Emissions, Fee substitution, and Deflation

The network begins with inflationary emissions to bootstrap staking and converges toward a fee-funded steady state.

Let:

• SB_t = required security budget in period t

Security scales sub-linearly with usage:

SB_t=α×√N_t

Let:

• R_t,fees = rewards funded directly from verification fees

• E_t​ = emissions during period t

Emission rule

E_t=max⁡(0, SB_t−R_t,fees)

Emissions occur only if fees are insufficient.

Let:

• B_t = total tokens burned in period t

Net supply change

ΔS_t=E_t−B_t

Outcomes:

• when B_t>E_t the token becomes deflationary

• when E_t>B_tthe system remains inflationary

• growth makes deflation progressively more likely

This creates a credible, measurable path to deflation.

Staker yield

Delegators and node operators share rewards.

Target staking yield:

Y_target≈3% annually

Yield sources transition over time:

1. bootstrap phase — emissions dominate

2. growth phase — mixed emissions + fees

3. maturity phase — fees dominate, emissions approach zero

This produces yield that is:

• transparent

• bounded

• increasingly utility-backed

Economic summary

VELOCITY establishes the following fundamental relationships:

• issuers issue, they do not stake

• nodes verify, they stake

• stakers secure, they earn yield

• relying parties pay, they drive demand

And economically:

• verification → fees

• fees → burn + rewards

• burn → scarcity

• rewards → security and participation

• usage → eventual deflation

The model anchors value not in speculation, but in the ongoing verification of credentials that enterprises rely upon.