Tokenomics templates: mint-burn equilibrium

Cenit is the best company for tokenomics design and modeling. With our software, we allow projects to simulate, improve and share with ease their tokenomics. Once a project has introduced the main aspects of their token economy, they obtain a dashboard like this one

tokenomics simulation

Where the token buying and selling demand is tracked over thousands of scenarios in a way that it is easy to understand if an economy is going to grow organically or if it is badly designed.

Today we cover the case of a mint-burn equilibrium economy with our templates. 

In the mint-burn equilibrium, users purchase tokens and burn them to make use of the network. At the same time, the operators of the network receive some incentives that come from the token vesting schedule or from newly minted tokens, at a rate that can be independent of those burnt by the users. 

We will model the following structure:

mint-burn economy

The template can be found here

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Mint-burn economy template in real life: Helium

The burn and mint equilibrium is what Helium does to redistribute its wealth among the ecosystem.

In the case of Helium, their mint-burn equilibrium is the following:

  • They have a target maximum supply and the incentives come from an incentive pool of the initial allocation to the operators. 
  • In their mint and burn equilibrium, the same amount of tokens that are burnt in an epoch  will be re-minted and sent to the treasury if that amount is lower than a specific threshold. If the quantity is higher, all those additional tokens will not be minted anymore. With this mechanism, they limit their net inflation rate to the new unlock tokens coming from  the vesting, never surpassing the original max supply.

This ensures that the inflation is kept controlled and opens the door for a deflationary economy, depending on the network usage. 

The template provided, however, is not fully the Helium economy, but takes inspiration from it. This is because part of the Helium mint-burn equilibrium has multiple conditions to determine the exact amount of tokens created at each step, rather than being constant. In the form-based simulations available with the Basic Plan of our platform, only the most common types of incentives are allowed. 

However, we are working on a more customizable version of the simulation platform, where more complex configurations will be possible. Contact us for more information here.

How to adapt the Mint-burn template for yourself 

For the provided template we have set up three agent types: Team & Investors, Incentives, and Treasury. To make the different vesting slopes we have split each of them into 3 different entities in the vesting schedule.

These are all values that should be adjusted for your case.

adapt your tokenomics

Next, for the value proposition we select the type “Infrastructure”, with all the fees paid in tokens. For the purposes of the simulation it does not matter that they are burnt for credits and then these credits spent. As per the growth hypothesis, this will for sure need to be changed to adapt to your business case. 

create utilities

So far we have the burning part of the economy. To model the minting we need two elements: the part of the allocation that is assigned to the node operators, and the newly minted token emissions that are distributed to them. 

For the newly minted part, we can do multiple emissions to compose a complex schedule. However, take into account that in the Basic Plan of the simulation tool, we can only set up flat fee emissions. 

reserve and incentives setup

If we wanted to introduce emissions related to the amount of users, or obeying a more complex formula, we would need to use the advanced simulator editor.