All Proof of Stake networks have to maximize the tokens staked to improve security, for Shardeum it is even more important as the number of Shards and security of each is dictated by the number of nodes available in the system and the amount staked.

Shardeum has a high percentage allocated as staking rewards - 51% of all tokens, this heavy allocation towards staking rewards indicates a commitment to reward loyal community members. The 49% of token holders will recieved 51% as staking rewards, making the long term cumulative inflation rate as ~104% (51/49) distributed over 25+ years.

The objectives to optimize for token release schedule :

1. Reward High % Staking Behaviour

2. Staking Rates comparable to other chains

3. Avoid Heavy Dilution of Unstaked coins

Token Release Schedule :

Keeping the objectives in mind, we will evaluate the different token release schedules that can be followed :

• Flat Inflation Model :

  Emissions = 7.5 : Distributed over 10 years

Advantages :

1. Simple to understand and to set expectation to end users

2. Flat inflation provides incentives to stake for a long time compare to Deflationary staking

Disadvantages :

1. Doesn’t provide any incentive to improve % of coins staked

2. Sudden Cliff in staking rewards, would pose security threat post 10 years

3. Token distribution is limited to shorter time frame which might not be enough to make the self sufficient based on transaction fees only.

Deflationary Emissions :

The network's token release Schedule is uniquely described by two parameters: Initial Inflation Rate, Dis-inflation

The initial inflation rate would be 9% and would dis-inflate 10% every year till it reaches 2% at the end of 15 years.

The staking rewards are dependent on the amount of coins staked, rewards are higher at lower stake percentage

% SHM Rewards = % of Emissions / % Total SHM Staked of Current Supply

Advantages :

1. More sustainable rewards for long term

2. Along with token price appreciation and transaction fee increase, the rewards are more appropriate

3. High staking rewards even post 10 years (~6%) in an average case

Disadvantages :

1. Low % staking behavior is rewarded more, this type of rewards don’t create an incentive for the community to prioritize & promote staking

2. Rewards are unpredictable, based on % staked

Variable + Deflationary Emissions :

The emissions are dependent on the % of coins staked, we would take the inverse relation here where higher the coins staked, more the emissions. Long term this would saturate to 2%

The corresponding staking rewards :

Advantages :

1. Creates a ve(3,3) style tokenomics, where a higher % stake results in a higher emissions. This creates a culture which promotes staking

2. Staking rewards are higher than most chains

3. Initial staking rewards would be high at low % staked, attracting users to stake

Disadvantages :

1. Complex to understand, staking rewards are not fixed

2. Staking rewards run out sooner

Fixed Staking Rewards :

The inflation schedule would adjust to make the staking rates uniform

Advantages :

1. Very simple to understand for the user

2. The staking rate is independent of the amount of % of Staked, which in earlier model were giving advantages to having a low % of stakers

3. Staking rates is higher than most chains over a v long period

Halving :

If we have the inflation rate such as Bitcoin Halving :

Note : Initial Reward is ~12% decreases progressively

Advantages :

1. Very Simple to understand

2. Initial rewards are quite higher than market standards

3. Creates progressive scarcity of coin

Disadvantages :

1. Halving could disincentivize people from staking

2. Less staking behavior could create a sell pressure on the coin

3. This could cause volatility in number of nodes participating during halving events

All Proof of Stake networks have to maximize the tokens staked to improve security, for Shardeum it is even more important as the number of Shards and security of each is dictated by the number of nodes available in the system and the amount staked.

Shardeum has a high percentage allocated as staking rewards - 51% of all tokens, this heavy allocation towards staking rewards indicates a commitment to reward loyal community members. The 49% of token holders will recieved 51% as staking rewards, making the long term cumulative inflation rate as ~104% (51/49) distributed over 25+ years.

The objectives to optimize for token release schedule :

1. Reward High % Staking Behaviour

2. Staking Rates comparable to other chains

3. Avoid Heavy Dilution of Unstaked coins

Token Release Schedule :

Keeping the objectives in mind, we will evaluate the different token release schedules that can be followed :

• Flat Inflation Model :

  Emissions = 7.5 : Distributed over 10 years

Advantages :

1. Simple to understand and to set expectation to end users

2. Flat inflation provides incentives to stake for a long time compare to Deflationary staking

Disadvantages :

1. Doesn’t provide any incentive to improve % of coins staked

2. Sudden Cliff in staking rewards, would pose security threat post 10 years

3. Token distribution is limited to shorter time frame which might not be enough to make the self sufficient based on transaction fees only.

Deflationary Emissions :

The network's token release Schedule is uniquely described by two parameters: Initial Inflation Rate, Dis-inflation

The initial inflation rate would be 9% and would dis-inflate 10% every year till it reaches 2% at the end of 15 years.

The staking rewards are dependent on the amount of coins staked, rewards are higher at lower stake percentage

% SHM Rewards = % of Emissions / % Total SHM Staked of Current Supply

Advantages :

1. More sustainable rewards for long term

2. Along with token price appreciation and transaction fee increase, the rewards are more appropriate

3. High staking rewards even post 10 years (~6%) in an average case

Disadvantages :

1. Low % staking behavior is rewarded more, this type of rewards don’t create an incentive for the community to prioritize & promote staking

2. Rewards are unpredictable, based on % staked

Variable + Deflationary Emissions :

The emissions are dependent on the % of coins staked, we would take the inverse relation here where higher the coins staked, more the emissions. Long term this would saturate to 2%

The corresponding staking rewards :

Advantages :

1. Creates a ve(3,3) style tokenomics, where a higher % stake results in a higher emissions. This creates a culture which promotes staking

2. Staking rewards are higher than most chains

3. Initial staking rewards would be high at low % staked, attracting users to stake

Disadvantages :

1. Complex to understand, staking rewards are not fixed

2. Staking rewards run out sooner

Fixed Staking Rewards :

The inflation schedule would adjust to make the staking rates uniform

Advantages :

1. Very simple to understand for the user

2. The staking rate is independent of the amount of % of Staked, which in earlier model were giving advantages to having a low % of stakers

3. Staking rates is higher than most chains over a v long period

Halving :

If we have the inflation rate such as Bitcoin Halving :

Note : Initial Reward is ~12% decreases progressively

Advantages :

1. Very Simple to understand

2. Initial rewards are quite higher than market standards

3. Creates progressive scarcity of coin

Disadvantages :

1. Halving could disincentivize people from staking

2. Less staking behavior could create a sell pressure on the coin

3. This could cause volatility in number of nodes participating during halving events