The token economics (tokenomics) lay the foundation of every single blockchain and every blockchain project that deploys their own token. The token economics define the very usability of the coins or tokens, and the reasons — or lack thereof — why there is a demand for them. With poorly thought out tokenomics, no amount of usage and adoption will fundamentally impact demand for the tokens — they need sufficient utility.
With poorly thought out tokenomics, no amount of usage and adoption will fundamentally impact demand for the tokens — they need sufficient utility
At Phantasma, we love tokenomics. Tokenomics design, tokenomics discussion, tokenomics optimization — we’re all over it. That is why we have our dual token system, and it is why both $SOUL and $KCAL have such a multitude of use cases. While some actors in the space use their tokens primarily as a way to raise funds, Phantasma uses SOUL and KCAL to power NFTs, gaming and dApps in a growing blockchain powered ecosystem.
Good tokenomics must provide reasons for token holders to want their tokens, benefits to hold those tokens and ways to use them
Good tokenomics must provide reasons for token holders to want their tokens, benefits to hold those tokens and ways to use them. For any project aiming for longevity such as Phantasma, the tokenomics must also be sustainable. In the following, we will take you through the Phantasma token economy — how it is designed, and some of the reasons why we believe we have found one of the best designs available.
A dual token system
Single token systems suffer from an unsolvable problem: Using the ecosystem drains your ownership share of the token supply. You decrease your influence on the evolution of the chain or project the more you use it. A dual token system allows us to escape this flawed design by separating the governance and fuel tokens.
Earning fuel tokens through staking the governance token allows anyone to use the ecosystem without suffering decreasing influence — and that is why we all earn KCAL by staking SOUL. It also allows anyone to opt to acquire the fuel token only if they have no desire to influence the future of the ecosystem, but simply want to play that amazing game or send some NFTs to their friends.
Earning fuel tokens through staking the governance token allows anyone to use the ecosystem without suffering decreasing influence — and that is why we all earn KCAL by staking SOUL
However, there are potential pitfalls with dual token systems. One of these is unchecked inflation. If you keep generating the fuel token at a very high rate with no checks and balances, you will end up with an inflated supply that no amount of dApps can create enough demand for. This would negatively impact the value of not just the “infinite supply” fuel token, but also the governance token which derives part of its value from the fuel token’s supply and demand mechanics.
This leads us to another potential challenge that we have already touched upon — the two tokens in the dual token system must be inextricably linked. If they aren’t there will be no fundamental correlation between their values, and you run the risk of one token becoming unattractive and forgotten. The obvious link between governance and fuel tokens is to generate one from the other, which is why KCAL can be generated by staking SOUL.
The obvious link between governance and fuel tokens is to generate one from the other, which is why KCAL can be generated by staking SOUL
SOUL — Governing the future, unlocking potential
SOUL is the governance token of the Phantasma blockchain, and the evolution of Phantasma is driven by the SOUL holders. There are multiple benefits awarded to SOUL holders
- VOTING — At the core of the Phantasma blockchain is our decentralized governance system. Each and every token holder staking SOUL earns voting power in proportion to their amount of SOUL stake and their staking duration. To avoid a handful of large token holders exerting undue influence on chain governance the voting power follows this formula:
Voting power = sqrt(amount of SOUL staked) x (staking duration in days)
The time bonus is capped at 1000 consecutive days staked, and will reset in the event the SOUL is unstaked and moved.
- STAKING — Staking SOUL generates the fuel token KCAL at a rate of 0.002 KCAL per day per SOUL you have staked. You are free to unstake and move your funds at any time, except the first 24 hours after staking SOUL or claiming KCAL.
- CHAIN NAME —Staking a minimum of 2 SOUL enables you to claim your Phantasma name on chain so that Bill and Rob can send funds from ‘bill’ to ‘rob’ instead of P2KJMe8W1…Ju4D4nWmm.
- SOUL MASTER — Staking 50,000 SOUL or more earns you the title of Soul Master, which provides multiple additional benefits.
First of all, being a Soul Master is a prerequisite for the ability to apply for a Block Producer slot on Phantasma.
In addition, all Soul Masters who stake a minimum of 50,000 SOUL for an entire calendar month get an equal share of the monthly Soul Master SOUL rewards — 125,000 SOUL dedicated to Soul Masters every single month in perpetuity.
All Soul Masters who stake a minimum of 50,000 SOUL for an entire calendar month get an equal share of the monthly Soul Master SOUL rewards — 125,000 SOUL dedicated to Soul Masters every single month in perpetuity
On top of this, every Soul Master who keeps staking without interruption is eligible to receive a multi asset infused CROWN NFT every 90 days counted from the Genesis block of the Phantasma mainnet — more on these later.
- CROWNs — 0.2% of the annual SOUL inflation (see next section) is collected in the CROWN reward pool — as well as half of all KCAL transaction fees, excluding instances where this portion of the KCAL fee is required by the dApp being interacted with.
Every 90 days an automatic custom CROWN NFT minting process is triggered.
In this process, Soul Masters who have been staking at least 50,000 SOUL consecutively for the past 90 days are considered eligible, and each receive a CROWN NFT infused with an equal share of the CROWN reward pool.
The recipient can then choose to burn the CROWN NFT to unlock the infused assets, or to hold the CROWN NFT to automatically generate an additional 5% KCAL on their staked SOUL.
Every 90 days Soul Masters who have been staking at least 50,000 SOUL consecutively for the past 90 days receive a CROWN NFT infused with an equal share of the CROWN reward pool. The owner can choose to burn the CROWN NFT to unlock the infused assets, or hold the CROWN NFT to automatically generate an additional 5% KCAL on their staked SOUL
The KCAL generation bonus is capped at 100%, corresponding to holding 20 CROWN NFTs in your wallet.
