Aligning Token Emissions with Demand

The IOTY Protocol ensures that the number of new tokens created (inflation) is linked to actual usage. This is done through strategic locking durations, which means tokens are locked away for specific periods based on the type of activity. This approach ensures that inflation is controlled and reflective of real demand.

Revenue Generation and Token Buybacks

Revenue is generated through various streams. Part of this revenue is used to buy back tokens from the market, reducing the circulating supply and supporting the token’s value. The remaining funds are managed in a treasury to ensure the stability and growth of the ecosystem.

Community Pool and Reserve Ratio

The community pool is a reservoir for future token emissions, ensuring that new supply matches actual demand. The reserve ratio provides a real-time health indicator of the protocol, enabling adjustments to emission rates to maintain stability.

Creating Buying Pressure

The IOTY Protocol uses both controllable and market-driven strategies to create demand for IOTY tokens. Controllable strategies include token buybacks, providing liquidity, and over-the-counter (OTC) deals. Non-controllable strategies involve effective marketing and engaging market makers. This dual approach balances controlled mechanisms with market-driven factors, fostering a robust and active community.

Staking Pool Management

The staking pool offers attractive annual percentage rates (APRs) derived from well-planned revenue allocations. This encourages long-term staking, reducing the circulating supply and stabilizing the token’s value. The protocol is planned to support itself for at least 25 months, based on realistic profitability projections, ensuring continuous rewards for participants during the early phase.

Strategic Interplay and Long-Term Success

As the IOTY ecosystem grows, the interplay of these components will be crucial in fostering continuous engagement, enhancing token value, and ensuring the protocol’s overall success and sustainability. The dynamic inflation mechanism, staggered release approach, and strategic reserve management create a stable and predictable economic environment, mitigating volatility and building stakeholder trust.

If you find an error or a typo, please contact our us or simply want further explanation, please contact our Support team

This article, written under the guidance of Jaafar SAIED, Co-founder at Dar Blockchain , is the result of a collaboration of Dar Blockchain Token Economy team and Connectify & IOTY PROTOCOL Founders, Pierre FOURMESTAUX and Rejeb ZORGANI.

Disclaimer : All the information presented in this document reflects the orientation that the founders are giving to the project under development and the foundations of the tokenomics of the CONNECTIFY project and the IOTY Protocol. As the project may evolve, this information remains indicative for the sake of full transparency with investors, and may change in the future.

In this article, we look at the innovative tokenomics design of the IOTY token, a meticulously engineered model for generating controlled inflation based on protocol demand. The mechanism ensures that the release of new tokens is proportional to protocol usage, helping to maintain a balanced and sustainable ecosystem. Developed by CONNECTIFY, the IOTY protocol aims to revolutionize the Internet of Things (IoT) ecosystem by creating a lean infrastructure layer that identifies connected objects, manages data routing, stores and makes data available, while reducing industrial and operational costs, and optimizing the efficiency of IoT devices. By leveraging blockchain technology, the protocol guarantees secure, immutable storage of device identities and data, fostering innovation and democratizing access to IoT technologies. Through this comprehensive exploration, we’ll discover how the IOTY token captures value, supports economic stability and promotes long-term growth within the ecosystem.

Overview of the IOTY Protocol and its aims

The IOTY protocol, developed by CONNECTIFY, is a blockchain-based solution designed to streamline, facilitate industrialization, ease the go-to-market of smart objects and make the Internet of Things (IoT) ecosystem more scalable. Its primary objective is to create a lean infrastructure layer that identifies connected objects, manages data routing, stores them and makes them available, while reducing industrial and operational costs, and optimizing the efficiency of IoT devices. By leveraging blockchain technology, the protocol guarantees secure, immutable storage of device identities and data, fostering innovation and democratizing access to IoT technologies.

Explanation of the Ecosystem and Its Components:

The CONNECTIFY ecosystem is composed of several key components:

• The IOTY Network: A decentralized network built by contributors using smartphones and gateways, enabling seamless connectivity and communication of IoT devices.
• CONNECTIFY Platform: A comprehensive platform for device serialization, network ID management and data routing, designed to industrialize and efficiently manage the life and use of IoT devices.
• Blockchain Integration: Utilizes blockchain for storing device IDs and messages, ensuring data integrity, security, interoperability and transparency.
• SDKs and services: Provides SDKs for both embedded firmware and web and mobile applications for integrating services that interact directly with the blockchain to manage operating models or connectivity subscriptions for IoT objects.

