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Tokenomics & Inflation Model

note

This includes advanced content.

tip

Models for Astar & Shiden are the same but some configuration differences are possible. In the following chapters, we will only mention Astar and ASTR token but same applies for Shiden and its SDN token.

Astar Network tokenomics model is built around supporting developers via dApps staking. At its core, ASTR tokens have multiple roles:

  1. Payment for transaction fees
  2. Staking dApps
  3. dApps staking rewards & collator rewards

Inflation Model

Overview

Previous chapters defined initial ASTR token distribution. However, Astar uses an inflationary tokenomics model (unbound supply) where tokens are issued each time a new block is produced. These tokens drive the dApps staking system and are used to reward stakers and collators.

For each produced block, Astar will issue a fixed number of tokens. These numbers were picked to achieve approximate 10% inflation for the first year, assuming a new block is produced every 12 seconds.

NetworkIssued Per Block
Astar266.4 ASTR
Shiden2.664 SDN

The reader might notice that Astar issues 100 times more tokens per block than Shiden. This is due to Astar having a 100 times greater initial supply than Shiden.

Beneficiaries

Each block reward is distributed to a set of beneficiaries. ​

> Collators

The collator responsible for building the block will receive collator's portion of reward. This is the main financial incentive for the collators. Portion is configured as percentage of the block reward on-chain and is constant per block unless manually changed.

In addition, it will receive fees paid by the users for transactions that were included in the produced block. For Shiden, 20% of the fees are burned to provide deflationary force to the model. The same might soon be adopted by Astar.

> On-chain Treasury

Treasury receives a variable portion of block reward. It is primarily used as reserve for parachain auction and to support various projects and activities accross Astar ecosystem.

> dApps Staking

dApps staking, Astar's innovative developer incentive mechanism, receives a variable portion of the block rewards depending on current total value locked (or TVL in further text) in dApps staking.

Part of it is dedicated for supporting dApp developers while another part goes towards stakers who locked their ASTR to stake or vote for a dApp.

Model Overview

Previous chapters described that inflation per block is fixed - however, the way we distributed this reward for some beneficiaries is dynamic and depends on certain parameters. It's important to emphasize that all of the related parameters of the model are read on-chain - nothing is provided off-chain. This makes it secure and easily verifiable.

There are two main things to understand before diving deeper into the model - TVL and configurable block reward parameters.

TVL

The main variable in the system that fluctuates from block to block, based on user actions, is TVL from dApps staking.

note

TVL in this context does not consider non-ASTR tokens locked by other protocols built on top of Astar (e.g. DeFi protocols) and as such has no effect on the reward distribution schema.

We're interested particularly in TVL percentage

  • total_issuancetotal\_issuance - total amount of issued ASTR tokens
  • TVLTVL - total amount of tokens locked in dApps-staking
  • TVL%=totalTVLTVL_{\%} = {total \over TVL}

In case total_issuance equals 1000 and TVL is 242, TVL percentage will be 24.2%.

Configurable Parameters

The following parameters influence how each block reward is distributed.

NameDescriptionExample Value
Collators PercentFixed percentage that goes to collators10%
Base Treasury PercentMinimum percentage that always goes to treasury10 %
Base Staker PercentMinimum percentage that always goes to dApps-staking staker rewards pool20 %
dApps PercentFixed percentage that goes to dApps-staking dApp reward pool15 %
Adjustable PercentPercentage that is split between treasury and stakers, depending on the TVL45 %
Ideal dApps-staking TVLTVL percentage which is considered to be ideal60%

The amount received by stakers and the treasury is dynamic and depends on TVL. However, there is a lower bound on how much goes towards them. These are the base parameters. Collators and dApps always receive a fixed percentage of the reward.

Adjustable Percent

Depending on the TVL, the adjustable percent of the block reward is split between stakers and the treasury.

adjustablestaker=min(1,TVL%TVLideal)adjustable%totalstaker=basestaker+adjustablestakertotaltreasury=basetreasury+(adjustable%adjustablestaker)\begin{aligned} a&djustable_{staker} = min(1, {TVL_{\%} \over TVL_{ideal}}) * adjustable_{\%} \newline\newline t&otal_{staker} = base_{staker} + adjustable_{staker} \newline\newline t&otal_{treasury} = base_{treasury} + (adjustable_{\%} - adjustable_{staker}) \end{aligned}

As more tokens are staked and TVL increases, the portion of staker rewards will increase to compensate for the fact that otherwise staking would be a zero-sum-game. This increase is linear up to a certain threshold, TVLidealTVL_{ideal}, after which it saturates. Any further increase in TVL will not result in increase to stakers rewards.

Note that in Polkadot's model, when ideal TVL is reached, staker rewards drop exponentially. In our case, they only become saturated, making it a zero-sum-game. Motivation behind our approach is simplicity.

Interest Rate

Using the parameters from the previous chapters, we can express yearly interest rate for the stakers:

i=inflationanualtotalstakerTVL%i = {inflation_{anual} * total_{staker} \over TVL_{\%}}

For example, in case totalstaker=55%total_{staker} = 55\% and TVL%=40%TVL_{\%} = 40\%, we end up with 0.10.550.4{0.1 * 0.55 \over 0.4} which is 13.75% anual interest rate.

However, inflation dilutes the interest rate so it's more precise to consider inflation adjusted anual interest rate.

iadjusted=i+1inflationanual+11i_{adjusted} = {i + 1 \over inflation_{anual} + 1} - 1

To follow up on the example above, inflation adjusted value would be 0.1375+10.1+11{0.1375 + 1 \over 0.1 + 1} - 1 which is 3.4%.

Model Visualization

The following graph is a visualization of the described model.

  • green line is interest rate ii
  • blue line is total staker inflation totalstakertotal_{staker}
  • red line is inflation adjusted interest rate iadjustedi_{adjusted}

tokenomics_model_visualization

You can check the model and configure if yourself here.