"Tokenomics" are broken for investors. Discussion

My thesis is that current “tokenomics” are broken for investors. They work wonderfully for builders but not for investors. Many or most builders need investors to use their products, and so what is bad for investors will in the long run be bad for builders and therefore the network.

Assume we’re burning about 18 billion cycles per second right now. At that rate we burn about 20 ICP per hour, or 480 per day, assuming that we are burning at these prices. And we’re minting approximately 111,000 ICP per day through voting/staking rewards.

Now we have about a year and a half of the VC 1.5 million ICP monthly dumps left. This means at current prices we need to burn 6700 ICP per hour to keep up with this along with staking rewards, which is 335 times higher than we’re burning now. And that would keep our circulating supply from increasing.

If ICP increases in price the number of cycles increases proportionally. At 10x the price we need to be burning not at 335 times our current rate but 3350 times our current rate just to not have increasing supply, assuming only 1.5 million ICP unlocks per month.

This is obviously broken for investors, as there remains significant downward pressure on price until usage increases immeasurably. Now I know many people here don’t care. You may have been an early investor who bought at $.03. or may be benefiting from how cheap it is to build on ICP. But a lot of us are not.

As a representative for retail investors I believe this is at least worthy of discussion. I am suggesting that we significantly overhaul tokenomics for the time being to alleviate the downward pressure on price. I am not sure how to do this but here is one set of ideas:

  • Proposal: unlock all neurons immediately.
  • Staking rewards are to be set to equal half of the cycles burned daily in terms of ICP, split proportionally between voting neurons.
  • Neurons are never locked. To vote you simply have your ICP in a neuron which can vote, and the rewards for voting are (as stated above) a weighted proportion of ICP equal to half of the cycles burned in the previous day.
  • Node provider rewards remain on their current schedule, unless somebody has a better idea.

This change would be disastrous obviously. Why would I propose a disaster? Well, I am trying to start a discussion. We would have almost 200 million ICP unlocked immediately, after which the tokenomics would become more favorable.

I understand that there could be backlash, anger and shock at these suggestions. But my goal is to propose a set of incentives that don’t just benefit the “VC investors” and builders, but also lead to sustainable price movement for investors. Right now we have two of the three, which I believe is harmful for the ecosystem as a whole.

Please discuss. I am not making a proposal (as I did once with suggesting all seed investors’ neurons be locked for 8 years) but want to foment discussion and draw attention to the significant financial toll ICP has taken on investors. To dismiss these concerns is naive and short-sighted, as the project cannot thrive if investors are scorned.

Thank you.


I agree that the tokenomics are unfavorable for non-early investors, but I wouldn’t group the unlocking schedule together with this. Honestly, the unlocks for the next 1.5 years aren’t that much of a problem, they don’t increase the total supply, but only the circulating supply.

However, I do think the cycles mechanism/reverse gas model make it so that devs and users benefit from the ICP while non-early investors do not. I don’t think it’s necessarily a problem since the idea is to provide devs and users a general purpose web3 blockchain instead of enriching investors, but I wish I would have thought this all through before buying at around 40 dollars.


Thank you for the response. I am unsure about what solutions could be, which is why I want to have this discussion. Hopefully the community and team could come to a win-win scenario here.

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That would be amazing. The reverse gas model is a big positive, little doubt about it. How it relates to the ICP token price is questionable though.

If a higher token price means a lower burn rate, it seems that any price growth will automatically be severely slowed. But I’d love to hear other’s opinions on this.

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What I am looking for is the “holy grail” of tokenomics - something that works for everybody. A win-win-win scenario. And I think what we have right now is not the winning formulation. This is why I want this discussion, and I hope that anybody with any ideas will come forward to contribute. Thank you all!

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Looping in @Zane as he has also had some great posts on tokenomics/IC operational profitability estimates.

If you are concerned about 1.5 M tokens being sold on the open market monthly, what leads you to believe dumping in excess of 100 million would prove any fruitful results? I must admit, such a proposal seems outlandish and ill-conceived. (Perhaps this is your intention to garner discussion?)

Correct me if I’m wrong here Smaug. “Dumping 1.5M tokens monthly is bad for circulating supply.” I think most would agree with you here.

Thought provoking discussions revolving around Why seed investors are dumping is more fruitful. We should be collectively discussing how we can encourage those to restake. (My personal opinion)

Some half-baked thoughts (Have not deep dived on implications):

  • Reduction in rewards curve for delegated voters. Can we conceive a model in which delegated votes (i.e - votes dedicated to yourself for example) would be less than manually voting? Such a model must result in growing voting power/rewards, but perhaps not proportional to manual voters?
  • Reduction in flat rate for node providers (Literally not educated enough to come to conclusions here, nor even if such a proposal is viable. Just trying to spur discussion)
  • Rewards proportional to burning mechanism? (I personally like this approach very much, but fear such a massive overhaul would be critiqued as “blasphemy” for those who have already staked 8 years - rightfully so. Would need to be extremely robust plan before we could even consider imo)
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The main question in my opinion is how do we keep dev costs cheap enough while simultaneously having a viable path towards deflation, without hampering token appreciation.

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Yes, I just want a discussion! I hope that we can come up with ideas on how to improve the protocol. I was just sharing my thoughts for one avenue which would of course come with significant problems.

I doubt anybody would say that the “tokenomics” are perfect. This is the place to propose improvements. Thank you for your contributions.

