Emissions, Fee substitution, and Deflation
The network begins with inflationary emissions to bootstrap staking and converges toward a fee-funded steady state.
Let:
SBt = required security budget in period t
Security scales sub-linearly with usage:
SBt=α×√Nt
Let:
Rt,fees = rewards funded directly from verification fees
Et = emissions during period t
Emission rule
Et=max(0, SBt−Rt,fees)
Emissions occur only if fees are insufficient.
Let:
Bt = total tokens burned in period t
Net supply change
ΔSt=Et−Bt
Outcomes:
when Bt>Et the token becomes deflationary
when Et>Bt 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:
Ytarget≈3% annually
Yield sources transition over time:
bootstrap phase — emissions dominate
growth phase — mixed emissions + fees
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.
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