce useful work for more than one Proof-of-Work network. SOAP uses that by routing the external merge-mining reward through Quai. The outside-chain reward is sold at market, and the proceeds are used to buy and burn QUAI. In plain terms, SOAP tries to attach revenue to emissions the chain was going to pay anyway.

Philosophically, that is different from paying users with incentives or promising an airdrop. Those programs spend the network's own asset to create activity. SOAP starts from the security budget a Proof-of-Work network already needs, then asks how much external revenue can be captured around that mining activity. Economically, the loop is external mining rewards fund buy-and-burn, buy-and-burn offsets some of the emission pressure, stronger asset economics can attract more hashrate, and more hashrate strengthens security.

 Miners, validators, and traders all provide useful functions. They should be paid for those functions. But if all of the value created by the network immediately flows out to service providers or short-term participants, the protocol itself does not build long-term strength.

Retained value is how the network aligns itself with long-term holders and users. In Quai's case, SOAP buy-and-burn accrues value to the asset rather than directing all of the economic benefit to miners at the moment of block production. That does not mean miners are less important. It means the network and its long-term participants also share in the value being created.

This matters for security as well. In Proof-of-Work, the value of the asset is connected to the security budget. A stronger asset can support a stronger mining ecosystem. So value retention is not only a financial design choice. It is also part of how the network supports long-term security.

 We disagree with the assumption that Proof-of-Work and scale are fundamentally incompatible. That assumption pushed much of the industry toward Proof-of-Stake. Our view is that the right architecture can preserve the advantages of Proof-of-Work while still scaling throughput.

Proof of Entropy Minima (PoEM) and merged-mined execution shards are our answer to that. They let Quai add capacity while sharing one security pool. The goal is to avoid the tradeoff where each new chain or shard fragments security.

We also disagree with the idea that energy is only a cost to minimize. In Proof-of-Work, energy is the external input that ties the system to the physical world. That matters for Quai because the monetary design depends on a real-world cost of production. Proof-of-Stake is a valid design path for many systems, but it does not give you the same energy anchor. For energy-linked money, that anchor is essential.

 The starting point is that durable money usually has a cost behind it. Gold has value partly because it is hard and expensive to extract. Fiat has value because states spend real resources enforcing tax systems, legal systems, borders, and monetary policy. Bitcoin made the production cost explicit through mining.

Those systems are very different, but they all connect money to work in some way. Quai takes that observation seriously and makes the link direct. Qi is designed so issuance tracks difficulty, which is the protocol's measure of the work required to secure the network.

That is why the blockchain has to be built around Proof-of-Work. If the goal is energy-linked money, the system needs a measurable energy input. Qi uses that input as the basis for a medium of exchange whose monetary policy is tied to production cost rather than a central authority.

 It changes money from something people understand mainly as a policy decision into something closer to a production-cost measurement. Today, most currencies depend on central bank decisions, government balance sheets, and policy targets. That means people's savings are exposed to decisions they cannot control.

Qi is designed around a different reference point. Its issuance is tied to the work required to produce blocks. That does not remove every source of volatility or complexity, but it gives the currency a rule based on energy rather than discretion.

If that works, people can start thinking about money in more physical terms. A unit of money is not just a promise from an institution. It is connected to the cost of producing and securing it. That is especially important globally, because energy is a universal input. No country owns the concept of a joule.

 Yes, in many cases. DeFi has built very sophisticated financial products, but a lot of those products depend on assets that do not have external cash flows. When the main source of yield is another incentive program, the system can become very reflexive. It grows when prices and rewards rise, and it contracts when they fade.

Our view is that sustainable DeFi needs a stronger economic base underneath it. That means money with credible monetary policy, security with a real cost behind it, protocol revenue, and assets that produce yield from activity outside the financial loop.

That is why Quai's order of operations matters. First build the monetary system. Then build a scalable Proof-of-Work system. Then build value capture through SOAP. Then build financial products around assets like liquid mining tokens and mining cash flows. DeFi is more useful when it sits on top of productive economic activity.

That said, we just introduced our first foray into DeFi and launched Quainance on July 8th. It marks an important milestone, as it has been heavily requested by our community and we’ve been putting all of the building blocks in place to ensure the perfect environment was ready for it. 

To reduce risk, the incentives we’ve provided with it are ownerless, as are the deployments to the LP factory. With SOAP revenue now in place, our long-term goal is to drive TVL of USDT for the QUAI/WQI pairs for more overall liquidity in the ecosystem.

 I think the idea is that crypto's highest-value use case is still money. Not points, not governance, not abstract blockspace, but a private, digital monetary asset that can stand on its own. The industry has spent a lot of time building financial applications around tokens, but the foundation is the money itself.

For that to work, the asset needs two things. It needs privacy, because money that exposes your entire financial life is not really cash. And it needs a real cost of production, because neutral money should be anchored to something outside politics and outside its own token economy. That is why Proof-of-Work matters. It connects the monetary asset to energy, and energy is the most universal cost in the world.

So the broader idea I think the industry adopts is energy money. A monetary system where the base asset is produced through real work, secured by real energy, and usable privately as money. For Quai, QUAI is the store-of-value asset, Qi is the energy-linked medium of exchange, and Proof-of-Work is what makes both of those claims credible. SOAP fits into that by making the network economically productive, but the deeper thesis is that the next major crypto asset is money with privacy, energy, and Proof-of-Work at the core.