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Tokenomics

Circulating Supply​

Circulating supply is simply a total supply minus the treasury tokens:

Circulating supply = Total supply - Treasury

There are three main value flows within Synternet token economy:

  1. Network / inflationary flow:
    1. tokens are purchased on exchanges or earned from yield-bearing mechanisms
    2. tokens are staked on validators
    3. transaction gas fees are collected and new tokens are minted
    4. rewards are paid in tokens to validators and delegators
    5. tokens are sold on exchanges or invested into yield-bearing mechanisms
  2. Utility flow:
    1. tokens are purchased on exchanges or earned from yield-bearing mechanisms
    2. tokens are paid to agents for their work
    3. tokens are sold on exchanges or invested into yield-bearing mechanisms
  3. Protocol / deflationary flow:
    1. tokens are purchased on exchanges or earned from yield-bearing mechanisms
    2. tokens are used to pay protocol fee imposed on all agent interactions that are part of protocol
    3. protocol revenue is burned or kept in treasury for future use

Naturally, the network security flow is a source of inflation. That's why protocol fee pathway is being introduced to counter that by creating a token sink.

Learn More​

Incentives​

Incentives for stakers (validators and delegators) have two components.

  1. Gas fees collected for the on-chain transactions
  2. Inflationary rewards that are created with each block

Validator inflation is decreasing each year.

Year123456+
Inflation rate8%6.5%5.5%4.5%3%0-3%

Token allowance, which will be distributed over a year, is minted at the beginning of each year using the predetermined inflation rate.

Staker reward rate, or annual percentage rate (a.k.a. APR), depends on how much tokens are bonded as compared to their total supply:

Reward rate = Inflation rate / Bonding rate

Whereas, bonding rate is a fraction of tokens staked (a.k.a "bonded to validators"):

Bonding rate = Staked supply / Total supply

For a delegator, more tokens staked means more earnings, because rewards are attributed proportionally to the amount of tokens staked. Conversely, more tokens staked overall means lower rewards for everyone. Therefore, the bonding rate is usually at the sweet spot of token economy: large enough to secure the chain, but not too large to make the rewards unattractively low.

note

Due to the inflationary mechanics, the actual inflation rate is decreasing throughout the year. This is because the amount of tokens minted each block is exactly the same throughout the year, while the total supply is steadily increasing. This makes the momentary inflation rate slightly lower with each passing block.

Slashing​

Slashing is a disincentive mechanism designed to prevent low-quality validator nodes from existing within the system. It involves four parameters.

  1. Signed Block Window - the sliding number of blocks that are used as a basis for monitoring.
  2. Min Signed Per Window - minimum number of blocks that are required to be signed per Signed Block Window.
  3. Downtime Jail Duration - number of seconds the punished validator node has to stay offline and cannot rejoin the network.
  4. Slash Fraction Downtime - the actual percentage rate used to slash the staked tokens.

The rule: if during Signed Block Window number blocks, the validator misses more than Min Signed Per Window fraction of blocks, it is jailed for Downtime Jail Duration and all tokens staked on it are slashed by Slash Fraction Downtime.

An example using the actual parameters as of time of writing: suppose the delegator is staking 250,000 SYNT on some validator. This validator also stakes 10,000 SYNT on itself. If this validator misses 8001 blocks within 16000 block window, he is jailed for 10 minutes. The validator's self-delegated stake is slashed by 0.01% and becomes 9,999 SYNT. Delegator's stake is also slashed by 0.01%, so it becomes 249,975 SYNT. Under current reward rates, this level of slashing is compensated by rewards earned in less than half a day.

Slashing rate for double-signing is much more severe, since double-signing is a very serious offense.

Learn More​

Protocol Fee​

In different pricing modes, protocol fee is applied differently.

  • Within the pay-per-data mode, a fixed fee per gigabyte of data transferred applies.
  • Within the pay-per-message mode, a percentage fee rate per message applies. Additionally, a price floor is imposed to prevent transferring very large messages free-of-charge.

Pay-per-Data​

Current protocol fee is 4 SYNT/GB, which is applied on top of the agent pricing for the data it provides.

For example, if an agent is selling 1 GB of its data for 8 SYNT, users will be paying 12 SYNT/GB in total.

Pay-per-Message​

Current protocol fee rate is 25%, which is applied on top of agent's per-message pricing. However, a minimum of 0.001 SYNT per message applies, because some agents may price their messages very low or give them away for free, while the protocol still has its costs.

For example, if an agent is selling 1 message for 0.0005 SYNT, the total cost for the user will be max(0.001 + 0.0005, 0.0005 * 0.25) = 0.0015 SYNT.

Learn More​

Burning and Buybacks​

A part of protocol revenue will be burned. If the protocol revenue happens to be collected in other non-SYNT denominations, it will be used to buyback SYNT on exchanges. The burning functionality is already live on Synternet, but the burn transactions are still manual.