With the lack of proper infrastructure in our target countries, there are almost no public Wi-Fi connections or shared connectivity in shopping malls, restaurants, bus stations, and shops.
K3 is already testing a technical solution that facilitates sharing bandwidth through special access points, and 3air will provide the correct interface and blockchain solution.
There are 2 main issues with bandwidth sharing:
- Local regulations.
- Terms and conditions from the ISP provider.
Every country wants to control the usage of the internet to some degree. That’s why ISPs are regulated companies that require licenses to operate. Each user needs to register so that there is a record in case of any criminal activities. The same goes for mobile operators. There are exceptions to the rule with public Wi-Fi connections and similar services, but even those have at least one authentication method.
Secondly, ISPs don’t allow commercial or noncommercial bandwidth sharing. It is especially true of shared connection plans, which are the most popular type of broadband connectivity today. The ISPs that operate a shared network sell your bandwidth cheaper than they buy it because they resell it multiple times. They operate on the premise that not everybody will use the full bandwidth at the same time and apply a fair usage policy. So, these connections do not support bandwidth sharing, and the ISP can decline your service request if your bandwidth usage is excessive.
Communities built on such sharing economies have raised concerns about the long-term feasibility and potential crackdown from ISPs. (Is anyone concerned about what happens when ISPs get wise to the game re: internet usage?, 2021)
To avoid these issues, we are facilitating the differentiation of services on our platform, where ISPs can charge a premium for permitting bandwidth sharing. When users acquire such a package, they will get the proper access point hardware, preinstalled with a software solution that allows multiple, payable, or free connections. Users can share free bandwidth in shopping malls, restaurants, and places where such additional services are needed.
To avoid regulatory issues, users will authenticate with their DIDs or use the internet under a short-term public connection policy that requires light authentication only.
Types of users
There are 4 types of users in the 3air bandwidth sharing model:
- ISPs, providing original bandwidth,
- Access point operators, sharing their bandwidth,
- Consuming users, connecting to shared access points,
- Insurance providers, ensuring sustainable system maintenance.
These users’ incentives are not aligned and must be managed carefully.
ISPs operate a business model based on selling bandwidth as their primary service and main revenue stream. The goals of ISPs in sharing economies are to:
- Create an additional revenue stream from selling bandwidth to transitory users (tourists, shop visitors, etc.).
- Create an additional revenue stream from upselling existing users to be able to use roaming.
- Promote themselves by providing exceptional services in public places, therefore gaining new customers.
- Offer roaming possibilities on fixed connections to their clients and clients from other networks.
ISPs are strongly opposed to sharing bandwidth as it:
- Promotes unnecessary network loads and unfair data usage.
- Clogs up broadband infrastructure, especially during peak periods.
- Leads to additional costs in buying more bandwidth from the backbone providers.
- Reduces their primary revenue stream.
Therefore, ISPs will never allow bandwidth sharing without additional incentivization. Due to the sharing demands of most retail internet connection plans, ISPs will deny service if they notice unfair bandwidth usage. If you are constantly utilizing 100% of your shared connection, the ISP has the legal right to deny you service, even if you did not share your connection.
Access Point operator
Access Point (AP) operators run access points for diverse reasons that can be summarized thus:
- Additional revenue stream from providing a connection point as a service.
- Better customer experience, building the brand reputation, and gaining an edge on the competition.
- Attracting more transitory customers, such as tourists.
Someone from a developed country, where quality Wi-Fi or mobile data is available everywhere, may find it difficult to comprehend the advantages of offering quality connectivity in public places or businesses.
Good connectivity in many emerging economies is hard to come by, so providing such a service can lead to a significant competitive edge. Shopping malls, restaurants, tourist centers, bus stations, and banks would benefit from providing public internet services.
Also, it may generate revenue by providing a connection spot.
The consuming user has the following incentives to use the public access points:
- Roaming capabilities on their fixed broadband.
- Cheap, short-term access to quality Wi-Fi in public and semi-public places.
