Introduction
Stride’s mission is to serve the Cosmos community by providing the best liquid staking possible. In service to this mission, Stride has a minimalist design and credible neutrality; Stride has received numerous security audits and plans to use rate-limiting as a security feature; and Stride has an unparalleled liquid staking user experience.
But another important thing is the Stride token. While not every crypto project needs its own token, in Stride’s case a token is necessary.
The Stride tokenomics have been designed with three complementary outcomes in mind:
• quickly and effectively distribute Stride governance power across the communities Stride serves
• facilitate social coordination to promote Stride liquid staking
• build and maintain value for the ST token
The following tokenomics plan achieves these three outcomes, thereby contributing to Stride’s mission of serving the Cosmos community with the best liquid staking possible.
Stride’s Unique Position
Stride is in the unique position of launching with a pre-existing product-market-fit and a means of generating significant and sustainable revenue from day one. The prevalence of liquid staking in other crypto ecosystems shows that liquid staking is a product people want. And this product can easily be monetized, simply by charging a fee on the staking rewards earned by liquid staked tokens.
So whereas most crypto projects give themselves a long “inflation runway” in order to buy time to establish product market fit and find a way to generate revenue, Stride has a relatively short inflation runway. Stride incentives and staking rewards are front-loaded. After an initial burst of incentives and staking rewards, Stride will survive because people want to use liquid staking as a product and are willing to pay a fee for that product.
Token Allocation: Genesis Supply
The Stride governance token is called ST. At genesis, the circulating supply is 9,200,000 ST.
While this amount will technically be in circulation, effectively the true circulating supply will be less. The Strategic Reserve will likely not be used for some time to come. Also, some of the airdrop amount is reserved for subsequent airdrops to chains Stride on-boards in the future. See full airdrop details here.
Token Allocation: Terminal Supply
ST has a maximum supply of 100,000,000 ST. Half the supply will be in circulation by the middle of year two, and 95% will be in circulation by the end of year three.
Token Emissions: Block-by-Block
Stride has three types of token emissions: block-by-block emissions, emitted every block on the Stride blockchain; incentives distribution; and token vesting to core contributors and partners.
In the first year, 9,450,000 ST will be emitted via block-by-block emissions. These emissions will be allocated to four categories: staking rewards, strategic reserve, initial security budget, and staking rewards. Every year block-by-block emissions will be reduced by 50%, until they asymptotically reach zero. In other words, Stride will have a “halvening” every year.
A total of 18,900,000 ST, or 18.9% total supply, will be emitted via block-by-block emissions.
Token Emissions: Incentives Distribution
Unlike other Cosmos blockchains, the Stride incentive pool is available at launch, not emitted block-by-block. The Stride DAO, controlled by ST-holders, will decide how the incentive pool is distributed. However, to make ST emissions more predictable, there is an emissions quota that the DAO must meet in year one. The DAO must emit 20,000,000 ST over the course of year one, leaving 9,000,000 ST worth of incentives to be distributed in subsequent years.
A total of 31,000,000 ST, or 31% total supply, will be emitted as incentives.
Token Emissions: Vesting
ST tokens vesting to Stride core contributors and Stride partners are vested linearly over two years with a one-year cliff. This means that neither the core contributors nor the partners will receive any ST tokens until one year post-launch, at which point they begin to receive ST linearly on a month-by-month basis, which lasts for an additional two years.
A total of 16,700,000 ST vests to Stride's partners, and 24,200,000 ST to Stride's core contributors.
Vesting tokens are staked to secure the network, but are not eligible for staking rewards. This ensures high network security without diluting staking rewards.
All Emissions
This chart displays all ST emissions, albeit in a rough way. Ultimately, the Stride DAO and the Stride Foundation will use their discretion to determine when their ST is actually “spent.”
Description of Allocation Categories
Airdrop: 6,300,000 ST, or 6.3% total supply
•There will be a genesis airdrop to ATOM, OSMO, and JUNO stakers, and subsequent airdrops to the communities of new blockchain on-boarded by Stride.
•The airdrop category also includes the Switching Cost Rebate Program, where Stride users will receive additional airdrops for depositing with Stride.
