> 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/incentives-and-value-flow.md).

# 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:

* N<sub>t</sub>​ = number of verifications in period t
* f<sub>t​</sub> = fee per verification (denominated in $VLCT)

Total fees collected in period t:

F<sub>t</sub>=N<sub>t</sub>×f<sub>t</sub>

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)&#x20;
* j = issuer
* t = period

Let:

* V<sub>i,j</sub> = 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%⋅f<sub>t</sub>

Issuer revenue:

hen issuer reward becomes:

IssuerReward<sub>j,t</sub>=∑<sub>i</sub>p<sub>i</sub>⋅V<sub>i,j,t</sub>

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%&#x20;

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.