Zephyr Protocol — Tokenomics Information
In this article, we will outline the tokenomics of Zephyr Protocol.
Technical Specifications
- Total Supply: 18.4 Million (before tail emission)
- Block Time: 120 seconds
- Assets:
ZEPH(Base Currency)ZSD(USD Stablecoin)ZRS(Reserve Share)
- Mining Algorithm:
- RandomX proof-of-work (PoW) optimized for general-purpose CPUs to promote decentralization and egalitarian mining.
- Emission Curve: Zephyr has been designed with a slightly slower emission curve compared to Monero. This design choice is aimed at rewarding early adopters by reducing their dilution over time. By slowing the initial emission, the potential inflationary impact on the price of ZEPH is lessened, benefitting the stability of the algorithmic stablecoin system.
Emission Overview
Zephyr follows a similar emission schedule as Monero, with some key differences from Bitcoin (and others):
M = 2**64 (~18,446,744 ZEPH)
M is often notated as the maximum supply due to the block reward calculation:
block_reward = (M - circulation) * 2**(-emission_speed_factor)
Crucially, when the block reward drops below 0.6 in this calculation, 0.6 is used as the block reward. This means that total supply is technically unlimited and exceeds 100% of M over time.
It's more fitting to say M = "Initial Emission Cap" or M = "Pre-Tail Emission Cap".
Why Tail Emission?
As you likely know, Bitcoin will eventually have no block reward, as miners are paid from fees alone. Miners need an incentive to mine. Because of the dynamic blocksize, competition between miners will cause fees to decrease. If mining is not profitable due to a high cost and low reward, miners lose their incentive and will stop mining, reducing the security of the network. Tail emission ensures that a dynamic block size and fee market can develop.
Emission Schedule
| Year | Total Emission | % of Max Supply | Yearly Inflation Rate (%) |
|------|----------------|-----------------|---------------------------|
| 0 | 500,000.00 | 2.71 | NA |
| 1 | 4,478,548.79 | 24.28 | NA |
| 2 | 7,575,107.48 | 41.06 | 69.14 |
| 3 | 9,985,201.28 | 54.13 | 31.82 |
| 4 | 11,861,010.10 | 64.30 | 18.79 |
| 5 | 13,320,977.65 | 72.21 | 12.31 |
| 6 | 14,457,290.27 | 78.37 | 8.53 |
| 7 | 15,341,697.85 | 83.17 | 6.12 |
| 8 | 16,030,044.32 | 86.90 | 4.49 |
| 9 | 16,565,793.75 | 89.80 | 3.34 |
| 10 | 16,982,774.82 | 92.06 | 2.52 |
| 11 | 17,307,316.87 | 93.82 | 1.91 |
| 12 | 17,559,912.37 | 95.19 | 1.46 |
| 13 | 17,756,510.88 | 96.26 | 1.12 |
| 14 | 17,916,977.60 | 97.13 | 0.90 |
| 15 | 18,074,657.60 | 97.98 | 0.88 |
| 16 | 18,232,337.60 | 98.84 | 0.87 |
| 17 | 18,390,017.60 | 99.69 | 0.86 |
| 18 | 18,547,697.60 | 100.55 | 0.86 |
| 19 | 18,705,377.60 | 101.40 | 0.85 |
| 20 | 18,863,057.60 | 102.26 | 0.84 |
Compared to Bitcoin and Monero
Block Reward Breakdown
Prior to v1.0.0
The Block Reward was split between the Mining Reward (95%) and Governance Reward (5%).
Block Reward Breakdown v1.0.0+
The following section is a breakdown of the block reward distribution after our v1.0.0 launch on October 1, 2023:
Mining Reward:
75% of the Block Reward is allocated for Miners. Miners play an important role in securing the network as Zephyr is a PoW coin.
Reserve Reward:
20% of the Block Reward is allocated towards bolstering the ZEPH Reserve, and as an additional incentive mechanism for Reserve Providers in Zephyr Protocol's Over-Collateralized stablecoin system.
Governance Reward:
5% of the Block Reward is allocated for funding the ongoing development of Zephyr Protocol. Zephyr has no VC funding and launched with no ICO.
Funding and Sustainability
Adequate funding is of paramount importance for the success and longevity of a project like Zephyr. This is why Zephyr has a robust treasury fund of 500,000 ZEPH, which not only covers operational costs but primarily serves as a strong reserve. This reserve is designed to bolster the protocol during adverse market conditions and provide liquidity when required, thus ensuring the protocol’s stability and resilience.
In addition, Zephyr incorporates a 5% governance fee to guarantee ongoing development, marketing, and other operational activities. This fee facilitates the continuous enhancement of the Zephyr ecosystem, improving its features, user experience, and overall functionality. It also allows Zephyr to keep pace with technological advances and market trends.
These funding mechanisms are crucial for the project’s longevity and robustness. By ensuring not only the protocol’s launch but also its continuous growth and adaptation to the evolving needs of its users and the wider crypto market, Zephyr stands as a testament to a self-sustaining, resilient, and evolving protocol that is prepared for success in the long run.
