#Tokenomics

Findings 🕵️‍♂️ I think Internet Computer uses a more unique tokenomics approach then most people realize. The community holds the responsibility of monitoring and adjusting the system's parameters via NNS proposals to optimize and evolve the IC's tokenomics.

ICP tokenomics are designed to create a self-sustaining ecosystem that balances goals such as maintaining low and stable storage/compute costs for developers, incentivizing node providers with attractive rewards, and fostering balanced staking and governance participation rewards while limiting inflation.

The numbers 👩🏻‍💻 As of July 14th, 2023, the Internet Computer (IC) ecosystem operates with a total supply of 500.8 million ICP tokens, out of which 438.4 million ICP tokens are circulating, constituting 87.5% of the total supply. Additionally, 252.4 million ICP tokens, equivalent to 50.4% of the total supply, are staked. Within the staked ICP, 80.9% has a dissolve delay of more than one year, and 51.5% is staked for an eight-year dissolve. These statistics can be reviewed on the IC neuron dashboard.


The use👨🏻‍🏫

  1. Node Provider Rewards: Node providers offering computing/storage infrastructure for the IC receive ICP rewards. The reward amount is consistent in fiat terms, and its variability depends slightly on the node's geographical location. These rewards are paid through the minting of new ICP tokens, contributing to inflation.

  2. Governance: ICP token holders can stake their tokens to create Neurons, which grant voting rights via the Network Nervous System (NNS). NNS allows neuron holders to vote on proposals for protocol upgrades, onboarding node providers, and expanding the network. Neuron holders receive rewards for participating in governance, which are distributed as maturity attributes, convertible to ICP.

  3. Fuel for Computation/Storage: Smart contract computations on the IC use "cycles," fueled by burning ICP tokens. In contrast to Ethereum's "user pays" model, the IC operates on a "smart contract pays" model. Cycles are generated by burning ICP tokens, leading to deflation.

  4. Transaction/Proposal Fees: Transferring ICP between wallets incurs transaction fees, and submitting proposals to the NNS requires small fees in ICP.


The extra's 👯‍♀️ The ICP token's total supply is dynamic, influenced by minting (inflationary) and burning (deflationary) mechanisms. Inflation supports node providers and governance participants, while deflation occurs when tokens are burned for computation or transaction/proposal fees.

ICP tokens can be acquired through various means, including direct purchase on exchanges, receiving rewards for participating in governance, receiving tokens from others, developer grants, or obtaining tokens as remuneration for contributing computing capacity as a node provider.

The DFINITY Foundation's Tokenomics Series provides an analytical framework to assess the interplay between supply and demand factors influencing ICP. This quantitative approach aids in evaluating the tokenomics state and potential changes over time. Show Less

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