Total supply, circulating supply, and staked ICP
Understanding the supply of a token is important to many people in the crypto community.
The total supply of ICP is variable, with both minting (inflationary) and burning (deflationary) mechanisms. The circulating supply of ICP is also variable, and in addition to being affected by minting and burning, it's also affected by the unlocking of neurons from early contributors (e.g., neurons of seed round donors are on a multi-year unlocking schedule).
Background: the design intent
The design intent of the tokenomics of the IC is to create a self-sustaining ecosystem that can balance the following goals and constraints:
- Developers pay very low storage and compute costs.
- Node provider rewards are high enough to incentivize node providers to be part of the network.
- Voting rewards are high enough to encourage staking (but not too high).
Since this is a dynamic system, it is up to the community to keep an eye on the system and adjust its levers accordingly, evolving and optimizing the IC's tokenomics via NNS proposals.
Definitions
Total supply
Total supply is the sum of all tokens currently in the system (whether they are locked/staked or not).
The total supply changes over time due to inflation and deflation. Its current value can be seen on the Circulation page of the IC dashboard.
Circulating supply
Circulating supply is the sum of all tokens circulating in the market and in the general public's hands. This includes all tokens that have ever been liquid in the system, even if they were subsequently staked, so circulating supply includes such staked ICP.
The circulating supply changes over time due to inflation, deflation, and the unlocking of neurons. Its current value can be seen on the Circulation page of the IC dashboard.
Staked ICP
Staked ICP is the sum of all tokens that are staked in neurons. ICP utility token holders stake ICP in order to engage in network governance and earn voting rewards for their participation.
The total amount of staked ICP changes over time. Its current value can be seen on the Neurons page of the IC dashboard.
Numbers
At network Genesis
May 10, 2021:
- Total supply: 469 million
- Circulating supply: 123 million
Current status
As of February 28, 2022:
- Total supply: 477 million
- Circulating supply: 207 million (43.5% of total supply)
- Staked ICP: 275 million (57.7% of total supply)
Inflationary mechanisms
The NNS mints ICP tokens for two reasons:
- For voting rewards (i.e., staking).
- For node provider rewards.
The amount of ICP minted since Genesis can be seen in the "Total Rewards" chart on the IC dashboard.
Voting rewards
Voting rewards are generated by minting ICP, although this minting only happens at the moment rewards are spawned, maturity is merged, or the neuron is disbursed.
The voting rewards rate schedule is designed with the goal that 90% of the token supply is staked in neurons. With this goal in mind, in the first year, the NNS allocates 10% of the total supply to generate voting rewards. Note the term "allocates" rather than "mints", because rewards are not minted (increasing the total supply) until they are spawned, merged, or the neuron is disbursed. As the network becomes more stable over time, this allocation rate drops quadratically until it reaches 5% by year 8. Like all parameters in the NNS, this rate schedule can be changed via NNS proposals.
See more in Staking,_voting_and_rewards.
Node provider rewards
Node providers are rewarded for running the node machines that power the Internet Computer.
Deflationary mechanisms
The NNS burns ICP tokens for three reasons:
- To mint cycles, used to pay for compute and storage.
- For transaction fees.
- For failed NNS proposal fees.
The amount of ICP burned since Genesis can be seen in the "Total ICP Burned" chart on the IC dashboard.
Paying for compute and storage
Dapp and smart contract developers pay computation and storage costs with cycles. Cycles are acquired from the NNS by converting ICP to cycles, which burns the converted ICP.
The cycles costs for IC computation and storage can be seen at Computation and Storage Costs.
Transaction fees
Transferring ICP across accounts incurs a transaction fee of 0.0001 ICP, which is burned.
Failed NNS proposals
It costs 1 ICP to submit a proposal. If the proposal passes, the 1 ICP is returned to the proposer. If the proposal is rejected, the 1 ICP is burned. Note that this only happens at disbursement or merging of neurons, so accumulated failed proposal fees can persist for a while before finally contributing to deflation.
History of fundraising rounds
Because the IC took years of R&D (at Genesis, the DFINITY Foundation team had over 200 full-time members), there have been three main fundraising rounds and one airdrop event.
For a breakdown of the different rounds and vesting schedules, see Messari's report "Introduction to ICP". The unlocking of neurons has been the largest contributing factor to circulating supply since Genesis, so it's important to understand the context.
1. Seed Round, Feb-2017: This round was advertised by a tweet and open to the public by downloading a web extension. DFINITY raised CHF3.9 million (US$3.9 million) from 370 participants, at a valuation of $16 million, or a price of $0.03 per token. It held a portion of these funds in ETH and BTC during the 2017 crypto bull run. According to the team, DFINITY at one point turned these earlier ETH and BTC allocations into $40 million worth of fiat. The neurons of seed round donors are on a 4-year unlocking schedule.
2. Strategic Round, Jan-2018: DFINITY raised $20.54 million for 7.00% of the initial supply (the number has been revised from the previously cited 6.84%). This allocation will vest monthly over three years starting from mainnet launch (May 2021). Participants include Polychain Capital, Andreessen Horowitz, CoinFund, Multicoin Capital, and Greycroft Partners. This round marks the first token a16z invested in. Polychain and DFINITY later collaborated to create the "DFINITY Ecosystem Venture Fund" (later renamed "Beacon Fund") of an undisclosed size. The goal is to fund new projects that would grow the IC's application ecosystem. The media reported that DFINITY raised a much larger amount of $61 million. It's possible that this enlarged amount has either been revised or included funds for the Ecosystem Venture Fund.
3. Private Sale, Aug-2018: 110 participants contributed $97 million for 4.96% of the initial supply, sold at 4 CHF (around $4 at the time) per ICP token. This number has been revised from 4.75% previously reported. This allocation came with a monthly vesting schedule of one year from mainnet launch. Vesting began one month after the initial token distribution event on May 10, 2021. Participants in this round include Andreessen Horowitz, Polychain Capital, SV Angel, Aspect Ventures, Electric Capital, ZeroEx, Scalar Capital, and Multicoin Capital.
4. Airdrop, May-2018: $35 million worth of ICP tokens (formerly DFN), or 0.80% of the initial supply, was airdropped to early supporters by being part of their mailing list, forums, and community. At this time, valuations reached $1.89 billion. Airdrop participants received the IOU version of their ICP tokens in September 2020. This allocation came with a monthly distribution schedule of one year from mainnet launch, which began on May 10, 2021.
Inflationary or deflationary?
Because the IC has both inflationary and deflationary mechanisms, it can be either inflationary or deflationary depending on the circumstances. Since Genesis, ICP has been inflationary, but it has the potential to become deflationary as the IC ecosystem grows over time.