EOS Pursues MEGA Ambition with Latest Tokenomics Model

Make EOS Great Again – that‘s the mantra of the EOS Network Foundation, which recently green-lit a proposal to cap the chain’s token supply at 2.1 billion.

Per the May 31 announcement, EOS will burn 80% of its future token supply, transitioning from an inflationary token capped at 10 billion to a fixed supply of 2.1 billion. And thats just the start.

One of a raft of updates introduced since the ENF began manually funding EOS Labs as an entirely new entity last year, the tokenomics upgrade will also see the implementation of quadrennial halvings a la Bitcoin. The new tokenomics model is “designed to enhance the economic potential of the EOS ecosystem” and mark a “New Era for EOS.”

A MEGA Upgrade

The bold proposal, which was put forward by ENF boss Yves La Rose in April, was passed by a super majority consensus of EOS Block Producers.

“High liquidity with expectation of inflation increases the difficulty of market making, and the market value ranking of EOS continues to decline,” read the proposal, underlining the need for such a change. EOS launched with a 1 billion token supply and annualized 5% inflation in 2018.

By reducing its tokens Fully Diluted Value (FDV) by a gargantuan 80%, the ENF hopes to eliminate inflation and enhance long-term value for the EOS community. The addition of halving cycles, meanwhile, is intended to moderate the influx of tokens entering the market. Of the 2.1 billion fixed supply, 1.15bn is already in circulation (54% of total supply).

While the inflation-tackling measures understandably generated the most headlines, there were other provisions baked into the proposal. For example, 250 million EOS tokens (around $142 million at todays prices) were allocated towards staking rewards for EOS and RAM, with the rate of reward emissions to be governed by EOS block producers.

EOS staking rewards are expected to begin by the end of June with the implementation of REX 2.0.

If the introduction of quadrennial halvings inevitably evoked the specter of Bitcoin, the proposals mention of high-yield staking rewards calls to mind the DeFi-centric Ethereum and Layer2 landscape.

Elsewhere in the proposal, it was stipulated that 350 million EOS tokens are to be locked in a dedicated account managed by ENF and Labs and allocated towards nurturing the chains RAM market cap, which already stands at $300 million.

These efforts will include earmarking funds for the programmatic purchase of RAM from the Bancor pool to support funding of ecosystem initiatives. In time, EOS users will also gain the ability to stake their RAM – although this contract is still under development.

RAM is vital to the EOS networks functionality, facilitating operations like account creation and dApp execution.

“This strategic overhaul will not only stabilize the token economy but also incentivize active participation and growth within the network,” predicts La Rose.

For the ENF, the update is seen as a shot in the arm for the blockchain as it looks to revitalize its ecosystem and unlock value for token-holders, particularly through primitives like staking, inflation protections, and RAM market support.