Pyde Tokenomics

The PYDE token is the native asset of the Pyde blockchain. It is used for: gas payment, validator staking, governance signaling, and parachain operator bonds.

Total Supply & Genesis

• Total genesis supply: 1,000,000,000 PYDE
• Decimal places: 9 (1 PYDE = 10^9 quanta — see Chapter 14 for the full denomination ladder)
• Smallest unit: 1 quanta = 10^-9 PYDE

Initial Distribution (v1)

Numbers above are illustrative starting points; final distribution requires legal review and stakeholder negotiation.

Inflation Schedule

Rationale: front-loaded inflation rewards early validators; fixed 1% tail provides long-term security budget without unbounded dilution.

Inflation accrues to the reward pool, distributed per the same rule as the fee share (see below).

Fee Model (EIP-1559 Style)

Every transaction has:

• Base fee: dynamically adjusted per block (EIP-1559 mechanism, target 50% block utilization)
• No priority tip. The encrypted mempool eliminates the information asymmetry that priority fees price. Priority would re-introduce ordering exploitation.
• Combined gas: for cross_call! invocations (post-mainnet), Pyde-side + parachain-side gas billed in one transaction

Block Elasticity

• Target gas limit per block: 400M gas
• Maximum (4× elastic): 1.6B gas
• Base fee adjusts up when blocks are >50% full, down when <50%
• Adjustment factor: ±12.5% per block (EIP-1559 standard)

Per-Transaction Fee Flow

For every transaction's base fee:

100% of base_fee
├── 70% burned (deflationary pressure)
├── 10% to treasury (multisig-controlled)
└── 20% to the reward pool
    ├── 70% activity-weighted across active committee  (= 14% of total)
    │     • Vertices certified by ≥85 peers
    │     • Batches included in committed waves (× tx count)
    │     • Decryption shares submitted on time
    │     • Anchor selections (uptime-correlated)
    └── 30% flat across full stake pool                (= 6% of total)
          (every staked validator earns the base; activity bonus is layered on for those currently on the committee)

Plus inflation issuance (also flowing into the reward pool) distributed by the same rule.

Validator Staking

Bond Requirements

Single-tier staking:

• Minimum: 10,000 PYDE (MIN_VALIDATOR_STAKE) — any validator meeting this threshold enters the pool from which the 128-member active committee is uniformly randomly selected each epoch
• Maximum validators per operator: 3 (anti-Sybil cap, enforced on operator identity)
• Bonding period: 1 epoch (~3 hours) before active
• Unbonding period: 30 days (must exceed the 21-day safety evidence freshness window)

There is no separate "committee tier" with a higher floor. Pyde relies on threshold encryption + operator-identity cap + slashing for Sybil resistance, not on stake-size economics (see Chapter 16 §16.4 for the full security argument).

Staking Yield Estimate

Assume:

• 50% of supply staked → 500M PYDE
• Year 1 inflation: 50M PYDE → distributed to validators
• Activity rewards from fees: scales with chain usage

Estimated yield year 1:
  Inflation share: 50M / 500M = 10%
  Fee share: depends on chain activity
  
At low utilization: ~10-12% APY
At moderate utilization (target): ~12-15% APY
At high utilization: ~15-20% APY

Specific yields depend on actual network activity. Numbers above are illustrative; actual yields will be observable post-launch.

Active-Committee vs Awaiting-Selection Earnings

Every staked validator earns from the same pool; the difference is in the activity-weighted bonus while serving on the active committee.

Committee participation is per-epoch; over time, every validator qualifying for the pool will rotate onto the active committee proportionally and accrue activity bonuses then.

Slashing Economics

Slashing penalties (see SLASHING.md for full catalog):

Distribution of slashed amounts (safety offenses):

• 50% burned (irrecoverable, hurts attacker economics)
• 30% to treasury
• 20% to reporter (incentivizes monitoring)

Distribution of slashed amounts (liveness offenses):

• 100% burned (no reporter incentive needed; protocol auto-detects)

Treasury

The treasury accrues from:

• 10% of all transaction base fees
• Treasury portion of slashing (30% from safety offenses)
• Inflation allocation (if any portion designated)

Treasury spending is gated by M-of-N FALCON multisig (7-of-12 recommended) and is restricted to:

• Public goods grants (developer tools, audits, infra)
• Bug bounty payouts
• Emergency response (rare)
• Other purposes ratified by PIP (Pyde Improvement Proposal)

The treasury cannot be unilaterally drained — public PIPs + multisig threshold + 30-day-bounded emergency pause provide checks.

Parachain Operator Economics (Post-Mainnet)

Parachain operators stake PYDE as their bond and earn from the combined gas of every cross_call! invocation. The split is:

• 70% to parachain operator(s) providing the cross-chain service
• 20% to the Pyde-side reward pool (for executing the originating transaction)
• 10% burned (consistent with main fee model)

Parachain operators face their own slashing for misbehavior (incorrect responses, downtime), creating staked-honesty guarantees comparable to validators.

Token Velocity & Use

PYDE is intended to be used for transactions, staking, and bond, not held purely as speculative store-of-value. Mechanisms to encourage utility:

1. Gas burn (70%): every transaction reduces supply, creating deflationary pressure when network usage is high
2. Validator bond locking: 10K PYDE per validator slot, locked during operation
3. Treasury spending: continually deploys PYDE into the ecosystem
4. No priority tips: removes the speculative auction layer that creates token-velocity drag

Long-Term Sustainability

Post year-4, supply economics are:

• Inflation: ~1% per year (~10M PYDE)
• Burn rate: depends on usage; at 30K TPS sustained with mixed workload, estimated ~30-100M PYDE/year burned

At sustained moderate usage, the chain is net deflationary (burn > inflation). At low usage, slight inflation maintains validator security budget. At very high usage, deflationary pressure may eventually require fee structure adjustments (governance decision).

Open Questions

1. Initial distribution percentages: above are illustrative; final allocations need legal + stakeholder negotiation.
2. Investor terms: lockup, vesting, and post-vesting governance rights are open design questions.
3. Treasury governance specifics: which categories of spending require which multisig thresholds — to be detailed in governance PIP.
4. Parachain reward split: 70/20/10 above is starting point; may adjust based on operator economics post-mainnet.

References

• Fee flow: see WHITEPAPER.md §12
• Slashing details: see SLASHING.md
• Validator lifecycle: see VALIDATOR_LIFECYCLE.md

Version 0.1