The Value of NYM: The spice powering our network

The Nym mixnet: A digital privacy portal

Unfortunately, everything we do online is highly vulnerable to surveillance. With the advent of AI, the threats are exponentially growing. How we move across the web requires not only new privacy technologies, but also a new style of being online. In the spirit of the Fremen, who silently and safely glide across the desert sand, we can call our stealth digital steps the mixnet shuffle.

Dune - Sandwalk

The Nym mixnet (short for mix network) was designed to take digital privacy into this new generation. Rather than a traditional VPN model — which is centralized and typically only 1-hop by default — the Nym mixnet routes users traffic through 5 independently operated servers across the world.

With the addition of network noise, the mixnet can also help confuse surveillance in a way that other privacy networks do not:

• Anonymizing data packets
• Mixing or shuffling the data packets of different users together
• Introducing timing delays to combat AI-powered traffic analysis
• Adding cover traffic to expand the size and anonymity of the network crowd

Imagine the mixnet as if it were a portal through which your online activity is teleported. While someone might see you enter, tracking where you exit becomes extremely difficult because of how things get scrambled in between. The result is true anonymity and privacy for everyone in whatever they do.

But there’s no need to simply imagine it, learn more about how the mixnet underneath NymVPN’s Anonymous Mode works step-by-step.

In the end, though, the Nym mixnet is much more than a network routing scheme: it’s a community of people around the globe who are incentivized to build a privacy network together. This is where NYM as token comes into play.

Nym tokenomics: Decentralized, permissionless, and unlinkable

The NYM token firstly incentivises operators to run the powerful Nym network. NYM tokens are distributed to nodes that provide privacy services to end users. As the usage and demand increases, more value flows through the network and is distributed to operators, incentivisng more to join in and serve demand.

But the token also serves a technical function that provides very unique privacy features. Namely decentralization and unlinkability.

Making a decentralized network

The nodes that operate the Nym mixnet are run by independent people all over the world who care about privacy: not employees, but a community of service providers. In fact, anyone can set up a Nym node to be part of this growing community.

But this raises the question, who decides what node is or is not part of the network? One way to solve that is to have a “Directory Authority” meaning a list of nodes held by someone somewhere. Instead, Nym uses a more decentralised method, namely a Cosmos blockchain called Nyx to maintain this topology of nodes. This makes the network permissionless: running a node does not require the consent or administration of any central authority (e.g., Nym Technologies).

The result is a decentralized directory authority: a technologically coordinated and token-incentivized community of service providers without a center of control.

Unlinkability

Nym is decentralized, not just to be ethical and equitable, but because that helps for privacy. Because the network is decentralised and permissionless, anyone can join as a node by bonding some NYM tokens to signal that they want to join. This registers them with the Mixnet smart contract.

Every ‘epoch’ (set to 1hr currently), the mixnet contract selects a subset of those bonded nodes to be in the ‘active set’ of nodes routing user traffic. Each user packet is routed through different pathways across five hops. And because the available pathways change every epoch, this makes it near-impossible for an attacker to construct a malicious pathway and trace a packet from a user’s client to its destination. In short, offer unlinkability between sender and receiver.

In short, this protects people’s patterns of online behaviour through a unique architecture powered by the NYM token. The result of this form of tokenomics is a major, unprecedented privacy architecture: making users unlinkable to their traffic through a network that is truly permissionless and decentralized.

Incentivizing performance

Other similar privacy networks often rely solely on volunteers and may suffer from a lower quality of service in certain cases. Nym nodes are alternatively incentivized with NYM tokens to run high performing nodes for clients in a way that protects the privacy of the whole network.

There are two important components to this:

1. By network design, only nodes which qualify (e.g., by running the latest protocols or binaries) will be eligible to be part of the active set responsible for routing mixnet client traffic.
2. The higher the performance of nodes in routing user traffic through the network, the more rewards in NYM they will be eligible to receive.

In both cases, it is NYM which provides the incentive for nodes to perform better for clients.

The Value of NYM: Deepdives on Nym tokenomics

Tokenomics is anything but simple: it’s a reinvention of many core economic ideas and assumptions about monetary value. But fear not, The Value of NYM series is here to help. Each week Nym will walk you through the different intricacies and levels of the tokenomics behind the world’s most private network. Here are some of the questions to look forward to learning about:

• What is the payment flow model in which the value of NYM sustains and empowers Nym mixnet operators?
• How does the NYM token allow for anonymous payments?
• How do NYM rewards for service providers get determined?
• How can crypto provide a real world utility and not just speculation?

