Tokenomics
Total Supply Dynamics
Initially, the total supply of BITO tokens is set at 1 billion at genesis. This supply is subject to change based on token minting or burning activities. Specifically, the SNS is programmed to generate an annual increase of 2.5% of the total token supply during the first year, tapering down quadratically to 1% by the fourth year, as a mechanism to provide voting rewards to participating neurons. Apart from reward disbursements, though rare, token minting can occur through specific SNS proposals. Conversely, token burning is exclusively enacted via proposals.
Financial Flow: Income and Expenditures
At genesis, the SNS's assets include ICP collected from the decentralization sale and a treasury of 770 million BITO tokens. The SNS earns revenue mainly through protocol fees. Its expenditures encompass a range of costs, including ICP for hosting DApps' services (cycles), marketing campaigns, and compensations to the development team. In the formative years, expenditures are expected to exceed income, leading to a reliance on the BITO treasury primarily to fund user rewards. Over time, increasing revenue is anticipated to offset these expenditures gradually. Enhanced income will also enable a greater disbursement of rewards to stimulate user and usage growth.
Supply and Demand Dynamics
The potential for the SNS to burn BITO tokens exists, with the expectation that the burn rate will increase annually, eventually surpassing the minting rate from voting rewards. This will lead to a net decrease in total token supply over time. The following diagram provides a projected trajectory for BITO’s total supply, assuming a reward rate decline from 2.5% to 1% over four years and that the burn rate starts at 0.125%, increasing by a factor of 1.37 each year until it overtakes the reward rate.
Token Pricing Influences
Several factors influence BITO token pricing, including total supply, market sentiment, SNS income, operational costs, and liquid supply. Post-decentralization sale, the distribution of tokens includes various vesting periods that affect liquidity; for instance, only a fifth of the tokens from the decentralization sale are immediately liquid. The setup encourages token holders to engage in long-term staking, reducing the liquid supply in the market. The founding developer team's tokens have vesting periods from 0 to 4 years and a 1-month dissolve delay, while airdropped tokens have a dissolve delay of 1 month.
Tokenomics Strategy
The Bitomni DAO has the capability to adjust tokenomics parameters, such as maximum dissolve delays, voting rewards, and more, to manage both total and liquid token supply—directly impacting the token’s market price. This flexibility allows the DAO to strategically influence token valuation aligning with overarching goals, such as ecosystem growth versus token price stabilization. The comprehensive model of Bitomni’s tokenomics includes various charts and parameters and is available for review in a detailed spreadsheet. This model aids in forecasting the impacts of different tokenomics strategies and supports informed decision-making within the DAO.
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