Tokenomics is the economic model that governs the issuance, distribution, and management of tokens in a blockchain network. It includes various elements such as token supply, token distribution, token release and burn strategy, staking rewards and redistribution, and more.
In this blog post, we will discuss a tokenomics strategy for a hypothetical project. Let’s assume that the project aims to create a decentralized platform for peer-to-peer lending. The token is called LEND, and the platform is built on the Ethereum blockchain.
Token Supply and Distribution:
The total supply of LEND tokens will be 1 billion, and the tokens will be distributed as follows:
- 400 million LEND will be available for public sale.
- 200 million LEND will be allocated for the team, advisors, and early investors.
- 150 million LEND will be reserved for future development and marketing expenses.
- 150 million LEND will be set aside for staking rewards.
- 100 million LEND will be used for community incentives and partnerships.
Token Release and Burn Strategy:
To ensure that the value of LEND tokens remains stable, a release and burn strategy will be implemented. Initially, 40% of the total token supply will be released, which amounts to 400 million tokens. The remaining tokens will be released gradually over the next five years, with 100 million tokens being released every year.
To prevent inflation and maintain the value of the LEND token, a burn strategy will also be implemented. A percentage of the fees generated by the platform will be used to buy back and burn LEND tokens. The percentage will increase gradually over time, starting at 10% in the first year and reaching 50% by the fifth year.
Token Value:
The value of the LEND token will be influenced by various factors such as market demand, supply and demand dynamics, and platform adoption. The release and burn strategy will help maintain the value of the token over time by controlling its supply and ensuring that there is a steady demand for it.
Staking Rewards and Redistribution:
Staking rewards and redistribution are crucial elements of any tokenomics strategy. Staking rewards incentivize users to hold and stake tokens, while redistribution ensures that the rewards are distributed fairly among all stakers.
In our hypothetical project, staking will be available in both secured and unsecured forms. Secured staking will require users to lock up their LEND tokens for a fixed period, while unsecured staking will not have any lockup period.
For secured staking, the staking rewards will be higher, starting at 20% in the first year and gradually decreasing to 5% by the fifth year. For unsecured staking, the rewards will start at 10% in the first year and decrease to 2.5% by the fifth year.
The staking rewards will be distributed among stakers based on their stake percentage. For example, if a user stakes 10% of the total staked tokens, they will receive 10% of the staking rewards.
The redistribution of staking rewards will be done on a weekly basis, and users will be able to withdraw their rewards at any time. The redistribution code for secured staking can be written as follows:
function distributeRewards() public {
uint256 totalStaked = getTotalStaked();
for (uint i = 0; i < stakers.length; i++) {
address staker = stakers[i];
uint256 stakePercentage = stakes[staker] / totalStaked;
uint256 reward = (stakePercentage *
stakeRewards) / 7; // divide by 7 for weekly distribution
rewards[staker] += reward;
emit RewardDistributed(staker, reward);
}
}The getTotalStaked function will return the total number of tokens staked by all users, while the stakes and rewards mapping will keep track of each user’s stake and reward balance.
For unsecured staking, the redistribution code will be similar, but the rewards will be distributed based on the total amount staked by each user instead of their stake percentage.
function distributeRewards() public {
for (uint i = 0; i < stakers.length; i++) {
address staker = stakers[i];
uint256 reward = (stakes[staker] * unstakeRewards) / 7; // divide by 7 for weekly distribution
rewards[staker] += reward;
emit RewardDistributed(staker, reward);
}
}Here is a full working staking smart contract code and redistribution smart contract code in Solidity:
Staking Smart Contract:
pragma solidity ^0.8.0;
contract Staking {
mapping(address => uint256) public stakes;
mapping(address => uint256) public rewards;
address[] public stakers;
uint256 public totalStaked;
uint256 public unstakeRewards = 100;
event Staked(address indexed staker, uint256 amount);
event Unstaked(address indexed staker, uint256 amount);
event RewardDistributed(address indexed staker, uint256 amount);
function stake(uint256 amount) public {
require(amount > 0, "Cannot stake 0 tokens");
require(balanceOf(msg.sender) >= amount, "Insufficient balance");
if (stakes[msg.sender] == 0) {
stakers.push(msg.sender);
}
totalStaked += amount;
stakes[msg.sender] += amount;
emit Staked(msg.sender, amount);
}
function unstake(uint256 amount) public {
require(stakes[msg.sender] >= amount, "Insufficient staked tokens");
totalStaked -= amount;
stakes[msg.sender] -= amount;
if (stakes[msg.sender] == 0) {
removeStaker(msg.sender);
}
uint256 reward = (amount * unstakeRewards) / 100;
rewards[msg.sender] += reward;
emit Unstaked(msg.sender, amount);
}
function distributeRewards() public {
for (uint i = 0; i < stakers.length; i++) {
address staker = stakers[i];
uint256 reward = (stakes[staker] * unstakeRewards) / 7; // divide by 7 for weekly distribution
rewards[staker] += reward;
emit RewardDistributed(staker, reward);
}
}
function removeStaker(address staker) private {
for (uint i = 0; i < stakers.length; i++) {
if (stakers[i] == staker) {
stakers[i] = stakers[stakers.length - 1];
stakers.pop();
break;
}
}
}
function balanceOf(address account) public view returns (uint256) {
return ERC20(tokenAddress).balanceOf(account);
}
}
interface ERC20 {
function balanceOf(address account) external view returns (uint256);
function transferFrom(address sender, address recipient, uint256 amount) external returns (bool);
function transfer(address recipient, uint256 amount) external returns (bool);
}
Redistribution Smart Contract:
pragma solidity ^0.8.0;
contract Redistribution {
mapping(address => uint256) public rewards;
address public stakingContract;
uint256 public stakeRewards = 100;
event RewardRedeemed(address indexed staker, uint256 amount);
constructor(address _stakingContract) {
stakingContract = _stakingContract;
}
function redeemRewards() public {
address staker = msg.sender;
require(staker != address(0), "Invalid staker address");
Staking staking = Staking(stakingContract);
uint256 reward = rewards[staker];
require(reward > 0, "No rewards to redeem");
rewards[staker] = 0;
staking.distributeRewards(staker, reward);
emit RewardRedeemed(staker, reward);
}
}
interface Staking {
function distributeRewards(address staker, uint256 amount) external;
}
Note: These contracts are intended to work together to create a staking and redistribution system. The staking contract allows users to stake their tokens and earn rewards for doing so. The redistribution contract allows users to redeem their earned rewards.
