Initia is going to more than double the supply towards Initia VIP.

Where should network inflation go?

It’s simple really.

As a network, we aim to maximally reward authentic and sustainable activity within the Interwoven Economy, specifically by creating economic games that promote alignment across the ecosystem’s various participants and stakeholders. Initia’s VIP is singularly focused on supporting its users: people who are actively using Interwoven Rollups day after day and are productive members of the Multichain Garden of Eden.

Why does supporting economic and sustainable growth matter? There are countless examples of blockchains no one uses, yet they continue to pay out excessive inflationary rewards to stakers.

Initia believes people who use the rollups are the ones who truly merit our attention and support.

We believe L1 token emissions serve two primary purposes:

• A budget to ensure reliability and security
• Incentives to spur economic activity and stimulate growth

Traditionally, L1s have focused on paying inflationary rewards to stakers as an incentive to secure the chain. Unfortunately, these traditional L1 teams have implicitly chosen to cuck themselves. Sad. While security is imperative, a portion of these emissions could be redirected towards more valuable services — namely, growing the economy.

If staking rewards start off too high, the chain is communicating to its token holders how it wants its tokens to be used. Unwittingly, the chain is promoting user behavior that incentivizes hoarding versus actively using the chain. This behavior, once learned, creates a negative feedback loop for early network participants and is often difficult to reverse. Instead of becoming productive members of the token economy, early users stake and accumulate tokens without ever contributing to the growth of the network. This model is boring and outdated. We commonly refer to the act of hoarding and accumulation of tokens as encouraging a ‘scarcity mindset.’

Emissions are a powerful tool that should be directed and designed with the goal of economic growth in mind, ultimately ensuring real participants who make Initia more productive — whether as an end user of an interwoven rollup or the rollups themselves — share in the upside this productivity creates.

This is why Initia has decided to increase the overall emissions allocated to Initia VIP by more than double. As the native flywheel mechanism responsible for rewarding organic usage of full-stack apps in the Interwoven Economy, Initia VIP will help spur economic growth and reward its most productive stakeholders.

wow!

A quick refresher on Initia VIP

If you’re a curious individual and like mechanism design, you can read a full detailed explanation of the Initia Vested Interest Program (VIP) here:

https://medium.com/@initialabs/introducing-vip-5fe1a0177055

Otherwise here’s a quick refresher:

In a system with thousands of Interwoven Rollups, it’s crucial to align incentives across all network participants. Initia VIP was designed to utilize Initia’s L1 architecture and native token, INIT, in order to tighten economic alignment and solve the principal-agent problem that arise between the users, developers, and interwoven rollups.

VIP programmatically controls the distribution of INIT to create economic alignment between interwoven rollups and encourages all actors within the ecosystem to care about the success of INIT. It builds demand and use-cases for the native INIT token across the Interwoven Economy while providing teams with rewards to attract and retain users.

Rewards are allocated to Interwoven Rollups based on 2 factors:

1. INIT activity on the rollup
2. A collective gauge vote by INIT and Enshrined Liquidity stakers

Interwoven rollups create an on-chain distribution mechanism to incentivize what they care about the most at any given point in time. Exchanges will want to incentivize trading volume; lending protocols will want to incentivize USDC deposits; onchain games will want to incentivize quests.

For Interwoven Rollup teams, VIP induces a monetization model that promotes building kickass applications. It also creates a long-term retention mechanism and on-chain programmatic grant system that distributes INIT to actual users. Users receive incidental incentives for simply using an application that they would normally use!

How did we increase the supply for VIP in a +EV way?

INIT has a fixed supply of 1,000,000,000 (1 Billion). To increase the supply allocated to Initia VIP, supply must be reduced elsewhere.

Remember, INIT inflation acts as the security budget for the chain and will also be used to incentivize activity in the Interwoven Economy. Economic security is important in Initia’s case as the L1 since it also secures every rollup deployed on the Interwoven Stack.

A crossroad has been met. An unmovable rock. Unless?

Fortunately we have found a pot of gold, there’s a substantial stack of INIT that will be vesting over 4 years with nothing else to do. You guessed it — VCs and investors who own 15% of the INIT supply.

This was a contentious decision. Allowing early investors to stake their unvested tokens hasn’t always led to ideal outcomes. However, Initia isn’t about to become another victim of the Cucked Cosmos Society. We believe we’ve found the right balance to ensure this decision is +EV for all Initia stakeholders.

Yes, VCs are allowed to stake their locked tokens, but there are constraints:

• Staking rewards are locked with a 4 year vesting schedule.
• We’ve significantly reduced the staking emissions rate to around 2-4% APY.

By allowing early investors to stake their tokens and secure the chain, we’re able to:

• redirect nearly 15%(!!!) more of the total INIT supply towards Initia VIP (to around 25%!)
• distribute more tokens to active users and incredible applications.

We don’t take this decision lightly and don’t view it as a minor change to our economic policy— it’s a fundamental reallocation of capital towards promoting expansion and velocity within the Interwoven Economy.

While other L1s continue to promote a scarcity mindset, incentivizing token hoarding by directing a majority of the supply to securing the chain, Initia is choosing to weaponize the supply surplus to ignite sustainable growth for the network.

Initia.

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