#160·DOT RFP #1 - Crowdsourced Research: Capped Supply & Step Change Inflation

I would love to see The polkadot ecosystem compared with Other leading ecosystems and their inflationary models along with their price fluctuations.

What will happen if we introduce more coin/rewards locking scenarios, the longer you commit to lock your coins the more rewards you will get and vice-versa. Also voting behaviors should factor in all dot rewards.

If a model is built to analyze inflation, it should be flexible enough to include new changes to some network parameters.

Aye from me X2

It’s time we get serious about our tokenomics and how the Polkadot ecosystem is perceived by investors, retail users, and the broader crypto community. Inflation has its benefits—it enables an abundance mindset and supports network incentives, but we also risk mimicking the patterns of fiat currencies if we’re not intentional.

As we evolve, we need to ensure that long-term holders and participants are respected through thoughtful, sustainable economic models. Exploring capped supply, step-change inflation, and reward mechanisms that promote longer commitment (like lockups) is a healthy direction.

Side note: This cycle is different. All eyes are on Bitcoin. Anything that aligns Polkadot with BTC's narrative, such as a capped supply or “Polkadot halving” concept, would be a massive edge against competitors. It’s extremely marketable, needs no explanation, and could naturally attract attention from both institutional and retail investors. It also creates strong incentives to stake now in anticipation of a stronger future DOT price.

Dear Proposer,

Thank you for your proposal. Our second vote on this proposal is AYE.

The Big Tipper track requires 35% participation and simple majority of non-abstain votes according to our voting policy v0.2, and any referendum in which the majority of members vote abstain receives an abstain vote. This proposal has received three aye and zero nay votes from ten available members. Below is a summary of our members' comments:

Voters expressed their support for a research initiative aimed at exploring inflation and token cap issues within the ecosystem. They found the proposal interesting and appreciated the opportunity for public contribution to address a comprehensive list of queries. While most were optimistic about the potential outcomes, one voter raised concerns regarding the necessity of certain questions, suggesting that some information was readily available through existing resources. Overall, the sentiment was positive, with anticipation for the research results.

The full discussion can be found in our internal voting.

Please feel free to contact us through the links below for further discussion.

Kind regards,
Permanence DAO
Decentralized Voices Cohort IV Delegate

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Polkadot 10MS-CS Model: A Sustainable Economic Framework

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Disclaimer: This document presents a proposal for Polkadot's economic model, including projections based on approximate current numbers and realistic assumptions. It's important to understand that actual outcomes may vary significantly due to both exogenous factors (external, uncontrollable events like broader market shifts, regulatory changes, or technological advancements) and endogenous factors (internal dynamics within the Polkadot ecosystem, such as changes in network usage, staking behavior, or governance decisions). This model serves as a framework for discussion and future adaptation.

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Objective

The 10MS-CS Model features:

• A 10% inflation rate based on the (Maximum Supply - Circulating Supply) gap.
• A 2.5 billion DOT cap by 2105 (80 years).
• Strategic coretime sales and transaction fee distribution, with DOT burning, validator rewards, and treasury funding.
• Assumed DOT price appreciation to ensure long-term network stability and validator incentives.

Parameters

• Maximum Supply: 2,500,000,000 DOT
• Starting Circulating Supply (July 2025): 1,595,666,163 DOT
• Inflation Rate: 10% of (2.5B - CS) until CS = 2.5B (2105), then 0%.
  • Formula: 0.10 * (2,500,000,000 - CS)
• Coretime Sales (Annual): 1,800,000 DOT/year (~$6.696M at $3.72/DOT)
  • 2025 Distribution: 80% burned (1.44M DOT), 10% validators (180,000 DOT), 10% treasury (180,000 DOT).
  • Burn Reduction: Burns reduce 1%/year to 0% by 2105. Validators' share increases to 90%.
• Transaction Fees (Annual): 5,000,000 DOT/year (~$18.6M at $3.72/DOT)
  • Until Cap: 25% burned (1.25M DOT), 10% treasury (0.5M DOT), 65% validators (3.25M DOT).
  • Post-Cap: 10% treasury (0.5M DOT), 90% validators (4.5M DOT).
• Price Appreciation Assumption: 5% annually ($3.72 in 2025 to ~$187.49 in 2105). With 10% annually yields ~$7,620.05.