The insurance provider takes on the risk of HW failure and needs to be compensated with an appropriate reward. The insurance provider’s incentives are the rewards from the Staking and Access Point pools.
There are different approaches to building out an IoT sharing economy and allowing bandwidth sharing. Companies like Helium and World Mobile Token use blockchain technology, while others like Xfinity are cloud-based or use similar technology. Some of these models have already been applied and seem to tackle the tragedy-of-the-commons (Hardin, 1968) situation well, while others still need to deploy and test in real-world settings.
There have been many papers published on the topic of fair bandwidth sharing (F. P. Kelly, 2003) (D. Shah, 2011) (Lautenschlaeger, 2014). Those papers are intended for ISPs to set up a sustainable, cost-effective, and fair use shared bandwidth model, but on a smaller scale, they are also relevant for broadband sharing in public spaces. The challenge here is how to provide bandwidth to the connected users and fairly distribute the available bandwidth without compromising the quality of the connection for each user. This calls for a basic decision model that must be validated and fine tuned in a real-world setting. 3air plans to tackle this with the help of K3’s expertise and experience in the shared broadband model at the ISP level. We believe that this is not a problem that blockchain needs to solve. The provisioning and fair usage does not need to be managed in a permissionless and decentralized way. Standard models allow for greater efficiency in these types of transactions. They do not contribute significantly to security or privacy as this data is not sensitive, attributed to a specific user, or valuable to hack.
Blockchain-based micro-economies thus seem well designed to enable bandwidth sharing (Bello, Muhammad, Binta, & Ahamed, 2021) (de Vos & Johan, 2018). They work well in regard to rewarding their users and encouraging them to behave correctly and honestly in the game theory. They enable financial incentives that help resolve the tragedy-of-the-commons situation. Financial data and transactions benefit greatly from the blockchain's transparency, security, privacy, and permissionless nature. A pool of funds, called the Access Point pool, may be set up to provide incentives for good behavior in the 3air sharing model.
Figure 17 3air bandwidth sharing model
Access point insurance
A certain amount of 3air tokens must be staked in a smart contract to operate an access point successfully. These tokens are used as insurance in case of access point HW damage, failure, or other events that need maintenance or replacement of the access point or supporting infrastructure. The required amount is to be determined at a later stage and will be adjustable. The access point operator must provide at least 25% of the minimum required tokens to incentivize proper care of the infrastructure.
If any maintenance or replacement is needed, insurance tokens will be reduced by the amount needed for repairs or to exchange the access point equipment. Until the 3air platform v2 is online, this procedure will require the manual involvement of the operating ISP. Information about the errors and consequent repairs will be shared, and the insurance token holders will have the right to file a dispute. The final decision may be decided by a vote from all insurance token holders.
The 3air platform v2 will be IoT and blockchain-powered, allowing self-reporting and automatic payments from the insurance pool to the maintenance team once the node is back online. Staked tokens will ensure access to all relevant IoT information and the ability to veto the maintenance team’s decisions to prevent system exploitation. When they cannot reach a consensus, insurance tokens from other access points can vote on the dispute. Such a complex permissionless insurance system warrants more in-depth analyses and reviews that will be provided with the 3air platform v2 documentation.
There will be a list of all issued access points provided and represented by a smart contract. Any token holder can stake their tokens into the smart contracts and pledge them as insurance. During the “early staking” period (see section 5.9.1 Early staking), tokens staked for insurance will also receive distributed rewards from the staking pool.
These tokens may get extra rewards from the Access Point pool to act as additional rewards for insurance providers.
The amount of tokens staked in the insurance contract drives additional speed to the access point.
Once 3air v2 is operational, the reward structures will change as the bandwidth sharing model will switch to operate on the 3air chain.
Accessing shared services
Professional Access Points (AP) will be provided by the ISP and preloaded with the 3air software. The AP will be selected considering the business type and will have a radius of 50 to 100m to serve up to 500 users simultaneously.