In the meantime, here’s a taste of the different aspects of Nym tokenomics that will be covered in coming weeks.

The payment flow

Traditional VPNs operate or rent proprietary servers across the world to reroute client traffic, making them highly susceptible to government overreach and surveillance. And other existing privacy networks do not incentivize their own service providers.

To push privacy technology to its next generation, Nym has created a decentralized community of global privacy-enthusiasts who are instead rewarded for their service with NYM. This “flow” of rewards, however, is the result of an extensive Nym research and development project to make novel tokenomics for privacy a concrete and self-sustaining reality.

For instance, it requires a feedback loop between different parts:

• A pool of rewards available to be earned by node operators
• A delegation’s program of NYM staking in performative node operators
• A community-decided division of rewards for operators and stakers
• A feedback of Nym profits into the NYM rewards pool

The Nym Token Flow

So understanding the complex process of this NYM payment flow will be the first step in appreciating the tokenomics behind the Nym privacy network.

But the aim, for NymVPN users and NYM holders alike, should not be forgotten: as a utility token, the value of NYM is linked to a real world problem: providing genuine privacy online. This ultimately depends on a symbiotic relationship between users paying in NYM for anonymity, the privacy-strength of the entire Nym network, and the success of NymVPN as the first commercial app to run on it.

There are three basic principles of this flow:

1. Principle of Anonymity: The more users who pay to use NymVPN with NYM, the more resilient the whole network becomes for everyone against external surveillance.
2. Principle of Incentives: The more private the network is for users, the more attractive it becomes for new ones, andthe more node operators are rewarded in NYM.
3. Principle of Growth: The higher the demand for online privacy becomes, the more the value of NYM will grow, benefiting clients and operators alike.

Anonymous payments: ZK-Nyms

The NYM token doesn’t just incentivize node operators, it also anonymizes NymVPN subscriptions for clients.

One of the biggest privacy problems with traditional VPNs is payments: you sign up for a privacy service, but you need to use fiat payments (e.g., a credit or debit card). This can be used to easily link your identity to your subscription, and potentially even to your traffic records, through the VPN’s servers if they are breached.

NymVPN addresses this with a zero-knowledge payment system called zk-nyms. A zk-nym credential functions paradoxically like an anonymous passport for your digital journey. By converting all payments first into zk-nyms, the subscriptions of users are then fully dissociated from their usage, and even from Nym Technologies itself!

At the portal entrance (what Nym calls an “entry gateway”), the only information available to the node operator or Nym is if the traveling document is valid. This does not require any knowledge of who or how it was acquired. Unlinkability thus extends all the way down for users.

So stay tuned for a deepdive into how zk-nyms work to protect your identity and all the work that went into developing them.

Communal governance

Nym nodes are not properties or employees of Nym, but rather stakeholders in a new privacy enterprise, and as such they should have a say in their own compensations.

A novel part of NYM tokenomics is to increasingly make this an effort in communal governance regarding how NYM rewards are distributed between different network agents: entry gateways, mixnodes, exit gateways, and Nym Tech itself.

The Nym community of operators has been active this year in their first self-governance initiatives, including votes on the distribution of rewards and minimum profit margins. So a big part of understanding Nym tokenomics will be appreciating these novel experiments in communal governance happening on the ground.

Stay tuned to dive into NYM tokenomics

However revolutionary crypto technology has been, it is definitely at a crossroads. While foundational tokens like Bitcoin continue to rise as planned, the rest fluctuate like squirrels in the middle of the road. And fiat currencies are freight trains running in every direction.

The big problem is that most tokens are connected with little but hype. Utility tokens like NYM provide a different route: don’t just speculate, be part of a project to address a real world need and power new technologies and institutions capable of meeting it.

With NymVPN and the power of NYM, we can move toward a future where digital sovereignty is within reach, and privacy is woven into the very fabric of the web.

But the tokenomics behind all this is admittedly new. So join us each week to explore a different part of it. We will deepdive into all the technical and social aspects of how the NYM utility token functions to power the world’s most private network.

In the meantime, Tweet or Telegram us with #NymTokenomics to share any questions or topics you’d like Nym to explain in more depth about NYM as a utility token.

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