Tokenomics

Overview

The tokenomics of your Avalanche L1 blockchain is a crucial aspect that determines how value flows through your network. The Subnet-EVM provides powerful tools to manage your token economy:

Initial token allocation in genesis
Dynamic token minting through the Native Minter precompile
Fee burning or redistribution mechanisms (via Transaction Fees & Gas)

Initial Token Supply

When creating your Avalanche L1, you can configure the initial token distribution in the genesis file:

{
  "alloc": {
    "0x8db97C7cEcE249c2b98bDC0226Cc4C2A57BF52FC": {
      "balance": "0x3635C9ADC5DEA00000" // 1000 tokens (in wei)
    },
    "0x1234567890123456789012345678901234567890": {
      "balance": "0x21E19E0C9BAB2400000" // 10000 tokens (in wei)
    }
  }
}

Consider the following when planning initial allocation:

Reserve tokens for validator rewards
Allocate tokens for development and ecosystem growth
Set aside tokens for future community initiatives
Consider vesting schedules for team allocations

Native Minter

Purpose

The Native Minter precompile allows authorized addresses to mint additional tokens after network launch. This is useful for:

Implementing programmatic token emission schedules
Providing validator rewards
Supporting ecosystem growth initiatives
Implementing monetary policy

Configuration

Located at address 0x0200000000000000000000000000000000000001, you can activate this precompile in your genesis file:

{
  "config": {
    "contractNativeMinterConfig": {
      "blockTimestamp": 0,
      "adminAddresses": ["0x8db97C7cEcE249c2b98bDC0226Cc4C2A57BF52FC"]
    }
  }
}

Interface

//SPDX-License-Identifier: MIT
pragma solidity ^0.8.24;
 
interface INativeMinter {
  event NativeCoinMinted(address indexed sender, address indexed recipient, uint256 amount);
  // Mint [amount] number of native coins and send to [addr]
  function mintNativeCoin(address addr, uint256 amount) external;
 
  // IAllowList
  event RoleSet(uint256 indexed role, address indexed account, address indexed sender, uint256 oldRole);
 
  // Set [addr] to have the admin role over the precompile contract.
  function setAdmin(address addr) external;
 
  // Set [addr] to be enabled on the precompile contract.
  function setEnabled(address addr) external;
 
  // Set [addr] to have the manager role over the precompile contract.
  function setManager(address addr) external;
 
  // Set [addr] to have no role for the precompile contract.
  function setNone(address addr) external;
 
  // Read the status of [addr].
  function readAllowList(address addr) external view returns (uint256 role);
}

The Native Minter precompile uses the AllowList interface to restrict access to its functionality with the following roles.

Tokenomics Best Practices

Initial Distribution:
- Ensure fair distribution among stakeholders
- Reserve sufficient tokens for network operation
- Consider long-term sustainability
- Document allocation rationale
Minting Policy:
- Define clear minting guidelines
- Use multi-sig for admin control
- Implement transparent emission schedules
- Monitor total supply changes
Supply Management:
- Balance minting with burning mechanisms
- Consider implementing supply caps
- Monitor token velocity and distribution
- Plan for long-term sustainability
Security Considerations:
- Use multi-sig wallets for admin addresses
- Implement time-locks for large mints
- Regular audits of minting activity
- Monitor for unusual minting patterns
Validator Incentives:
- Design sustainable reward mechanisms
- Balance inflation with network security
- Consider validator stake requirements
- Plan for long-term validator participation

Example Implementations

Fixed Supply with Emergency Minting

{
  "config": {
    "contractNativeMinterConfig": {
      "blockTimestamp": 0,
      "adminAddresses": ["MULTISIG_ADDRESS"],
      "enabledAddresses": []
    }
  },
  "alloc": {
    "TREASURY": {"balance": "TOTAL_SUPPLY"},
    "VALIDATOR_REWARDS": {"balance": "VALIDATOR_ALLOCATION"},
    "ECOSYSTEM_FUND": {"balance": "ECOSYSTEM_ALLOCATION"}
  }
}

Programmatic Emission Schedule

contract EmissionSchedule {
    INativeMinter public constant NATIVE_MINTER = INativeMinter(0x0200000000000000000000000000000000000001);
    uint256 public constant EMISSION_RATE = 1000 * 1e18; // 1000 tokens per day
    uint256 public constant EMISSION_DURATION = 365 days;
    uint256 public immutable startTime;

    constructor() {
        startTime = block.timestamp;
    }

    function mintDailyEmission() external {
        require(block.timestamp < startTime + EMISSION_DURATION, "Emission ended");
        NATIVE_MINTER.mintNativeCoin(address(this), EMISSION_RATE);
        // Distribution logic here
    }
}

Validator Reward Contract

contract ValidatorRewards {
    INativeMinter public constant NATIVE_MINTER = INativeMinter(0x0200000000000000000000000000000000000001);
    uint256 public constant REWARD_RATE = 10 * 1e18; // 10 tokens per block

    function distributeRewards(address[] calldata validators) external {
        uint256 reward = REWARD_RATE / validators.length;
        for (uint i = 0; i < validators.length; i++) {
            NATIVE_MINTER.mintNativeCoin(validators[i], reward);
        }
    }
}

You can find the Native Minter implementation in the subnet-evm repository.

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