XEON Protocol Tokenomics & Vesting

Introduction

The crypto space is rapidly evolving, and for most of the cycle so far, decentralized finance (DeFi) has taken a backseat to memecoins and other non-utility projects. Projects like these that generally feature fly-by-night devs and require different trust assumptions than more robust projects building in the space — many of which are manifest in the tokenomics.

People have come to expect a project’s LP to be burned, the contract to be renounced and immutable, and teams to have a negligible portion of tokens. This may acceptable for memecoins, but for a project like Xeon Protocol, we are opting for a different direction — one that is building towards a long-term utilitarian goal.

Since many new entrants to the space have only been exposed to non-utility tokens, this post will serve not only to break down the Xeon Protocol tokenomics and vesting schedule, but to educate people on why we’ve made the decisions.

XEON Tokenomics Rationale

$XEON is protocol utility token and plays an important role in the Xeon ecosystem. $XEON is inteded to be utilized in our advanced staking pools that help secure the protocol and distribute fair yield to participants. This factor played an important role in our distribution of tokens, specifically our vesting schedule which was designed to complete prior to the mainnet launch of Xeon Staking so that tokens could be used for primary intended purpose: being put to work inside the protocol!

Initial Distribution

The XEON TGE took place on June-24–2024. All of the XEON tokens were initially minted with a total supply of 100 million. The launch was assisted by our incubator — PROOF Platform. The token distribution was conducted as follows:

• Liquidity: 70% locked in a Team Finance token locker for 60 days by PROOF Platform.
• Ecosystem Growth: 14% (14M) vested linearly for 60 days through Sablier to a 2/3 multi-sig wallet controlled by core team members.
• Team Tokens: 8% (8M) vested linearly for 60 days through Sablier in individual streams of 2% (2m) each for core team members. Stay tuned for more information.
• Marketing: 7% (7M) with 2.2 million paid out on TGE to partners, the remaining vested linearly and allocated when needed for future growth.
• Incubator Fees: 1% (1m) paid out to PROOF Platform.

Contract Functions

The XEON token has a number of administrative functions that require active management and make it so we cannot simply renounce the contract:

• Tax Revenue: Xeon Protocol is funded by an up-to 5% tax on both buys and sells through LP. This is standard for the industry and allows us to continuously fund protocol growth without requiring us to dump our XEON holdings.
• Max Transaction Amount: In order to prevent large sums of tokens from being transacted at once, we are able to manage limits on the amount of tokens that can be included in a single transaction, which is currently set to 500k XEON (0.5% of the supply).
• Max Wallet Amount: To prevent whale activity in the early growth stage of XEON, there is also a limit on the amount of tokens a single wallet can hold, which is currently set to 1m XEON (1% of the supply).

By retaining ownership of the XEON token contract we can adjust these parameters as needed to best fit the needs of the protocol and community. If we simply renounced the contract, we could never adjust these limits.

Liquidity

When we launched XEON, our LP was locked for 60-days using Team Finance, a time-frame that was part of our launch through PROOF Platform. After the 60-day period the LP will be released to our team multi-sig wallet, at which point we will determine the most secure way to protect our LP in a manner that still allows it to create the most value for all stakeholders. When that time comes we will keep the community informed on our decision-making process and reasoning.

“Dev, why isn’t the LP burned?”

This is a question that comes up a lot. At some point in the last year, with the rise of memecoins, burning the LP (sending the token or ownership to the zero address) became synonymous with “safe” but the reality is much more nuanced.

There are many ways to secure liquidity without burning it, and new advances in LP management are coming out all the time. Our LP is not burned as this removes any possibility that the locked tokens and ETH can ever be useful in the future. Burning renders all the value in that LP futile for anything beside swapping between two specific tokens. Soon we will see new types of primitives in the LP space (things like v4 hooks and yield instruments) which will require liquidity controlled by a contract and not sitting in the zero address.

Rest assured that Xeon will always be at the cutting edge of new developments in the DeFi space, and we will communicate any decisions regarding liquidity management with the community.

Burning the LP prevents us from utilizing any future advances in liquidity management, and makes it so we cannot adjust important functions to adapt to changing market conditions.

Vesting

Out of the 100m supply of XEON tokens, 6.2% were distributed to launch partners and marketing manager. 23.8% (23.8m) are currently vesting over a 60-day period through a linear stream on Sablier. The breakdown is as follows:

• 18.5m tokens to Xeon ecosystem wallet
• 5m to individual core team member wallets
• 300k to pre-launch marketing partner’s wallet

Sablier is a very respected name in DeFi with a track record that dates back to 2019, much longer than most token management solutions currently being used. They have processed over $1.5b USD in volume, are trusted by many DAOs and onchain organizations, and their contracts are fully audited by six leading security firms. Sablier is completely permissionless, they do not use upgradeable proxies for their vesting streams, and their team has zero ability to interfere with the token locks or vesting schedules.

As a DeFi protocol focused on risk-management, Sablier was the obvious choice for distributing our tokens.

“Dev, why vest and not lock?”

To begin with, vesting prevents a large amount of tokens from becoming immediately liquid since the tokens are streamed in real-time to the recipients. This is important for our ecosystem tokens, as it allows us to have access to a steady stream of XEON that we can use to reward participants in our incentivized testnet campaign, which will start soon.

Secondly, vesting can help assuage investor concern over market dumping or price volatility that can accompany a large portion of tokens unlocking at once. If, as an investor, you are concerned about a paper-handed team, insuring that no one receives a lump sum of tokens that could potentially be dumped on the market is preferable.

“Dev, why 60-days?”

The vesting schedule is heavily related to our roadmap and the release of our testnet and Xeon Staking. By having team tokens unlock slowly over the next 60 days, we as the core team can utilize our tokens in protocol staking as soon as it is released. As stated before, XEON is a utility token who’s ultimate purpose is to be put to work within the protocol. We are extremely proud of what we are building, and having our tokens ready for the launch of staking means we get to bet on the protocol long-term from the outset.

Unlike many tokens, XEON is meant to be staked and put to work inside of the protocol.

Community

We have such an incredible community that has formed around Xeon Protocol, and will continue to grow as we release innovative new DeFi products. Thank you all for your trust and for coming on this journey. We would not be here without you.

As we get closer to our testnet and mainnet protocol launch, we will make a public Trello board available to the community so they can follow along with progress and give us feedback along the way.

We are looking forward to a bright future for Xeon and DeFi.

Jon

CTO — Xeon Protocol

P.S. You can find an up-to-date list of all official Xeon links on our Linktree.

• Website: https://xeon-protocol.io/
• GitBook: https://docs.xeon-protocol.io/documentation
• Warpcast: https://warpcast.com/xeonprotocol
• Twitter: https://x.com/XeonProtocol
• Telegram: https://t.me/XeonProtocolPortal
• Medium: https://medium.com/@xeonprotocol