The staking contract keeps track of each staker’s stake and earned rewards. The rewards are distributed to stakers each week based on the amount staked. When a staker unstakes their tokens, they receive a portion of their rewards as an additional incentive.
The redistribution contract keeps track of each staker’s earned rewards and allows them to redeem them for tokens. When a staker redeems their rewards, the staking contract distributes the rewards to the staker’s account.
Here’s an explanation of the code:
Staking Contract:
stakes: mapping of stakers and the amount they’ve stakedrewards: mapping of stakers and the amount of rewards they’ve earnedstakers: array of stakerstotalStaked: total amount of tokens stakedunstakeRewards: percentage of the stake a user will receive as a reward when unstakingStaked: event triggered when a user stakes tokensUnstaked: event triggered when a user unstakes tokensRewardDistributed: event triggered when rewards are distributedstake: function to stake tokensunstake: function to unstake tokensdistributeRewards: function to distribute rewards to stakersremoveStaker: function to remove a staker from thestakersarraybalanceOf: function to check the balance of a user’s tokens
Redistribution Contract:
rewards: mapping of stakers and the amount of rewards they’ve earnedstakingContract: address of the staking contractstakeRewards: percentage of the stake a user will receive as a reward when redeemingRewardRedeemed: event triggered when a user redeems their rewardsconstructor: function to set thestakingContractredeemRewards: function to redeem earned rewards
This staking and redistribution system provides an incentive for users to stake their tokens and hold them for longer periods, creating a sustainable economic system for the blockchain project.
Here’s an example ERC20 token contract that the staking and redistribution contracts can interact with:
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;
contract Lend {
string public name = "LEND";
string public symbol = "LND";
uint256 public totalSupply = 1000000;
uint8 public decimals = 18;
mapping(address => uint256) public balanceOf;
mapping(address => mapping(address => uint256)) public allowance;
event Transfer(address indexed from, address indexed to, uint256 value);
event Approval(address indexed owner, address indexed spender, uint256 value);
constructor() {
balanceOf[msg.sender] = totalSupply;
}
function transfer(address to, uint256 value) public returns (bool success) {
require(balanceOf[msg.sender] >= value, "Not enough balance");
balanceOf[msg.sender] -= value;
balanceOf[to] += value;
emit Transfer(msg.sender, to, value);
return true;
}
function approve(address spender, uint256 value) public returns (bool success) {
allowance[msg.sender][spender] = value;
emit Approval(msg.sender, spender, value);
return true;
}
function transferFrom(address from, address to, uint256 value) public returns (bool success) {
require(balanceOf[from] >= value, "Not enough balance");
require(allowance[from][msg.sender] >= value, "Not enough allowance");
balanceOf[from] -= value;
balanceOf[to] += value;
allowance[from][msg.sender] -= value;
emit Transfer(from, to, value);
return true;
}
}
This is a basic ERC20 token contract that includes the standard functions for transferring tokens (transfer, approve, and transferFrom), as well as a balanceOf function to check the balance of an account.
This contract can be deployed separately and the address can be provided to the staking and redistribution contracts as a constructor parameter.
Disclaimer: This code is provided for educational purposes only and should not be used in production without proper auditing and testing.
Conclusion
In conclusion, tokenomics strategies play a crucial role in the success of a blockchain project. By designing a well-thought-out strategy, a project can incentivize users to hold their tokens and actively participate in the network.
In this blog post, we have explored an example tokenomics strategy that involves a staking and redistribution system. The staking contract allows users to stake their tokens and earn rewards, while the redistribution contract allows users to redeem their earned rewards for additional tokens. We have provided a complete implementation of both contracts, as well as an example ERC20 token contract that the staking and redistribution contracts can interact with.
It’s important to note that this is just one example of a tokenomics strategy, and each project will have its unique requirements and considerations. Therefore, it’s crucial to carefully consider the tokenomics strategy for a project and adjust it based on the project’s goals, user base, and market conditions.
Overall, by creating a sustainable and effective tokenomics strategy, blockchain projects can encourage user participation, incentivize holding tokens, and ultimately drive the long-term success of the project.