5.5 Token Supply Model

The ratios and distributions presented in this chapter are approximate and may not reflect actual distributions. For more information, see the DGT Whitepaper.

Token supply, in the context of cryptocurrencies and blockchain technology, refers to the total number of tokens that exist or can exist. This is a particularly important concept because it affects the value of individual tokens; generally, the more tokens in supply, the less valuable each one is, all else being equal.

The model is based on a specific approach to token supply. Here are its primary characteristics:

• Token Supply: In this model, there is a capped total supply of tokens, denoted as TOTAL_SUPPLY. This is the maximum number of tokens that will ever exist.

• Initial Distribution: Upon the creation of these tokens, an initial distribution takes place. A certain proportion of the total supply is immediately allocated to the corporation. This could be for a variety of reasons, such as paying for the development of the blockchain, covering operating costs, or providing a source of income for the founding team.

• Minting for Nodes: The remaining tokens are not directly put into circulation. Instead, they're reserved for distribution to nodes in the network. This process of creating new tokens and distributing them to nodes is known as "minting."

• Node Token Distribution: The rate of distribution of these reserved tokens to nodes is not constant. Instead, it is determined by a specific function _SLA_PROFILE, which is based on an inverted sigmoid function. This function considers various factors, such as the steepness of the distribution curve , a stretch parameter , and a starting point of token distribution
• Adjustment over Time: As time progresses, the number of tokens distributed each month changes according to the S_SLA_PROFILE function. In the early stages, few tokens were distributed. The number of distributed tokens peaks at a certain point and then gradually decreases over time. This distribution function creates a kind of "inflation" in the early stages, as a growing number of tokens are put into circulation, followed by "deflation" as the rate of new tokens entering circulation decreases.

This model aims to incentivize node participation in the early stages of the network (when more tokens are being distributed) while ensuring a finite token supply. It also allows for a smooth transition from inflation to deflation, as opposed to a sudden halt of token distribution