We want the cost of an attack to be proportional to the price of NKN - if NKN becomes 10 times more expensive it should cost an attacker 10 times as much to attack the network.

The 10 NKN fee to start mining is means that the cost of attack isn’t proportional to the price of NKN, but proportional to the **SQUARE** of the price of NKN.

The reason is as follows: if the price of NKN rises by a factor of z then we expect there to be z times as many nodes in the network. So not only does the attacker have to have z times as many nodes to start an attack, the 10 NKN also costs z times as much so he ends up needing z^2 times as much money to start the attack. I’ll walk through an example with made-up values to illustrate but first I need to explain how miners reach equilibrium.

If it costs $1.00/month in costs to run a node in the network, then people are incentivised to keep starting new nodes, increasing the total number of nodes until the mining rewards goes below $1.00/month where people will stop making new nodes. If the price of NKN from here rises by a factor of 5, then we expect there to result with exactly 5 times as many miners before the mining rewards average $1.00 again. This is the equilibrium of mining - where the rewards in NKN of the network matches the cost of running the node. Now I’ll walk through the example of attack costs with imaginary values.

If there are 20,000 nodes in the network it means the price of NKN is $0.02 so the total network of NKN is worth $20m. Assume an attacker needs to create eg half of the total nodes to start an attack, so he will create 10,000 nodes each costing 10 NKN so it costs 100,000 NKN to start an attack, meaning his cost is $0.02*100,000 = $2,000 to start the attack. If NKN rises by a factor of 100 from $0.02 to $2.00, we expect the node count now to also rise to 100x its size for the miners reach equilibrium again so we expect 2,000,000 nodes in the network at this higher price. To generate an attack he needs half that many nodes again, so 1,000,000 nodes, each requiring 10 NKN for a total of 10,000,000 NKN needed. This costs $2.00 * 10,000,000 = $20m to start the attack. So you can see that the price of NKN rose by a factor of 100 but the cost to start an attack rose by 100^2 = 10,000.

The way to solve this is to tie the price to USD instead of NKN so that the cost of an attack remains proportional to the price of NKN rather than the square of the price of NKN.

Also, with a fixed fee of 10 NKN, it becomes more and more expensive to start mining on the network as the price of NKN rises. The growth of the node count of the network is crippled by a fee of 10 NKN. When NKN hits $100 it’s going to cost $1,000 to start a node. It would be impossible to recoup those costs from producing useful work in the network (relying on the bonus mining rewards is not acceptable). It is necessary to fix the price in USD not NKN.