Summary of Minterest Tokenomics
Why revise the tokenomics? In short, because previous tokenomics were crafted during a bull market to satisfy the prevailing demands of both retail and institutional supporters at the time. The new revision of Minterest’s tokenomics allows the protocol’s token economy to adapt to DeFi’s new reality following the sector’s correction earlier in the year.
A lot has changed in DeFi, and in some ways those changes favour a self-sustaining lending protocol like Minterest. The emphasis is now squarely on value creation and sustainability.
Minterest is designed to excel at both.
What has Changed?
The new tokenomics significantly reduce circulating supply, especially over the first 18 months. Lower supply protects the protocol’s token economy, reinforcing the value of emissions rewards as Minterest launches and grows out TVL. The table below summarises circulating supply of Minterest’s previous tokenomics (Whitepaper v1.1) with the revision (Whitepaper v1.2).
Minterest Circulating Supply Comparison
A significant reduction in circulating supply (Whitepaper v1.2) during the first 18 months.
New Aspects at Play
A number of new aspects are instrumental in constricting on-market supply.
The Standard Emissions will now be distributed over 15 years, instead of 5.
Emission Reward Vesting
All emission rewards now vest block-by-block over 12 months. Rewards which once impacted circulating supply immediately now take 12 months to do so, preventing sharp spikes in token supply.
Apart from LBP participants (which includes the CAE), MNT held by supporters – private investors, advisors and the team – are locked for 12 months, followed by 12 month vesting. During the first 12 months, on-market MNT comes only from LBP Participants and emission rewards for supplying, borrowing and staking.
A significant proportion of circulating supply is now accumulated by the Strategic Reserve, which is seeded from Team Tokens and grows from the NFT boost emission surplus. The Strategic Reserve will be operated and controlled by the DAO in the future.
Why surplus emissions?
Buyback Emissions subsidise governance rewards in the protocol’s early stages, incentivising early adopters to stake MNT and participate. They act as a kickstarter, and in DeFi’s current environment a total allocation of 5 million MNT is more than needed. What is not allocated instead goes to the Strategic Reserve along with any unused NFT Boost Emissions.
It’s similar for NFT Emissions. The initial allocation of 15 million guarantees no protocol user can ever be worse off by the presence of a NFT holder. Shielding users this way maximises fairness, but it requires a larger pool dedicated to NFT Emissions. With more tokens in NFT emissions than can ever be used, any surplus can be transferred to the Strategic Reserve.
The Strategic Reserve acts somewhat like the protocol’s savings account. Initially it accumulates surplus MNT tokens to be applied to staking, which earns governance rewards. Earning and never spending a proportion of governance rewards results in compounding, which over time intends for the Strategic Reserve’s holding becoming very significant. Removing MNT from on-market supply causes on-market scarcity, supporting demand and strengthening Minterest’s token economy for the benefit of all users.
Detailed View of Circulating Supply
You can find a detailed 7-year breakdown of circulating supply in this tokenomics sheet.
Minterest’s unique value capture model underpins its tokenomics. By tightening emissions and reducing on-market supply, Minterest ensures that token performance and protocol TVL can grow side-by-side, while ensuring that the rewards system incentivises properly.
It’s another way to show that Minterest takes the market seriously.
Minterest. Seriously DeFi.
13, October 2022