Immutable’s Tokenomics and Staking Principles
Immutable’s mission is to bring digital ownership to the world via NFTs. We think games are the obvious trojan horse — over 3 billion gamers worldwide are already using digital objects with real utility. The IMX token is crucial to completing this mission by accelerating the adoption of Immutable X and rewarding the various contributors to the leading platform for web3 games.
For context, the IMX token is issued by Digital Worlds NFTS Ltd (“the Foundation”) and the Foundation has partnered with Immutable in relation to the roll out of Staking Rewards.
Last week, the Foundation released the IMX Staking Rewards program in partnership with Immutable. Traders on any Immutable X-supported marketplace are rewarded IMX tokens by the Foundation in proportion to the size of their staking amount. More information on the staking process and rewards calculation here: https://imx.community/staking
The Staking Rewards program aligns incentives to fuel the sustainable growth of Immutable X. Unlike previously, where platforms extract value from their users, staking rewards ensures that value is shared back with users. Not only will games, marketplaces, and traders use the platform because of the value it provides, but they benefit from the continued growth of the ecosystem through staking.
There has been a growing trend of staking mechanisms with increasingly large rewards being used as a marketing tool to attract new users, only to collapse. The platform goal is to generate shared value between developers, marketplaces, traders, and other ecosystem participants. This article will discuss how the IMX Staking Rewards program is designed for long-term sustainability.
Designing a sustainable staking mechanism
A staking mechanism is sustainable when the value stakers provide is greater than the cost of staking to token holders over the long run. There are only two ways (so far) for generating staking rewards. Rewards come from new issuance, resulting in inflation for existing holders, or rewards are generated from protocol fees.
There is a wide spectrum of value provided by stakers, but they can also be categorized into two categories: direct value if the functioning of the protocol is dependent on stakers (e.g. stakers provide security in proof of stake chains) or indirect if the functioning of the protocol does not depend on stakers.
As a matrix between the value and the cost of staking, there are three common categories of staking mechanisms:
- Utility staking — If staking is required for the product functioning, then it is likely sustainable because without staking, there would be no utility for the token.
- Inflationary staking — If staking results in new issuances increasing faster than the value created (if there’s any value created at all), then one must ask what is the sustainability of rewards long-term
- Aligned staking — If staking adds indirect value (i.e. not strictly required to maintain protocol functionality), but rewards are funded from protocol fees (which in turn are generated from activity on the protocol), then the incentives of stakers and the protocol are aligned. So long as the protocol can fund its operations, this method of staking is sustainable.
Aligned staking will best ensure long-term value and sustainability to the protocol and its token holders. That’s why Staking Rewards plays a vital role in the Immutable X ecosystem by increasing the utility of IMX and thus making it a more powerful incentive to induce greater adoption.
- Activity on the protocol generates staking rewards
- Greater staking rewards increases the utility of IMX
- Greater utility of IMX results in more games, marketplaces, and traders
- More games, marketplaces, and traders create more trading volume
Supplementing staking rewards to bootstrap adoption
Immutable X enables next-gen Web3 games to reach planet scale, enable a smooth user experience, and obtain high liquidity for NFTs. While there are an exciting number of high-quality games in the development pipeline, these games take time to build.
Given the expected ramp-up towards key game launches, Staking Rewards will be supplemented with the least IMX issuance possible for a limited period. IMX issuance by the Foundation will come from the existing rewards allocation from the ecosystem development fund. Issuance in the first cycle will guarantee a minimum of 5% annualized rewards rate with 30% of the stakeable token supply staked. The stakeable tokens held by the Foundation and Immutable will not be staked to reduce the cost of this initiative.
Stakeable Token Supply
As of August 31st, 2022 the stakeable IMX token supply is 327,663,668
Minimum Guaranteed Rewards Rate
Aligned with the incentives philosophy, the Foundation will experiment with the subsidy cycle-to-cycle to achieve the best outcome for all token holders. Eventually, experiments will be run to reward token holders who stake for multiple cycles with unique rewards — more to come here.
Start staking your IMX tokens through the Staking Rewards dashboard now.
Digital Worlds NFTS & Immutable
The IMX token is an ERC-20 utility token built for rewarding pro-network activities on Immutable X, such as trading, liquidity provision, and building applications. The token aligns incentives between traders, creators, and marketplaces so that all participants benefit from protocol activity. Immutable develops the Immutable X protocol and has partnered with the token issuer, Digital Worlds Ltd. NFTS (the “Foundation”) regarding the IMX Staking Rewards Program. No director nor employee of Immutable nor Foundation directors will be directly receiving any tokens as compensation for their services or their involvement in the project.