> For the complete documentation index, see [llms.txt](https://velocity-network.gitbook.io/velocity-network/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://velocity-network.gitbook.io/velocity-network/usdvlct-tokenomics/emissions-fee-substitution-and-deflation.md).

# Emissions, Fee substitution, and Deflation

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

Let:

* SB<sub>t</sub> = required security budget in period t

Security scales sub-linearly with usage:

SB<sub>t</sub>=α×√N<sub>t</sub>

Let:

* R<sub>t,fees</sub> = rewards funded directly from verification fees
* E<sub>t</sub>​ = emissions during period t

#### Emission rule

E<sub>t</sub>=max⁡(0, SB<sub>t</sub>−R<sub>t,fees</sub>)

Emissions occur **only if** fees are insufficient.

Let:

* B<sub>t</sub> = total tokens burned in period t

#### Net supply change

ΔS<sub>t</sub>=E<sub>t</sub>−B<sub>t</sub>

Outcomes:

* when B<sub>t</sub>>E<sub>t</sub> the token becomes deflationary
* when E<sub>t</sub>>B<sub>t</sub> the 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<sub>target</sub>≈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**.