Rollup Economic Model

Rollups generally capture value through the following means:

• Transaction fees

• MEV income (Maximum Extractable Value for sequencers or validator nodes)

• Native token supply distribution of the Rollup-chain

For example, Arbitrum internally has two types of tokens: one is ETH used to pay Gas Fees, and the other is a native token used solely for governance (ARB).

Additionally, Rollups typically involve staking. In the case of ME Network, there are two types of Rollup-chain operators. One type is the validator node operators of ME Network (national zones), who share the validator node's stake; the other type is ordinary operators who do not run validator nodes simultaneously and need to stake additional MEC to allow their sequencers to join the network.

Although, in principle, each Rollup can issue its own native token, the SDK by default uses MEC as the Gas Fee. Additionally, the incentive mechanisms in the MEC economic model are not directly related to the Rollup itself. To prevent sequencers from operating at a loss, the main source of income for Rollups is transaction fees, detailed as follows:

• User Fees (charged by Rollup to users) = MEC used as Gas Fee

(To promote the healthy development of Rollup-chains within the ME Network and collectively drive user growth on ME Network, the following mechanism is set: based on the user's KYC country zone, if it belongs to country zone A, regardless of which Rollup-chain the user consumes Gas Fee on, ME Network will return the Gas Fee to the validator nodes of country zone A in a certain proportion. This way, each country zone does not have to worry about users migrating to other Rollup-chain operators.)

• Operator Revenue = User Fees + MEV

• Operator Costs = Settlement Layer Fees + DA Fees + Operator Costs

• Net Value Captured = Operator Revenue - Operator Costs

Furthermore, on each Rollup-chain, user addresses correspond to the same private key, allowing users to interact with DApps or send transactions across different Rollup-chains without needing to switch wallets, thus offering a seamless product experience.

Therefore, the MEC token in ME Network is used not only for validator node staking, transaction execution Gas, and DA storage fees on the ME Hub but also for sequencer staking, transaction Gas, and other related fees on Rollups. Consequently, MEC becomes the backbone of value on ME Network, while each Rollup or contract can also create its own token, exploring further derivative token value.