Tokenomics

How will each allocation be used?

As the IO net Foundation commits to providing deeper transparency for all current and future DAO members, it is helpful to understand the specific purpose and appropriate use of each allocation.

Ecosystem: Primarily used for Block Rewards, but can also be allocated for new liquidity pools and liquidity mining incentives.

DAO Treasury: Our expectation is that the IO net DAO will continue to organize, and formalize standard procedures for community-led initiatives, including developer incentives programming, marketing actions, and educational content creation. The IO net Foundation will continue to provide resources to meet the unique needs and assist the DAO as needed.

Foundation: Primarily used to support research and development for IO net’s open-source core protocols, provide funding for Foundation hosted hackathons, and continue to support the community-inspired Foundation Delegation Campaign (FDC), providing delegations to support our validators.

Token Utilities

Native IO tokens are required to secure and power the decentralized Oracle network of validators. The native IO token is used in different scenarios below:

• Transaction fee: the IO token is required in order to run an AI request sent to the IO net and run any transaction.

• Staking for validators: all validators are required to stake IO in order to be selected to create a block or fulfill data requests.

• Participation in network governance: the IO net is organized in the DAO manner, all protocol upgrades and parameter changes must be voted by token holders.

About transaction fees on IO net

The token plays a role as a transaction fee that is paid for parties as follows:

• Request-executing validators

• AI-API providers

• Testcase providers

• Block-creating validators.

The transaction fee is different depending on the fee requirement of request-executing validators, AI-API providers, and test-case providers. The transaction fee should be explicitly defined in MsgSetAIRequest of a request. When a request comes, request-executing validators must decide if they want to execute it. After that, a random validator, which is responsible for proposing a block will execute the request before firing an event to those request-executing validators.

Afterward, these validators interact with test cases and AI APIs to create a MsgResultReport in the end. A report contains the data sources, test cases used, the validator creating the report, and the block height of it. Using this information, we can collect validators, test case owners, and data source owners involved in a specific block to reward them. Only those creating reports are able to receive the rewards. If there is more than one validator asked in the MsgSetAIRequest (ValidatorCount), the transaction fee is divided proportionally to the voting power of each validator.

Minting IO

There are two ways to mint IO tokens on the IO net:

• The first way is that the IO token is rewarded for each newly created block. In the IO net, validators are responsible for creating new blocks, and a random validator is chosen to do that. In order to become a validator, one needs enough IO tokens that are staked or delegated. Note that new IO tokens are only mined when a block contains one or more transactions with transaction fees. Such fees will be converted into tokens in the form of rewards for the validators.

• The second way is briefly described above, in which the request-executing validators can earn some extra IO tokens by executing test cases and data sources. Similar to the first way, 70% of the total transaction fee is extracted as a reward for the first three parties mentioned earlier. The remaining 30% is saved to reward validators for the newly committed block. Nevertheless, this second way only occurs when there is at least a report broadcast to the IO net at the end of a block.

Inflation, Staking, and Slashing

In order to keep the value of the IO token, holders can stake their token to the IO net. The rewarding token is divided based on the number of tokens that a holder is staking to a validator.

Slashing is a mechanism to penalize misbehaviors of validators in aspects of AI API quality, response time, and availability.

Read more about incentives on IO net 2.0 & rewards for delegators and validators here.