Skip to main content
Quai Network’s dual-token system creates a sophisticated economic model that serves different monetary needs. The intricate relationship between Quai and Qi tokens positions Quai as an increasingly-scarce store-of-value, while Qi functions as a medium of exchange, loosely tied to the cost of generating a hash and thus the cost of energy. These complementary roles are achieved through carefully designed economic mechanisms that maintain balance and utility. The primary mechanisms driving these token dynamics are emissions through block rewards, conversions between the two tokens, and a highly responsive difficulty algorithm. Each mechanism works in concert to create a stable, functional monetary system where supply responds to demand in real-time. Understanding these interactions is crucial for grasping how Quai Network maintains economic equilibrium while serving diverse financial needs.

​
Emissions (Block Rewards)

Block rewards form the foundation of token creation in Quai Network, determining how new tokens enter circulation. Mining rewards follow two distinct mathematical functions that create fundamentally different supply dynamics for each token. The system measures mining difficulty - essentially how much computational work is required to find a valid block - but applies this measurement in drastically different ways for Quai versus Qi rewards. Quai and Qi block reward emissions are both calculated as functions of difficulty, but these functions produce opposite scarcity characteristics. The specific mathematical relationships between difficulty and token emissions create the economic properties that make Quai deflationary and Qi inflationary. These relationships are explored in detail on the block rewards page of the documentation. The mathematical foundation of token scarcity lies in these contrasting emission functions. The logarithmic relationship between difficulty and Quai emissions versus the linear relationship between difficulty and Qi emissions produces the fundamental difference between Quai scarcity and Qi expansion. For every doubling in mining difficulty - representing twice the computational work - Quai rewards increase by only one logarithmic unit, while Qi rewards double entirely. This creates dramatically different supply trajectories over time. This design ensures Quai becomes increasingly scarce as the network grows, while Qi remains naturally connected to miners’ actual costs of production, making it a reliable measure of energy or electricity pricing. The ability for miners to select which token they wish to receive as block rewards creates a market-driven emission system where Qi supply directly responds to demand, while Quai supply becomes progressively more constrained.

​
Conversions

Conversions between Qi and Quai provide the critical mechanism for rapid supply adjustment in response to market conditions. This system creates an arbitrage market that allows any network participant to exchange tokens at any time, not just miners receiving block rewards. The conversion ratio is dynamically determined by the current Quai and Qi block reward rates, ensuring the exchange rate reflects the underlying economic value of each token type. This conversion mechanism serves as a pressure valve for the entire token system, allowing supply to adjust almost instantly to demand changes. When market conditions shift, participants can convert between tokens to capture value or meet their specific monetary needs, creating natural market-driven supply regulation. The conversion system creates powerful stabilizing forces that respond to market demand in both directions. When demand for Qi falls, arbitrageurs can swap from Qi to Quai at the current conversion ratio, effectively reducing the circulating supply of Qi and supporting its value. Conversely, when demand for Qi rises, miners become incentivized to accept their block rewards in Qi rather than Quai, increasing the supply of Qi to meet growing demand. This dual-direction mechanism ensures that Qi supply stays closely aligned with actual usage and demand, while Quai benefits from the deflationary pressure when participants convert to it during low-Qi-demand periods. The conversion dynamic and its mathematical underpinnings are explored more in-depth in the conversions page of the documentation.

​
Difficulty

Difficulty adjustment represents the fundamental control mechanism that maintains network security and economic stability in Quai Network. Like other proof-of-work systems, the network determines block production rates and token emissions by dynamically adjusting how difficult it is to mine valid blocks. However, Quai Network’s approach to difficulty adjustment is more sophisticated and responsive than traditional systems, enabling real-time adaptation to changing market conditions. At its core, difficulty serves as the network’s throttle, controlling how fast new blocks are produced and thus how quickly new tokens enter circulation. This mechanism ensures consistent block times regardless of how much mining power joins or leaves the network. The difficulty adjustment algorithm operates as a supply-and-demand matching system for network security. Difficulty responds to demand-driven changes in miner hashrate by analyzing block time deviations and renormalizing the target difficulty accordingly. Unlike Bitcoin’s periodic adjustments that occur every 2016 blocks, Quai Network implements rolling difficulty adjustments based on a moving window of recent blocks, enabling much faster response to market changes. This continuous adjustment mechanism prevents the dramatic swings in block times that can occur in systems with infrequent difficulty updates. Instead of waiting for predetermined intervals, the network constantly fine-tunes difficulty to maintain optimal block production rates. The interaction between rolling difficulty adjustments and the dual-token emission model creates a dynamic economic system where token rewards evolve continuously. As difficulty changes with each block, the respective quantities of potential Quai and Qi rewards shift according to their distinct mathematical functions - logarithmic for Quai and linear for Qi. This means the economic incentives and supply dynamics are constantly adapting to network conditions and miner behavior. This real-time adjustment system ensures that both tokens maintain their intended economic properties even as network conditions change dramatically over time. The technical details of how Quai Network measures and adjusts difficulty are further explored in the difficulty adjustments page of the documentation.