Each user connecting to an Access Point (AP) will need to authenticate themselves. There are 2 ways of authentication:
- Full authentication, using a DID.
- Light authentication, using the public use policy.
The identification with a DID is almost seamless as the only thing needed is to allow the connection to the DID. The system then checks on the blockchain if the user is a 3air customer and if they have roaming services enabled to allow or deny access to the internet accordingly.
If the user is not a 3air customer, they have the option to buy a voucher code to access the public internet. The public internet usage policy sets the level of authentication, usually by validating the user’s email address or phone number. The voucher allows the user to connect to any 3air-provided AP. Vouchers have usage limitations and automatically disconnect a client after the conditions are met.
The AP operator can allow free access to the services if it is more suitable for their business model. In this case, they forfeit the related rewards of operating an AP.
The AP operator and the ISP providing the service will design the internet access interface. The user can see the availability of a 3air connection in their home area and can apply for services.
Access point pool
The Access Point pool is intended to incentivize all the parties needed to provide bandwidth sharing services to the end user. The Access Point pool will be fueled by:
- Monthly premium fees, paid by the end user for roaming.
- Monthly premium fees, paid by the access point operator.
- Access fees, paid by transitory users who buy vouchers or pay online.
Rewards from Access Point pools are distributed every week.
Three parties need to be incentivized to operate the bandwidth sharing system so the end user can connect to it. The AP pool is split:
- 10% - Access Point operators.
- 50% - ISPs providing the bandwidth.
- 40% - Insurance providers.
Access Point operators receive 10% of the total AP pool. This 10% is distributed to each pool according to how many users connected to it during the week. To calculate each AP reward, we use the formula:
Rap = Rt * Uap / Ut
- Rap (Reward of selected AP)
- Rt (Total rewards for all AP)
- Uap (Unique users connected to the selected AP in the week)
- Ut (Total users connected in the week, calculated as the sum of all Uap)
The logic behind such a split is simple since it incentivizes the AP operators to promote the services and connect as many users as possible. It generates revenue streams in the system.
ISPs bear most of the costs in this model. They provide the initial AP, infrastructure, and ongoing bandwidth, so they are awarded most of the AP pool funds. The funds are split based on users that connected during the week with a similar formula as AP operators:
RISP = Rt * UISP / Ut
- RISP (Reward of selected ISP)
- Rt (Total rewards for all ISPs)
- UISP (Total users served by ISP in the week, calculated as the sum of Uap that the ISP provides service to.)
- Ut (Total users connected in the week, calculated as the sum of all UISP)
Another option to ensure fair rewards distribution would be to split the rewards by bandwidth usage. At the same time, this opens up the potential for system exploitation with ISPs intentionally spending bandwidth. Additionally, bandwidth tracking and calculations lead to complex systems. We have also restrained from calculating total users as it is also easier to exploit the AP and ISP rewards calculations. We believe the suggested system provides the perfect balance between fairness and complexity and the least vulnerabilities to exploitation.
Insurance providers receive 40% of the rewards because they carry some potential risk in the system. A system of diminishing returns will be integrated to prevent token centralization and equal distribution between APs. The goal is to have a balanced AP insurance, where every AP is fully insured before it becomes operational.
The rewards for the insurance providers are set up so they have diminishing returns on the additional tokens staked. The formula to calculate the total insurance reward per AP is:
Ri(ap) = Ri(t) * f / APn + ((Ri(t) – (Ri(t) * f)) / Ts * Ts(ap))
- Ri(ap) (Total insurance reward for AP)
- Ri(t) (Total insurance rewards)
- F (Distribution factor between 0 and 1)
- APn (Total number of operational AP)
- Ts (Total tokens staked in all AP)
- Ts(ap) (Total tokens staked in current AP)
The distribution factor (F) regulates how much power the diminishing system has. A lower value means returns are less diminishing, and higher values mean that the rewards on additional tokens will be more diminishing. With adjustments to this factor, we can balance the AP insurance pools.