- STORAGE — Your decentralized Phantasma storage allocation, served by the block producers, is also proportional to and growing with your stake. SOUL enables you to securely store your most precious files — encrypted, of course. Every SOUL staked increases your storage allocation by 40 KB, meaning that a Soul Master staking 50,000 SOUL has a 2 GB storage space allocation available.
SOUL sustainability — Limited supply, low inflation
At the launch of the Phantasma mainnet in October 2019, the initial SOUL supply was exactly 94,000,000 SOUL. An important tokenomics aspect for Phantasma is that almost the entire existing supply is unlocked. For token holders, this means two things:
- There are no large surprise token allocation unlocks to cause massive amounts of new tokens to flow into the secondary market
- What you see is what you get — Phantasma’s market capitalization is very close to its fully diluted value (FDV).
- In the interest of transparency, interested token holders can always find the current circulating supply and the total supply of SOUL readily available.
There are no large surprise token allocation unlocks to cause massive amounts of new tokens to flow into the secondary market. What you see is what you get — Phantasma’s market capitalization is very close to its fully diluted value (FDV)
SOUL sustains the entire ecosystem through a low 3% annual inflation, in addition to the fixed Soul Master SOUL rewards which amounts to 125,000 SOUL monthly. Of the 3%:
- 1% is allocated to Phantasma’s decentralized developer and core contributor group Phantom Force.
- 1% is allocated to Phantasma’s consensus nodes, the block producers. 75% of this is allocated to active block producers, while the remaining 25% is shared among standby block producers.
- The remaining 1% is distributed to block producers until it has been allocated to various future incentives — at the time of writing 0.2% has already been allocated to the CROWN rewards pool, while the remaining 0.8% remain unallocated. A part of this remainder will be allocated towards sustainable liquidity provider incentives.
- The Soul Master SOUL reward system is a perpetual incentivization of long term loyal token holders.
- While the fixed Soul Master rewards are minted and automatically distributed on a monthly basis, the remaining inflation is split into four automatically distributed quarterly allocations.
To sum up the inflation numbers, SOUL starts out with approximately 4.5% annual inflation with one relative (3%) and one fixed (125,000 monthly) component.
As time moves towards infinity the fixed portion of the inflation will correspond to a smaller percentage, and SOUL’s annual inflation will be moving towards 3%.
The annual inflation is distributed to core developers and contributors, block producers, various community incentives and long term loyal token holders.
SOUL starts out with approximately 4.5% annual inflation with one relative (3%) and one fixed (125,000 monthly) component. As time moves towards infinity, SOUL’s annual inflation will be moving towards 3%
KCAL fuels everything with a dynamic supply
KCAL fuels everything in the Phantasma ecosystem, and is needed for every single type of transaction on the blockchain, giving it a wide range of use cases. In short, anything that happens on the Phantasma blockchain consumes KCAL, and everything that happens on the Phantasma blockchain burns KCAL:
- Transactions — sending fungible and non fungible tokens
- Staking — sending your SOUL to the staking smart contract
- Unstaking — Withdrawing your SOUL from the staking smart contract
- Claiming KCAL earned through staking
- Cross chain swap transactions
- Cosmic swaps between native Phantasma assets
- Minting non fungible tokens
- Deploying smart contracts
- Deploying new tokens
In short, anything that happens on the Phantasma blockchain consumes KCAL, and everything that happens on the Phantasma blockchain burns KCAL
All core chain functionality except smart contract and token deployment charges the user a very low fee of around 0.003–0.005 KCAL, and these values can be adjusted through governance proposals. This ensures that using Phantasma can remain affordable for everyone regardless of future token values. The transaction fees are distributed as follows:
- 50% is burned immediately
- 25% is distributed to block producers
- 25% is distributed to the CROWN reward pool, unless the dApp being interacted with requires this portion to be sent to the dApp provider
Smart contract and token deployment comes at an increased cost, pegged to a fiat value by Phantasma’s native oracles. A developer who wishes to deploy a smart contract for his dApp pays a fee of $10 in its KCAL equivalent. The full amount of KCAL is immediately burned on contract deployment.
For a project building on top of Phantasma that needs its own token, a fee of $100 in its KCAL equivalent is charged on token creation — also this 100% burned. The same applies to artists and others who wish to deploy their own NFT minting smart contract to be able to mint $ARTISTNAME NFTs instead of the default $GHOST NFTs native to GhostMarket.
In addition, dApp providers are contributing, with GhostMarket burning half their earned KCAL fees, further driving a downwards pressure on the KCAL supply.
The only way new KCAL can be generated is through staking SOUL. There is no additional minting or inflationary mechanisms than staking. For each SOUL you stake, you generate 0.002 KCAL every single day. Based on this, a 1,000 SOUL stake generates 2 KCAL every day — and with Phantasma’s sustainable low fees that is enough to cover all normal transaction types for the average user in perpetuity.
The only way new KCAL can be generated is through staking SOUL. There is no additional minting or inflationary mechanisms than staking
The balance between inflationary (staking) and deflationary (burning) measures guard the KCAL token economy, and the ecosystem blossoms the KCAL supply will eventually reach its equilibrium. After this KCAL may potentially becoming deflationary — after which governance proposals can be submitted to avoid a too strong deflationary component draining the available supply. The current KCAL supply can always be found here.
Built for the Future
Taking the above information into account, it is obvious to the reader that Phantasma has designed its tokenomics with the future in mind. Organic growth and sustainability is not built on large supply burns or buybacks, but on creating a framework that enables longevity and growth.
Having a fully unlocked supply with clearly defined token mechanics and low inflation provides security for token holders and the team alike. No surprises, just transparency. We grow the platform together, and both the team and the community have exactly the same incentives to guide our actions.
Supply and demand — usage and adoption,