I think the idea of reducing delegated vote reward in favor of manual votes has been discussed, with the conclusion that some people could game that by writing bots or code to make sure they vote on everything.

Reduction in rates for node providers is an idea worth discussion and is admittedly out of my realm.

Rewards proportional to burn was in my initial suggestion, but yeah the long term stakers would be upset about such a decline in rewards, which is why I suggested unlocking all neurons so we could get a fresh start. But that comes with significant problems.

Thank you.

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Got ya - thanks for clarifying here Smaug.

Let me continue:

I’ve similarly discussed in many threads why I believe circulating supply is something our community should tackle. I’m (personally) not interested in “This is a bear market” hot-takes.

In addition, I’m also not in the game of trying to determine how an increase of purchasing of our token on exchanges will impact market dynamics. (For which I have literally no idea, and I don’t think anybody does)

Encouraging seed investors to participate in re-staking is hugely important imo. They dont believe this is a viable investment? They have already made such a crazy amount of money they literally don’t care about the IC anymore? They are using their rewards as a flywheel for other investments? Nobody really knows.

Thus, would be great if as a community could engage with the largest proponent of seed investors to collectively understand why they would prefer to dump (Again, basic instinct would suggest they already made boatloads. They simply don’t care about future potentialities when they can just lock in real fiat now)

Further, I assume many would not want to participate in such discussion as they would fear it would result in our governance taking steps to prohibit their rewards.

So again, this rabbit hole leads to the same conclusion. How can we encourage those early seed rounds/Strategic Rounds/Private sale participants to consider re-staking?

I’m honestly not quite sure.

Sorry for all the edits! Poor spelling lol


If we assume a 1 trillion market cap and 5% inflation rate, we would need $50 billion worth of cycle burns. Is there a way to calculate, for example, AWS computation load to what it would be in cycles? Or AWS computational load in dollar terms?

That might give a rough example of ICP’s burn rate at mass adoption. Or am I thinking too simple?

I have metioned this question for N times, but Kyle and Dominic still think they will success,
Under this tokenism, ICP price is a disaster.
ICP will never be successful, it will never becomes deflation. We can imagine what will happen if a token has unlimited huge inflation forever but without enough burning rate to destory the inflation.
copared with inflation, the cycle burn rate is too small, token will become more and more, it already goes into a death spiral.(price shows)
no matter whether people choose to merge or unlock their maturity neurons , the new tokens has already been generated, and finally will be released. I am so desperate about ICP price under such a terrible tokenism.
but the Difnity team don’t care about it. they only care about make money from huge inflation.

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they delete evey post if they found anyone say there a big problem with their tokenism.
what a pity !

Your manner of posting doesn’t help dude. It’s kinda annoying rather


I have heard lots of people are afraid of ICP tokenism. it makes them keep far away from ICP.

that is because the Dfnity team never listen to community advise, they just repeat tech day by day, they still don’t realize how bad the tokenism, it will destory whole project, Nobody want to see icp keeping going down, but tokenism makes it keep falling.


If it works to get their attention then keep spamming tbh. But I’m not sure it’ll work.

I do remember the nns spammer did eventually get the attention needed to the nns spam problem so maybe this works too I guess

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I hope so, but I mentioned so much times in appropriate way, there is no feedback.
we all know how to calculate the real burned ICP and inflation every year.
they still use LP staking and merge maturity ICP to oppose us. don’t they know those ICP will finally released ?

Nice topic, and I like your approach to finding solutions @smaug

I think I’m still in my first year of thinking about tokenomics, so please excuse brain farts.

I don’t really like any of the solutions completely yet, but to frame it a bit:

  • reducing voting rewards turns down inflation and harms investors (which is risky)
  • reducing node providers’ rewards does it too, but has existential risk (which is very scary)
  • increases burning turns up deflation, but harms devs (which is quite scary)
  • linking burning to minting feels smart but could just cause problems with both areas

I like the input-output type system because it seems to give a natural velocity to ICP. I would normally be more wary of manipulation, but I am so impressed with the NNS as a concept, that I think it can work. Lots of assumptions, but we need to start from somewhere.

I think any solution will need to have some creativity if it is truly to be win-win-win. My prediction is that this cannot be found simply but arranging the existing pieces. Something new must be introduced, so the question is what?

This could be an additional route for burning cycles, perhaps one related to the externalities produced by the canister. These unwanted, but sometimes unavoidable, outputs could be taken as costs. These could be environmental (carbon footprint, life cycle impact), organisational (exclusivity) or even social - I can imagine that, while the canister shows advertising to make money, there is also a cost imposed due to the negative effect that these have on the concentration or happiness of the person seeing them.

Another sword I would like to throw in is demurrage, or a cost associated with holding or owning a currency. It fell out of favour a hundred years ago, but I could see it coming back as an interesting tool for programmable money. Did you know that Norweigan bank notes expire?


I think this is the only positive thing you said, and I don’t really know what it means. Are you suggesting that we should just do the thing that fixes everything, and we should do it straight away? If so, I love it.

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For your question, I want to ask, which chain like ETH and Solana, Avalanch, Dot, does take their Funding to developers to help their eco increase based on inflation token?
No, neither of them do this. they just directly use their funding to give money to developers. but what Dfinity team do? they only use inflation to give developers, their token become more and more.