Polkadot 10MS-CS Model: A Sustainable Economic Framework
Polkadot 10MS-CS Model: A Sustainable Economic Framework
Disclaimer: This document presents a proposal for Polkadot's economic model, including projections based on approximate current numbers and realistic assumptions. Actual outcomes may vary significantly due to exogenous factors (e.g., market shifts, regulatory changes, technological advancements) and endogenous factors (e.g., network usage, staking behavior, governance decisions). This model is a framework for discussion and adaptation.
Objective
The 10MS-CS Model features:
- 10% inflation rate based on the (Maximum Supply - Circulating Supply) gap.
- 2.5 billion DOT cap by 2105 (80 years).
- Strategic coretime sales and transaction fee distribution, with DOT burning, validator rewards, and treasury funding.
- Assumed DOT price appreciation for long-term network stability and validator incentives.
Parameters
- Maximum Supply: 2,500,000,000 DOT
- Starting Circulating Supply (July 2025): 1,595,666,163 DOT
- Inflation Rate: 10% of (2.5B - CS) until CS = 2.5B (2105), then 0%.
- Formula: 0.10 * (2,500,000,000 - CS)
- Coretime Sales (Annual): 1,800,000 DOT/year (~$6.696M at $3.72/DOT)
- 2025 Distribution: 80% burned (1.44M DOT), 10% validators (180,000 DOT), 10% treasury (180,000 DOT).
- Burn Reduction: Burns reduce 1%/year to 0% by 2105. Validators' share increases to 90%.
- Transaction Fees (Annual): 5,000,000 DOT/year (~$18.6M at $3.72/DOT)
- Until Cap: 25% burned (1.25M DOT), 10% treasury (0.5M DOT), 65% validators (3.25M DOT).
- Post-Cap: 10% treasury (0.5M DOT), 90% validators (4.5M DOT).
- Price Appreciation Assumption: 5% annually ($3.72 in 2025 to ~$187.49 in 2105). With 10% annually yields ~$7,620.05.
Assumptions
- Current Treasury Balance: ~$109M
- Current Staking: 47.5% (758M DOT)
- Current Inflation (estimated): 7.3% (~$522M)
- Current APY for Stakers: 8%
- Governance Model: OpenGov
Projection (2025–2105) - Key Data Points
| Year | CS Start (DOT) | Inflation (DOT) | Coretime Burn (DOT) | Net Change (DOT) | CS End (DOT) | Price 5% (USD) | Rewards 5% (USD) |
|---|---|---|---|---|---|---|---|
| 2025 | 1,595,666,163 | 90,433,384 | 1,440,000 (80%) | 87,743,384 | 1,683,409,547 | 3.72 | ~12.76M |
| 2035 | 2,274,518,820 | 22,548,118 | 1,278,000 (71%) | 20,020,118 | 2,294,538,938 | 6.06 | ~20.90M |
| 2050 | 2,426,673,091 | 7,332,691 | 990,000 (55%) | 5,092,691 | 2,431,765,782 | 12.60 | ~43.90M |
| 2075 | 2,487,177,834 | 1,282,217 | 540,000 (30%) | -507,783 | 2,486,670,051 | 42.66 | ~151.70M |
| 2105 | 2,499,496,038 | 503,962 | 0 (0%) | -746,038 | 2,499,750,000 | 187.49 | ~1,181.19M |
Polkadot Supply and Price Charts:
- 2025–2029:
- 2025–2035:
- 2025–2045:
- 2025–2105:
Market Impact
Once the market is aware of this model's predictable and fixed token supply, especially the initial drop in net issuance, it is expected to reduce immediate selling pressure. This structure is designed to encourage holding, accumulation, and promote proper resource and capital efficiency within the Polkadot ecosystem. Key Outcomes
- Supply: 1.595B to 2.5B DOT by 2105 (0.57% annually), then stable.
- Inflation: Decreases from 90.4M DOT to ~0.5M DOT by 2105.
- Burns: ~110.9M DOT burned total until 2105 (coretime + fees).
- Revenue (USD): Coretime (~$6.696M/year), Fees (0.5M DOT to treasury, 3.25M DOT to validators initially). Post-2105, significant USD value due to price appreciation.
- Validator Returns: While the inflationary component of DOT rewards decreases, the USD value of validator rewards is projected to increase significantly (e.g., ~$12.76M in 2025 to ~$1,181.19M in 2105 at 5% price appreciation; or ~$48.01B at 10% price appreciation). This shift is driven by price appreciation and the increasing share of coretime sales and transaction fees allocated to validators, ensuring robust incentives despite decreasing DOT issuance. It is important to note that inflation (new token issuance) does not directly equal return to participants; returns will increasingly be derived from coretime sales and transaction fees.
- Coretime: USD value stable at ~$6.696M, requiring fewer DOT over time.
- Inflation Schedules: The 10MS-CS Model offers a continuous, decreasing inflation linked to the supply gap, designed to precisely hit the 2.5B cap.
- Inflation: Model provides controlled issuance, a defined cap, and robust burn mechanisms, ensuring long-term value.
- Validator Rewards: Projected USD rewards significantly increase, ensuring strong incentives despite decreasing DOT APY.
- Treasury Income: Initial direct treasury income is lower than current balance, requiring strategic use of existing 109M DOT. Long-term treasury funding is robust with price appreciation.
- Market Cap: Expected to grow significantly due to DOT price appreciation.
- Benefits of Cap: Scarcity, enhanced investor confidence, and stable coretime value.
- Disadvantages of Cap: Lower DOT APY for validators and early treasury income shortfall (in newly generated DOT) are offset by price appreciation and leveraging the existing treasury.
Implementation
- Technical: Requires runtime upgrade.
- Governance: OpenGov proposal.
- Monitoring: Continuous monitoring and adjustments.
Notes
- Coretime: 1.8M DOT/year is realistic. Higher volumes (e.g., 3.6M DOT/year) could accelerate cap.
- Price Appreciation: Crucial for USD value of rewards and treasury.
- Risks: Early treasury income needs careful management, mitigated by existing ~$109M treasury.
Comments (0)
Comments (0)