In this post, we will cover the general economics of the Dfinance network coin, XFI (not to be confused with other XFI tickers). All details described in this document may be subject to change without any prior notice.
Dfinance is a Tendermint based, layer-2 standalone blockchain that integrates Libra’s Move as its virtual machine. As such, it is fueled by its native coin, XFI. As the lifeblood of Dfinance, XFI serves a number of important functions and utilities:
1. Functions of XFI within the Dfinance network:
1.1. Staking — Network Security
Network security is incentivized through network fees and inflation mechanics (a full explanation will be made public in a separate post).
1.1.1. Self-staking (security stake)
XFI is used for staking by validators, which are nodes, or computers, that run the Dfinance network software and are responsible for the security of the protocol. In order to ensure that the motives for running a validator are aligned, the protocol requires each validator to commit a certain amount of XFI. This can be looked at as “skin in the game”. If a validator misbehaves (for example, double signs transactions or misses transactions), the total stake (self-stake + delegated stake [see below]) suffers a slashing and some of the coins are permanently lost.
1.1.2. Delegating
In order to allow non-technical community members to also take part in the network security without having to set up a node, Dfinance also supports delegating — which is a non-technical process of selecting a validator and nominating him as a representative for your stake. Due to the slashing mechanisms, it is very important that delegators carefully select only trusted validators.
1.2. Staking — Liquidity
In order for a healthy ecosystem to exist, liquidity needs to be abundant. For this reason, the Dfinance network will also reward those who provide liquidity through Uniswap (and possibly more options to be added at a later stage). XFI holders that provide liquidity to Uniswap will be able to stake their Liquidity Provider (LP) tokens and earn inflation rewards in the form of XFI.
1.3. Network fees (gas)
Dfinance functions just like any other proof of stake network. Transactions submitted on the network and virtual machine operations (Dfinance uses Move VM as its virtual machine) require a small fee in the form of XFI. By default, validators burn 50% of these network fees while network inflation is active.
2. Total supply of XFI
The Dfinance mainnet will launch with an initial supply of approximately 145,000,000 XFI, subject to different lockups and vesting schedules as listed in this article. There will also be a small number of inflationary XFI which will be created during the incentivized testnet period, and distributed at the mainnet launch (more on this below). The total supply of XFI ever to exist will be capped at 500,000,000 XFI.
3. Distribution of XFI
Approximately 71% of the total supply shall be allocated for staking rewards (inflation), and will be distributed over several years between the parties contributing to the security, development, and health of the network such as validators, delegators, and liquidity providers. An additional 20% has been allocated to the WINGS:XFI ongoing swap, which started on September 07 and will continue for a total of 182 days.
Out of the remaining 9% of XFI, 1.55% is distributed to the Wings Foundation, 4% to the Team, Partners & Advisors, 0.025% to the Community Rewards Program, and 0.025% will seed the Public Treasury (more on this in a different post). A total of 3.4% XFI has been sold in a private sale to strategic partners and supporters. The below chart presents the previously described XFI distribution:
3.1. Distribution, vestings, lockups
The estimated circulating supply at network launch is approximately 5.8% of the total supply.
3.1.1. Staking Rewards
Each newly minted block will distribute staking/inflation rewards to validators, delegators, liquidity providers, the public treasury, and the Wings Foundation. The staking rewards will keep all network participants incentivized to continue to secure and develop the network, provide liquidity, build ecosystem extensions, tools, and solutions. The staking rewards pool will be capped at a total of 355,000,000 XFI which will serve the network for years. Due to a dynamic inflation model that is highly dependent on network parameters, it is not possible to estimate the actual annual inflation percent in advance. We estimate between 250,000 to 1,000,000 XFI to be released from the staking rewards pool during the incentivized testnet period.
3.1.2.WINGS: XFI Swap
A total of 100,000,000 XFI has been allocated to the optional WINGS:XFI swap. Full details about the swap can be found here. Depending on the swap outcome, the lockups of the XFI resulting from the swap may change. Un-swapped WINGS, will also have their XFI representation created by the smart contract, however, those XFI will be locked for a period of 24 months. At the time of writing, approximately 60,000,000 WINGS have been swapped. If this remains unchanged by the end of the swap period, this would result in at least 40,000,000 XFI being locked for a period of 24 months.
3.1.3. Private Sale
In order to support the marketing effort and provide liquidity, a total of 17,000,000 XFI were sold in two tranches to strategic supporters. 13,547,620 XFI were sold at an approximate price of $0.1107 (or a fully diluted mainnet launch valuation of approximately $16,000,000). Another 3,452,381 XFI were sold at an approximate price of $0.1448 (or a fully diluted mainnet launch valuation of approximately $21,000,000).
Out of the total 17,000,000 XFI sold, 3,400,000 XFI will be instantly available, while the remaining 13,600,000 will be distributed to purchasers over a period of 12 months.
3.1.4. Foundation Reserve
These tokens are allocated to the Wings Foundation to support development and different ecosystem incentives such as different marketing and promotional efforts. The 7,750,000 XFI allocated to the Wings Foundation shall be locked for a period of 3 months and vested for a period of 12 months.
3.1.5. Team, Advisors & Partners
This pool, allocated to the (large 25+) Dfinance team, it’s advisers, and also to strategic partners, includes a total of 20,000,000 XFI and is subject to a 6-month lockup and an additional 12-month vesting.
3.1.6. Reward Program
This pool includes the 125,000 XFI that were part of the reward program that started several months ago that helped us to launch our initial community. The tokens shall be locked for a period of 60 days starting at the mainnet launch.
3.1.7. Public Treasury
The public treasury is a DAO-based governance controlled wallet through which the community may fund ecosystem projects, tools, and efforts. The initial pool will start with a total of 125,000 XFI (unlocked), and will gradually refill and grow through inflation rewards.
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