Assumptions

• Current Treasury Balance: ~$109M
• Current Staking: 47.5% (758M DOT)
• Current Inflation (estimated): 7.3% (~$522M)
• Current APY for Stakers: 8%
• Governance Model: OpenGov

Projection (2025–2105) - Key Data Points

Year	CS Start (DOT)	Inflation (DOT)	Coretime Burn (DOT)	Net Change (DOT)	CS End (DOT)	Price 5% (USD)	Rewards 5% (USD)
2025	1,595,666,163	90,433,384	1,440,000 (80%)	87,743,384	1,683,409,547	3.72	~12.76M
2035	2,274,518,820	22,548,118	1,278,000 (71%)	20,020,118	2,294,538,938	6.06	~20.90M
2050	2,426,673,091	7,332,691	990,000 (55%)	5,092,691	2,431,765,782	12.60	~43.90M
2075	2,487,177,834	1,282,217	540,000 (30%)	-507,783	2,486,670,051	42.66	~151.70M
2105	2,499,496,038	503,962	0 (0%)	-746,038	2,499,750,000	187.49	~1,181.19M

Polkadot Supply and Price (2025–2029) Chart:

Polkadot Supply and Price (2025–2035) Chart:

Polkadot Supply and Price (2025–2045) Chart:

Polkadot Supply and Price (2025–2105) Chart:

Market Impact

Once the market is aware of this model's predictable and fixed token supply, especially the initial drop in net issuance, it is expected to reduce immediate selling pressure. This structure is designed to encourage holding, accumulation, and promote proper resource and capital efficiency within the Polkadot ecosystem.

Key Outcomes

• Supply: 1.595B to 2.5B DOT by 2105 (0.57% annualized), then stable.
• Inflation: Decreases from 90.4M DOT to ~0.5M DOT by 2105.
• Burns: ~110.9M DOT burned total until 2105 (coretime + fees).
• Revenue (USD): Coretime (~$6.696M/year), Fees (0.5M DOT to treasury, 3.25M DOT to validators initially). Post-2105, significant USD value due to price appreciation.
• Validator Returns: While the inflationary component of DOT rewards decreases, the USD value of validator rewards is projected to increase significantly (e.g., ~$12.76M in 2025 to ~$1,181.19M in 2105 at 5% price appreciation; or ~$48.01B at 10% price appreciation). This shift is driven by price appreciation and the increasing share of coretime sales and transaction fees allocated to validators, ensuring robust incentives despite decreasing DOT issuance. It is important to note that inflation (new token issuance) does not directly equal return to participants; returns will increasingly be derived from coretime sales and transaction fees.
• Coretime: USD value stable at ~$6.696M, requiring fewer DOT over time.

RFP Questions 15–21 Highlights

• Q15 (Inflation Schedules): The 10MS-CS Model offers a continuous, decreasing inflation linked to the supply gap, designed to precisely hit the 2.5B cap.
• Q16 (Inflation): Model provides controlled issuance, a defined cap, and robust burn mechanisms, ensuring long-term value.
• Q17 (Validator Rewards): Projected USD rewards significantly increase, ensuring strong incentives despite decreasing DOT APY.
• Q18 (Treasury Income): Initial direct treasury income is lower than current balance, requiring strategic use of existing 109M DOT. Long-term treasury funding is robust with price appreciation.
• Q19 (Market Cap): Expected to grow significantly due to DOT price appreciation.
• Q20 (Benefits of Cap): Scarcity, enhanced investor confidence, and stable coretime value.
• Q21 (Disadvantages of Cap): Lower DOT APY for validators and early treasury income shortfall (in newly generated DOT) are offset by price appreciation and leveraging the existing treasury.

Implementation

• Technical: Requires runtime upgrade.
• Governance: OpenGov proposal.
• Monitoring: Continuous monitoring and adjustments.

Notes

• Coretime: 1.8M DOT/year is realistic. Higher volumes (e.g., 3.6M DOT/year) could accelerate cap.
• Price Appreciation: Crucial for USD value of rewards and treasury.
• Risks: Early treasury income needs careful management, mitigated by existing ~$109M treasury.