Initial VIP rise plan: Reshaping inflation distribution, activating full-chain interconnected economy

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Initia will increase the Token supply allocated to the VIP program to more than twice the original amount.

Author: Initia

Compiled by: DeepTech TechFlow

Where is the network inflation heading?

The answer is actually very simple.

As a network, our core goal is to promote the economic incentive mechanism that facilitates the coordinated interests of ecosystem participants through design, and maximally rewards genuine and sustainable activities within the 'Interwoven Economy.' The unique focus of the Initia VIP Program is on the genuine user community that uses the interwoven Rollup network day after day and creates value for the 'Multichain Garden of Eden'.

Why is sustainable economic growth so critical? The blockchain industry is full of a large number of unused 'zombie chains', which continue to pay excessive inflation rewards to stakers.

Initia believes that the real focus and support should be on the users who actually use the Rollup network.

We believe the release of L1 Token should serve two core goals:

  • As a budget to ensure the reliability and security of the network
  • As an incentive tool to stimulate economic activity and ecosystem growth

Traditional L1 chains often distribute inflation rewards mainly to stakers as security incentives. Unfortunately, this model fundamentally limits the development potential of the ecosystem. Sadly, these traditional L1 teams inadvertently chose to tie their own hands. While network security is crucial, a Token release mechanism that relies solely on staking incentives actually restricts the possibilities for ecosystem development. In fact, it is entirely possible to redirect some of the Token releases towards more economically valuable directions—such as driving ecosystem economic growth.

If the initial setting of the staking reward is too high, the blockchain essentially conveys to Token holders its expected Token usage. This mechanism inadvertently promotes users hoarding Tokens rather than actively using on-chain services. Once such behavior becomes habitual, it can trigger a negative feedback loop among early network participants, which is often difficult to reverse. Early users no longer become builders of the Token economic system, but instead continue to accumulate Tokens through staking without contributing to network growth. This economic model lacks innovation and appears outdated, and we typically refer to this encouragement of hoarding and hodling behavior as fostering a 'scarcity mindset'.

Token release should be a strategic tool oriented towards economic growth, ultimately allowing real participants (whether they are end users of interwoven Rollup or Rollup builders) to share the value brought by productivity improvement.

This is exactly the fundamental logic behind Initia's decision to double the total allocation of VIP plan Tokens - as a native flywheel mechanism that rewards the organic use of the interwoven economic ecosystem full-stack applications, Initia VIP will effectively stimulate economic growth and reward the most productive stakeholders.

VIP Mechanism Highlights

(For detailed mechanism design, please refer to this link)

In a system containing thousands of Interwoven Rollups, it is crucial to incentivize the interest coordination of all network participants. The design of Initia VIP aims to leverage Initia's L1 architecture and native Token INIT to enhance economic consistency and address potential delegation agency issues between users, developers, and Interwoven Rollups.

By programmatically controlling the distribution of INIT Token, the VIP mechanism establishes economic consistency between Interwoven Rollups and incentivizes all participants in the ecosystem to focus on the success of INIT. This mechanism not only creates demand and use cases for the native INIT Token in the entire Interwoven Economy but also rewards the team to attract and retain users.

Reward Distribution Two-Factor Model

  • Rollup on-chain INIT activity intensity
  • INIT Stakers and collective voting by 'Enshrined Liquidity' holders

The interwoven economic system enables different Rollups to dynamically adjust the incentive focus according to the development stage: exchanges incentivize transaction volume, lending protocols attract USDC deposits, and chain games drive task completion.

For developers, the VIP plan not only creates a monetization model but also establishes a user retention mechanism - by distributing INIT Token directly to actual users through the on-chain programmatic grant system. This means that users can automatically receive incentive rewards simply by using the application normally, without any additional operation.

How to achieve the +EV (positive expected value) expansion of VIP Token supply?

The total supply of INIT is fixed at 1 billion (1,000,000,000). If the supply allocated to Initia VIP needs to be increased, it must be reduced elsewhere.

Please remember that the inflation of INIT is not only the source of on-chain security budget, but also will be used to incentivize various activities in the 'Interwoven Economy.' As a Layer 1 blockchain, economic security is crucial for Initia, as it also secures all Rollups deployed on the Interwoven Stack.

We have come to a crossroads, an insurmountable obstacle. But perhaps, is there a solution?

Fortunately, we have discovered a 'gold reserve' - a large number of INIT Tokens will be gradually unlocked over the next four years, and currently they have no other use. Yes, you guessed it right - these Tokens belong to VCs and early investors holding 15% of the INIT supply.

This decision has sparked intense controversy. Allowing early investors to pledge their unlocked Tokens does not always lead to ideal results. However, Initia will not become another victim of the 'Cucked Cosmos Society.' We believe we have found a balanced solution that can ensure all Initia stakeholders achieve their expected value (+EV)

Venture capitalists can stake their locked Token, but must adhere to the following restrictions:

  • Staking rewards will be locked in a 4-year linear unlocking schedule.
  • We significantly reduced the emission rate of staking, maintaining only a 2%-4% annualized yield (APY).

By allowing early investors to stake their Token and provide security for the chain, we are able to:

  • Redirecting about 15% (approximately 25%) of the total supply of INIT to Initia VIP,
  • Allocate more Tokens to active users and high-quality applications.

We have taken an extremely cautious approach to this decision, not considering it as a minor adjustment to economic policy - this is a fundamental capital reallocation aimed at promoting the expansion and liquidity of the 'interwoven economy'.

In other layer 1 blockchains (L1), they continue to promote 'scarcity mindset', by using most of the Token supply for on-chain security to incentivize Token hoarding, while Initia chooses to use supply surplus as a weapon to ignite sustainable growth of the network.

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The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
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