June 30, 2020 | 3 Min Read

The Role of Cypherium Tokens (CPH)

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Like most smart contracting platforms, Cypherium utilizes a proprietary cryptocurrency called the Cypherium Token. But what exactly does this token do in and for the Cypherium network?

In the original case of Bitcoin, the currency is the very purpose of the network; it is not just a part of the mechanism but, in fact, its reason for being. With the advent of smart contracts, however, the crypto community began to realize the immense and diverse implications for smart contracts. Coins and tokens, thus, have become a fascinating area of exploration for crypto enthusiasts and developers. They sit at the corner of digital economics and decentralized technological development.

Ethereum developed Ether (ETH) coins to operate its network. In order for a network participant to originate a transaction or to execute some other more complicated smart contract, that participant needs to pay some calculable amount of ETH to the network. In Ethereum’s network, this fee is technically referred to as “Gas,” which is a function of the amount of ETH used in executing the transaction multiplied by the rate in ETH, as set by the network.

This mechanism serves a number of roles. It is a measure of the on-chain computing resources being expended by users and developers when initiating various operations; it is a reward method for the miners who pack and verify blocks; and it is an operational fee, which can protect against a Denial-of-Service style attack, thereby preventing economic paralysis.

Cypherium’s Token (CPH) operates according to this model.

CPH serves to allocate network resources to participants. The amount of CPH you hold corresponds to your stake in the network’s resources (computing storage, bandwidth, etc.). Cypherium CPH holders receive a proportional amount of Cypherium Power, where each Power represents 1 share of the total network resources. This resembles Ethereum’s Gas mechanism: the more coins a user holds the more Power that the user has, which affords them access to network resources, such as the maximum limit per transaction. And the larger one’s Power value, the greater the recovery rate after Power is expended.

Like Ethereum, Cypherium does charge a smart contracting fee. The CVM bills for both the execution and storage of its contract. In other words, there is a joint charge to record the transaction, but not for the memory that recording consumes on the CVM. However, Etherum, like Bitcoin, only rewards a single miner, while CPH evenly splits the fees collected from a transaction among the committee members. This departure keeps the fees lower than on the EVM because the committee working collectively allows the network to process a greater overall number of transactions, reducing the cost of each individual contract.

Of course, in keeping with the Cypherium philosophy of keeping what works and throwing out what doesn’t, there are still more structural similarities between the two. CPH is the native currency that keeps Cypherium running. It does so without the prevalent problems of bottlenecking, bidding gridlock, and overpaying fees.

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