•Full airdrop details available here.
Staking rewards: 5,200,000 ST, or 5.2% total supply
•Staking rewards given to ST stakers.
Community incentives: 31,000,000 ST, or 31% total supply
•These tokens will be distributed to incentivize the usage of Stride liquid staking. Initially, Osmosis liquidity pools will be incentivized. The DAO may wish to also incentivize pools / order books on: Crescent, Astroport, Kujira, and others. Also, the DAO may wish to incentivize the usage of stTokens on other protocols, such as money markets.
Community growth: 3,600,000 ST, or 3.6% total supply
•The Stride DAO will distribute these tokens to pay for community services. The DAO may wish to operate a “support lab,” similar to the Osmosis Support Lab. The DAO may also wish to pay for community events, pay ambassadors, content-creators, moderators, and so on.
Initial Security Budget: 2,200,000 ST, or 2.2% total supply
•The Stride DAO will use these tokens for ongoing audits, for developing rate-limiting solutions, insurance, or other similar security purposes.
Strategic Reserve: 10,910,000 ST, or 10.91% total supply
•The strategic reserve is entrusted to the Stride Foundation.
•The mission of the Stride Foundation is to promote the growth and long-term success of Stride. As such, the Foundation may seek to strategically provide DeFi liquidity, compensate future Stride developers, or otherwise help Stride be the best liquid staking provider in the Cosmos.
•2,000,000 ST from the foundation reserve is earmarked for spending on community initiatives, i.e. community events, grants for content creators, and so on.
Core contributors: 24,200,000 ST, or 24.2% total supply
•These tokens incentivize current and future core contributors.
Partners: 16,700,000 ST, or 16.7% total supply
•Stride Labs has partnered with many respected Cosmos validators as well as crypto venture capitalists in order to bring the vision of Stride to reality.
The Value of ST Token
The ST token has two main sources of value: its voting power and the fees collected by Stride.
ST is valuable for its governance power, as there are many crucial governance decisions that the community of ST-holders must make. ST-holders decide: which validators to stake underlying tokens with, how to weight said validators, how to distribute ST incentives, how to spend community pool funds, what additional features should be designed for the protocol, and so on. As Stride becomes a pivotal part of Cosmos DeFi, protocol governance power will become more valuable.
ST is also valuable for the fee collected by Stride. As a fee for liquid staking, Stride collects 10% of the staking rewards of all liquid staked tokens. Protocol revenue benefits ST token holders.
By default, the Stride Foundation will be the recipient of all protocol fees. However, ST-holders are free to implement other ways of handling protocol revenue, if they so choose. ST-holders may decide to deploy revenue into Stride liquid staked token liquidity pools as protocol owned liquidity. ST-holders may decide to use revenue to buy back and burn ST tokens from the market. Or ST-holders may decide to stream revenue directly to themselves, proportional to their share of staked ST. Whatever the community decides, Stride fees will provide value to ST.
Discussion
As per the Stride tokenomics, a total of 50.2% of the ST token supply will be distributed to the communities Stride serves, through airdrops, staking rewards, and so on. This allows the communities Stride serves to control Stride and benefit from Stride. Stride will become a “community of communities.” Seeing as Stride is such a vital part of the Cosmos DeFi stack, it is important that no one group or one community controls Stride.
At the same time, the value of community is balanced with the values of security and professionalism. With Stride Labs' seed round of funding, it now has a large pool of funds to use towards improving protocol security, and an ample runway. With its treasury, Stride Labs can operate as a serious and professional company, without having to cut corners due to cost.
With regard to core contributors, they are highly incentivized to remain committed to the project and have a long-term view. Like partner tokens, core contributor tokens don’t begin to vest until one year after launch, and at that point take two more years to fully vest.
The Stride tokeomics depends on the value of ST token. As above, Stride allows ST-holders to vote on many consequential aspects of the protocol, giving ST considerable value due to its governance power. But most importantly, ST-holders are in charge of handling the 10% liquid staking fee collected by Stride.
The Stride tokenomics plan achieves the outcomes laid out at the beginning, and contributes to Stride being the best liquid staking provider in the Cosmos.