To calculate the reward per user, we first calculate the reward per token in a specific AP:
Rt(ap) = Ri(ap) / Ts(ap)
- Rt(ap) (Reward per token of a specific AP)
- Ri(ap) (Total insurance reward for AP)
- Ts(ap) (Total tokens staked in current AP)
The reward per user is then:
Ru(ap) = Rt(ap) * Ts(uap)
- Ru(ap) (Reward per user in a specific AP)
- Rt(ap) (Reward per token of a specific AP)
- Ts(uap) (Total tokens stakes by user in the AP)
Such a system should provide fair and competitive reward structures with minimal centralization and exploitation opportunities. It should incentivize all the key players to provide quality services to the end user.
The tokens are paid to the same wallets that staked the tokens.
Users can also decide to stake the tokens in the regular staking pool during the early staking period. Such staked tokens are also distributed as early staking rewards.
Providing Free internet
An AP operator can decide to provide the internet to his clients for free. It is especially desirable in restaurants, bars, shops, etc., as it might attract new customers and tourists.
If an AP decides to deliver free internet, they also forfeit their right to the AP operator rewards distribution. These rewards go back to the AP pool to be used in the subsequent distribution. The AP operator is still eligible for standard insurance staking rewards.
3air or any ISP can decide to set up a free internet AP in areas of interest. In such cases, they must follow the rules of a standard AP operator.
Maintenance request cases
In the case of maintenance costs, the tokens are deducted from the AP pool, where each contributor contributes an amount proportional to their stake.
For instance, if a user holds 5% of the total staked tokens in the AP, their contribution to the repairs will be 5% of the total cost.
Staking and unstaking
Staking will be done via a browser application that allows users to connect a wallet to the dApp. The application will display a full list of APs, but only the ones with minimum self-delegation will be active for token delegation. The APs will include statistics such as total tokens staked, self-delegation percentage, maintenance request, cost incurred, current APY, and other additional information.
Users will need to select an AP and the amount of tokens they wish to delegate and stake them in a smart contract.
The user interacts with a smart contract to unstake. Unstaking takes 2 weeks, and no rewards are distributed during the unstaking period. After 2 weeks, the user gets their tokens returned in the same wallet they staked with.
Staking and unstaking to APs and the early staking pool can be done at the same if desired, but it needs to be noted that they are two different staking contracts, and they have different unstaking requirements.
Roaming within the 3air system is easy and accessible for all parties in the ecosystem. There is no need for in-depth contractual relationships between different providers. All the premiums and voucher funds are collected in a separate pool and distributed according to usage through a fair and permissionless model. Using Digital Identities that are virtually impregnable, users can connect to APs and authenticate themselves.
Roaming is instant and fairly priced across different providers, cities, or countries.
It is essential to mention that other ISPs can join the 3air platform for roaming functions exclusively and participate in setting up APs within their networks. This may create many access points around the world. It is essential to finalize agreements before setting up an AP. This is the only sustainable way to build a sharing economy in the future.
ISPs have an economic model that does not include uncontrolled bandwidth sharing. Currently, sharing communities are still small and mostly unnoticeable. To achieve mainstream popularity, ISPs have to be included.
Getting the details right in such a system of complex interactions is tricky. The game theory provides good insight into how different actors will act to serve their personal interests. We believe we have tackled all the loopholes but will continue monitoring the system closely once implemented to adjust the rewards distribution and insurance staking parameters. This is not the final model and will continue to evolve in the future.
First, we must justify whether such a system warrants a new second-layer blockchain. Many projects are developing their chains without any real purpose or in-depth thought. While a side chain might have some advantages, it also has many downsides. They involve security concerns, compatibility issues, additional development time, adoption, and recognition. We must also decide which transactions need to be recorded on the blockchain. Authentication events should be time stamped and recorded, and logs can be aggregated and recorded at certain times.
We concluded that with data optimization, a full sidechain might not be needed. That said, a sidechain might become necessary if we want to record more data on the blockchain in real-time.