Incentives and Value Flow
Trust Ledger Utilization Fees
A relying party executes a Trust Ledger Utilization every time it wants to verify a credential presented by the individual. It is the core value-generating event in the network.
Let:
Nt = number of verifications in period t
ft = fee per verification (denominated in $VLCT)
Total fees collected in period t:
Ft=Nt×ft
Each Trust Ledger Utilization fee paid by a relying party is programmatically distributed to align incentives and ensure long-term sustainability:
70% → Issuer reward
10% → Oracle node operator reward pool
10% → Foundation treasury
10% → Token burn (activated only once the node operator reward pool is sufficiently funded)
During the early phases of the network, the burn component is temporarily redirected to the node operator reward pool until a target funding level is reached. Once this threshold is achieved, the burn mechanism is activated, introducing a deflationary dynamic tied directly to network usage.
This structure ensures that value generated by verification activity is:
distributed to contributors who create and maintain trust in the network,
reinvested into ecosystem development, and
increasingly returned to token holders through scarcity over time.
Gas Fees
Credential registration and revocation executed by Issuers are core infrastructure operations that maintain the integrity and reliability of the network.
Fee Allocation
Gas fees are allocated with a different priority than Trust Ledger Utilization fees.
Their primary purpose is to ensure that the network has sufficient economic resources to support:
reliable node operation,
consistent transaction processing, and
long-term protocol sustainability.
Gas fees is programmatically distributed as follows:
100% → Oracle node operator reward pool (until target funding level is reached)
Thereafter: 100% → Foundation treasury
Bootstrap Phase — Infrastructure First
During the early stages of the network, all registration and revocation fees are directed to the node operator reward pool.
This ensures:
sufficient incentives for node operators,
stable and predictable participation, and
reliable processing of credential writes from inception.
At this stage, credential write activity directly contributes to securing the network.
Transition to Treasury Funding
Once the node operator reward pool reaches its target funding level, the allocation of credential write fees transitions:
fees are no longer required to support node incentives,
and are instead directed to the Foundation treasury.
This transition reflects the maturation of the network, where:
node operators are primarily sustained by verification fees and reduced emissions,
and credential write activity becomes a source of ecosystem funding.
Role in the Network Economy
Credential write operations are intentionally positioned as: low-cost infrastructure actions that maintain trust and data integrity
They are not designed to maximize value capture, but to ensure that:
credentials can be issued at scale,
revocations are frictionless and consistently executed, and
the network remains accurate and trustworthy over time.
As such:
early-stage value supports network security and participation,
later-stage value supports ecosystem growth and governance.
Economic Implications
This model ensures that:
infrastructure costs remain aligned with network needs,
node operators are properly incentivized during critical growth phases, and
the Foundation is sustainably funded as the network matures.
It also reinforces a clear separation of roles within the economy:
Verification fees drive value capture and participant rewards
Credential write fees support infrastructure and ecosystem continuity
Summary
Gas fees evolve with the network:
Initially supporting node operator incentives and network stability
Later contributing to Foundation-led ecosystem development
This ensures that even low-cost, high-frequency operations contribute meaningfully to the long-term sustainability of the Velocity Network.
Issuer Reward
Issuers earn rewards only when their credentials are verified.
Use:
i = credential type (Identity or Standard)
j = issuer
t = period
Let:
Vi,j = number of verifications of credentials type i issued by issuer j in period t
p = issuer share per verification fee (in $VLCT), where p=60%⋅ft
Issuer revenue:
hen issuer reward becomes:
IssuerRewardj,t=∑ipi⋅Vi,j,t
Issuer rewards may be shared between:
the Credential Issuer, and
the Credential Agent Operator (a service provider operating on behalf of the issuer)
Issuers are therefore incentivized to issue credentials that are:
accurate,
compliant,
economically meaningful, and
in demand by relying parties.
Issuance volume alone produces no reward.
Oracle Node Operator Reward
Oracle node operators and their delegators earn rewards from the node operator reward pool, funded by a fixed share of verification fees.
20% of each verification fee is allocated to this pool
During the bootstrap phase, the pool is additionally supplemented by emissions
Target staking yield:
Ytarget≈3%
Yield sources evolve over time:
Bootstrap phase — emissions dominate
Growth phase — mixed emissions + fees
Maturity phase — fees dominate, emissions approach zero
The temporary redirection of the burn allocation to the reward pool in early stages ensures:
sufficient incentives for node participation,
stable and predictable yield, and
secure network operation from inception.
Over time, as fee volume grows, rewards become increasingly driven by real economic activity rather than token issuance.
This results in a yield profile that is:
transparent,
bounded, and
increasingly utility-backed.
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