KYVE Tokenomics

The KYVE Token

The KYVE token ($KYVE) serves as the backbone of the KYVE Network, which is its own Layer 1 blockchain built with the Cosmos SDK and uses a network of validators who are incentivized to archive data correctly and efficiently. These validators upload data to a decentralized storage solution and generate proofs (which can be used to verify the authenticity of data when downloaded) to ensure the data is stored and retrieved accurately.

Designed to secure the network, incentivize participation, and support seamless governance, $KYVE ensures the ecosystem remains robust, scalable, and self-sustaining. This native utility token is vital in empowering validators, delegators, developers, and the broader community, fostering an environment where everyone contributes to and benefits from the network’s success.

$KYVE Token Utility

The $KYVE token is integral for three main functions across the KYVE network: delegation, governance, and incentivization.:

Token Distribution: Ensuring Balanced Growth

KYVE’s token distribution is designed to ensure a sustainable, secure, and decentralized ecosystem. The total supply of 1 billion $KYVE tokens is carefully allocated to ensure each category plays a unique role in the network’s growth and long-term success.

Here’s how the KYVE token distribution looks like:

‍Ecosystem (27.5%): The largest allocation is aimed at supporting network growth, fostering partnerships, and encouraging community participation. 20% of these tokens are unlocked at the Token Generation Event (TGE), while the remaining 80% is vested gradually over four years, ensuring that the growth is measured and sustainable.

Korellia Testnet Rewards (2%): This allocation incentivizes early participants who contributed to KYVE’s development by testing its protocol during the Korellia testnet phase. 8.33% of these tokens are released immediately at TGE, followed by monthly releases over 11 months. This helps reward early users for their contribution while spreading out the release to avoid immediate sell pressure.

Foundation Delegation (10%): The foundation delegation tokens are critical for securing the network in its early stages. 100% of these tokens are unlocked at TGE and are delegated to attract and incentivize top validators to help secure the network from day one, ensuring robust validator participation from launch.

Developer Adoption (10%): Developer incentives are crucial for long-term ecosystem growth, as they encourage the development of applications, tools, and integrations with KYVE. 10% of these tokens are unlocked at TGE, while the remaining 90% are vested over four years, ensuring consistent developer engagement and support for the network’s ongoing expansion.

DEX Liquidity (2.5%): Ensuring liquidity on decentralized exchanges (DEXs) is key to enabling trading and accessibility of the $KYVE token. This allocation is fully unlocked at TGE, allowing the token to be traded freely and ensuring enough liquidity in the market for buyers and sellers.

Funding Rounds (31.5%): This significant portion of tokens is allocated to early investors who believed in KYVE’s vision. The tokens are vested based on different schedules to prevent excessive market flooding. For example, round 1 (R1) tokens have a one-year cliff and a three-year vesting period, while rounds 2 (R2) and 3 (R3) have shorter vesting periods. This staggered release structure helps manage sell pressure and ensures that the market remains stable during the token release.

Team Allocation (16.5%): The team’s allocation is vested over three years with a one-year cliff, which ensures long-term commitment to the project. This structure aligns the team’s incentives with the growth of the network, as they are encouraged to continue contributing to KYVE’s success over the long term.

This balanced distribution ensures that each category contributes to KYVE’s long-term sustainability while incentivizing the right stakeholders. From early investors and validators to developers and community participants, every allocation is designed to support the network’s stability, security, and growth over time.

Inflation Splitting: A Balanced Approach

YVE’s innovative Inflation Splitting mechanism ensures long-term sustainability by dynamically balancing validator rewards with ecosystem stability. Through its inflationary model, new $KYVE tokens are created and distributed to validators as staking rewards, incentivizing network security even during low activity periods.

This entire process is governed by KYVE’s decentralized governance, allowing adjustments to maintain stability.To avoid over-supply and preserve token value, KYVE employs a dynamic inflation rate that adjusts based on staked token amounts, promoting balanced participation across the network.

During periods of high network activity, KYVE can also use transaction fees for fee burning, reducing the token supply and counteracting inflation. This creates a dynamic system where inflation decreases as network utility grows, fostering a self-regulating economic model.

This approach ensures KYVE remains a self-sustaining network, with validators consistently incentivized to secure both the consensus and protocol layers. It also guarantees that data pools remain operational without requiring constant manual funding, supporting the network’s scalability and long-term growth.

Expanding the $KYVE Experience

KYVE’s data pools can make any deterministic, historical blockchain data a trustless public good by validating and storing the data and keeping track of what’s true. The continuous funding of data pools is required to keep them operational, subsidizing the protocol validators that run in each data pool in $KYVE, ensuring they remain motivated to maintain the integrity of the data. (Risks of slashes can occur if a validator misbehaves or votes incorrectly).

With the v1.5 upgrade, KYVE introduced Multi-Coin Funding, allowing data pools to be funded in not only $KYVE but other tokens from different blockchain ecosystems. This opens the door for partner projects to fund their integrations using native tokens, adding flexibility and encouraging cross-chain collaboration.

This also further enhances the protocol economics, bringing on another use case for $KYVE.One of the first initiatives leveraging this feature is KYVE’s Public Goods Funding (PGF) initiative. KYVE runs validators on partner chains to earn rewards in their native tokens, which are then used to fund data pool integrations on KYVE. This creates a sustainable cycle of ecosystem collaboration and decentralized funding.

This initiative is a mutually beneficial opportunity for KYVE and all partner projects. It leverages a delegation to fund the off-boarding of their historical data for optimal scalability, avoiding costly archival nodes while expanding KYVE’s trustless data sets and capabilities.

Once tokens are collected, a proposal will be submitted to KYVE’s governance forum to whitelist the tokens, and the proposal will be subjected to a one-week voting period before being implemented on the protocol for funding.

If passed, the data pool will mainly be funded by commission rewards from the public good validator delegation, and the validators and delegators participating in the relative data pool(s) will be rewarded in tokens from both KYVE and the data source chain.If you want to learn more about the PGF initiative, please reach out via official KYVE channels.