Tokenomics & Inflation Model
This includes advanced content.
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:
- Payment for transaction fees
- Staking dApps
- dApps staking rewards & collator rewards
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.
|Network||Issued Per Block|
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.
Each block reward is distributed to a set of beneficiaries.
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.
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.
The main variable in the system that fluctuates from block to block, based on user actions, is TVL from dApps staking.
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 amount of issued ASTR tokens
- - total amount of tokens locked in dApps-staking
In case total_issuance equals 1000 and TVL is 242, TVL percentage will be
The following parameters influence how each block reward is distributed.
|Collators Percent||Fixed percentage that goes to collators||10%|
|Base Treasury Percent||Minimum percentage that always goes to treasury||10 %|
|Base Staker Percent||Minimum percentage that always goes to dApps-staking staker rewards pool||20 %|
|dApps Percent||Fixed percentage that goes to dApps-staking dApp reward pool||15 %|
|Adjustable Percent||Percentage that is split between treasury and stakers, depending on the TVL||45 %|
|Ideal dApps-staking TVL||TVL percentage which is considered to be ideal||60%|
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.
Depending on the TVL, the adjustable percent of the block reward is split between stakers and the treasury.
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, , 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.
Using the parameters from the previous chapters, we can express yearly interest rate for the stakers:
For example, in case and , we end up with 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.
To follow up on the example above, inflation adjusted value would be which is
The following graph is a visualization of the described model.
- green line is interest rate
- blue line is total staker inflation
- red line is inflation adjusted interest rate
You can check the model and configure if yourself here.