Tokenomi ICP (ICP)

1. Issuance Mechanism

Genesis Supply & Inflation:

• At network genesis, 469 million ICP were created.
• Supply is inflationary, primarily due to rewards to Node Providers (who run infrastructure) and voting rewards to stakers participating in governance.
• As of May 28, 2024, the total supply reached approximately 519 million ICP.

Reward Emissions:

• Node Provider rewards: Minted monthly, calculated based on the 30-day moving average price of ICP in Special Drawing Rights (XDR), and paid for operating node hardware and infrastructure.
• Voting rewards: Paid daily, proportionally to “neurons” (locked ICP) based on voting activity and power.

Burn Mechanisms:

• ICP is burned:
  • When converted to “cycles” (utility tokens to pay for computation/storage; 1 XDR worth of ICP = 1 trillion cycles),
  • On each account transfer (0.0001 ICP is burned as a fee),
  • When NNS proposal fees (10 ICP) are burned if proposals are rejected.

2. Allocation Mechanism

• Additional tokens distributed via airdrop (vesting over 1 year from May 2021).

3. Usage & Incentive Mechanisms

Primary Uses:

• Staking:
  • Stake ICP (minimum 1 ICP) to create a “neuron.”
  • Locked “neurons” grant voting power, the ability to propose or vote on governance (NNS, the network DAO), and reward accrual (called “maturity”).
• Cycle Creation (Gas):
  • ICP can be converted (burned) into cycles to pay for computation, memory, and storage on canisters (Internet Computer’s smart contracts).
• Network Operations:
  • Used to pay node providers and, in the near future, API nodes.
• Burning:
  • Transfer fees and rejected proposal fees are burned, reducing supply.
• Medium of Exchange:
  • Transacts value within the ecosystem and on DEXs such as ICPSwap.

Incentives:

• Node Providers: Receive monthly inflationary rewards in ICP.
• Stakers (“neurons”): Earn daily voting rewards (can be claimed as ICP, subject to unlock conditions).
• No liquidity provision mechanism presently exists.

4. Lock-up Mechanism

• To participate in governance and earn voting rewards, ICP must be locked in a neuron for a “dissolve delay” of minimum 6 months; maximum 8 years.

• Voting power depends on both lock-up length (dissolve delay) and “age bonus” (how long the neuron has been staked).

  • 6 months → 1.06x bonus; 8 years → 2x bonus (linear in between).
  • Maximum “neuron age” bonus is 1.25x after 4 years.

• Users can increase lock-up duration at any time, decrease only by initiating “dissolve,” which starts the countdown.

• Adding tokens to a neuron resets its age bonus proportionally.

5. Unlocking Time

• Unlocking (Dissolving):

  • When dissolve delay reaches zero, neurons can be “disbursed” (ICP returned to owner).
  • Voting rewards claimable only after full unlock; minimum claim is 1 ICP.

• Airdrop/TGE Vesting:

  • Airdrop tokens vested monthly over 1 year from launch (May 2021).

• Team and early allocations likely subject to bespoke vesting schedules, but publicly disclosed lockups are focused on staking, not team unlocks.

Summary Table

Nuances & Implications

• Economic Security: The long lock-up periods incentivize long-term commitment to governance, discouraging short-term speculation.
• Inflation: Secular inflation from node and voting rewards; counterbalanced by direct burning in utility (cycles), and governance (proposal) processes.
• Governance Centrality: Holding and staking ICP is essential to exercise any onchain control over Internet Computer—even for ecosystem projects (e.g. via SNS DAOs).
• Incentive Alignment: Node providers and governance participants are directly compensated, aligning the interests of infrastructure providers with network health.
• Unlock Risks: Most circulating supply is liquid; primary lock-up is voluntary via staking (with the exception of vesting allocations for investors and airdrop recipients).
• No Delegation: All governance power is directly tied to staked neurons; as of the latest disclosures, there is no delegation mechanism (unlike many PoS chains).

This structure provides an in-depth overview of ICP’s token economics. For specifics around unlock schedules and precise vesting details for early team/VC allocations, refer to official DFINITY/Internet Computer documentation, as public data is primarily focused on staking mechanics, airdrop, and network incentives.