The economic policy of the Omnichain Protocol (OCP) is a crucial element of its tokenomics, designed to foster a sustainable ecosystem. To gain widespread adoption, it is essential to ensure substantial incentives for early adopters and participants in the network.
OCP will have a total supply of 1 billion tokens. We will implement an innovative emission schedule characterized by a half-life of 4 years This means that every four years, the remaining uncirculated tokens will be cut in half. This approach mirrors the principles established by Bitcoin, using a Proof of Stake (PoS) mechanism, whereby emissions are directed partly to stakers and partly to the OCP Foundation.
For example, if 500,000,000 tokens are in circulation after the first four years, the remaining uncirculated supply would reduce to 250,000,000 tokens This structure helps maintain scarcity and adds long-term value to token holders while incentivizing participation in the staking process.
A distribution phase refers to the specific timeframe in which tokens are released from the reserves, or uncirculated supply. For OCP, a distribution phase will occur every 4 days. During each distribution phase, 0.3% of the supply remaining in reserves will be released to stimulate engagement and participation in the network. This structured release mechanism ensures that the incentives align closely with network growth and demand, ultimately contributing to the stability and health of the ecosystem.
For example, assuming that 40% of the maximum supply is left in reserve post-launch, this means that if there are 400,000,000 tokens in reserve, then during each distribution phase, the release of 0.3% would initially result in 1,200,000 tokens being emitted every 4 days. However, as the uncirculated supply decreases over time, the absolute number of tokens released during each distribution phase will also dwindle. This gradual reduction builds on the concept of Bitcoin's halving mechanism; while the overall emissions are halved every four years, the diminishing releases occur in a more granular manner with each passing period, resulting in fewer tokens allocated at each interval.
This approach helps create a sense of increasing scarcity, as the decreasing emissions enhance the value of the remaining tokens in circulation. By incentivizing early adopters with more significant token distributions early in the protocol's lifecycle, we ensure that those who engage with the network during its initial phase can derive greater benefits compared to those who join later, when emissions are less abundant. This structure not only supports early participation but also contributes to a more sustainable token economy that rewards commitment and investment in the network's growth.
To ensure the security and effectiveness of the network, stakers will be rewarded with a portion of the newly minted tokens. This not only provides motivation for individuals to grow their stakes in OCP but also aids in sustaining the funding of the OCP Foundation, which is crucial for ongoing operations and development.
The design of the emissions will maintain equilibrium, balancing the incentives for stakers with the Foundation’s funding needs. Early in the network's existence, transaction fees may not be sufficient as a reward mechanism since transaction volumes might be low. By implementing a robust emissions strategy, we can ensure that early adopters receive adequate compensation.
Setting appropriate transaction fees is critical to the functionality of OCP. These fees will primarily cover the costs associated with processing and storing transactions. Several factors will be considered when determining the fee structure:
Transaction Size: Larger transactions require more resources for processing and storage.
Minimum Fee: A baseline fee will be established to prevent DDoS attacks by making such attacks expensive and prohibiting malicious flooding of the network with small transactions.
The parameters for these fees will adapt to criteria such as transaction volumes, hardware costs, and the valuation of OCP tokens, and will be subject to adjustment through governance mechanisms.
Transaction fees will also support the rewards for stakers as well as fund the Treasury. At the end of every distribution phase, a portion of the transaction fees generated during that period will be allocated to a virtual pool along with the newly minted tokens. This pool will then distribute the resources, with 80% to stakers and 20% to the Treasury. This structure helps maintain liquidity while ensuring that those contributing to the network's security are adequately rewarded.
The 20% directed to the Treasury serves multiple purposes. In addition to supporting liquidity, it funds operations for Omnichain Labs and other initiatives that the foundation deems valuable for enhancing the network. This aspect of the treasury is vital for sustaining development and fostering partnerships that contribute to the long-term success and growth of the Omnichain Protocol.