CONNECTIFY Revenue Channels

Revenue channels are crucial in a Web3 economy for several reasons. Firstly, they ensure sustainability by providing a continuous influx of funds that support the development, maintenance, and expansion of the ecosystem. This is vital for the long-term viability of Web3 projects, which often rely on decentralized and community-driven models. Diverse revenue sources enable the implementation of mechanisms like buybacks and staking rewards, which incentive participation and engagement from users and contributors, thereby building a robust and active community. Regular and diversified revenue inflows also help manage the economic stability of the ecosystem by counteracting market fluctuations, supporting token value through buybacks, and ensuring sufficient reserves for strategic initiatives and emergencies. Moreover, steady revenue streams fund ongoing innovation and development, allowing for continuous improvement of the platform and the introduction of new features and services, fostering growth and helping the ecosystem stay competitive in the rapidly evolving Web3 space. Additionally, revenue from services like device creation and connectivity supports the democratization of access to advanced IoT technologies, making them more accessible and affordable. This drives broader adoption and integration of IoT solutions across various industries. In summary, well-structured and diverse revenue channels provide the financial backbone necessary to support decentralized, user-driven ecosystems in a Web3 economy.

Various revenue streams supporting the ecosystem.
CONNECTIFY offers various subscription plans to cater to different user needs:

MEMBERS FEES: Yearly Fees for Platform Access

• Free access:, suitable for users with no projects or devices, but providing access to the entire knowledge base on the creation of intelligent device hardware and the state of the art in the use of communication technologies dedicated to the IoT.
• Designer Plan: For users managing a few projects and devices at the prototype stage, offering access to additional features such as connectivity to IoT networks or design support tools, or support from our experts.
• Company Plan: Designed for companies operating connected objects, it provides comprehensive services including firmware and application SDKs, access to connectivity offerings and IOTY services.
• Manufacturer Plan: Tailored for large-scale manufacturers, offering extensive support services like test bench software, phone support, and industrial support.

DEVICES CREATION: Revenue from the creation of the product’s digital identity. Each new device created by a manufacturer will be assigned a digital identity comprising its serial number and the various IDs or other identifiers required for its secure use on networks and/or communication technologies mainly dedicated to the IoT. The revenue generated by the creation of a device at the time of manufacture depends on the number and type of technologies it embeds, from RFID to terrestrial or satellite technologies such as LoRa or Kineis… Manufacturers can also associate an NFT with each object, to manage data access rights (e.g., a connected medical bracelet) or device ownership (e.g., a connected luxury bag).

CONNECTIVITY & IOTY NETWORK: annual fees for access to the decentralized network or other connectivity technologies. Users pay an annual fee per object to use the IOTY network made up of contributors and gateways or for connectivity’s CONNECTIFY ecosystem will be able to provide. These revenues, which are calculated based on a fixed number of messages per day or data size, can also include message routing and/or Onchain storage. These revenues will be used in part to reward contributors to the decentralized IOTY network.

DATA ROUTING & STORAGE: thanks to the CONNECTIFY platform, it will be possible to centralize and route data transmitted by intelligent objects, regardless of the routing network (sigfox, LoRa, kineis, Bluetooth…). The operator, who develops the firmware embedded in the device, will be free to decide whether to store the data onchain, route it to a private server or both, using the standard message header library designed by CONNECTIFY. Each message will be counted as a billable ping.

IOTY SERVICES: Revenue from IOTY services, developed to facilitate use and adoption of the CONNECTIFY ecosystem, and to generate additional revenue. These include the provision of a WiFi MAC address base for INDOOR geolocation, data consultation and aggregation services from the blockchain, or shared management of connectivity subscriptions for end-users.

These revenue channels are designed to create a self-sustaining ecosystem, where the continuous influx of funds supports the development and expansion of CONNECTIFY and the adoption of IOTY Protocol, guaranteeing its long-term viability and success.

IOTY token

In the context of Web3, tokenomics plays a crucial role in defining the economic model that supports these revenue streams. A well-designed tokenomics framework ensures that the incentives are aligned for all participants, promoting sustainable growth and long-term engagement. By managing the supply and distribution of tokens, tokenomics helps maintain economic stability, prevent inflation or deflation, and ensure that the ecosystem remains attractive to new users and investors. This intricate balance of incentives and rewards is essential for fostering a thriving and resilient ecosystem.

The model introduces 3 main Pools ; Staking Pool, Treasury and Community Pool.

Staking Pool:
Allows stakers to earn rewards through revenue sharing, incentivizing long-term participation and investment in the protocol.
It Incentivizes long-term participation and network support.
Provides regular staking rewards to encourage continuous engagement.

Treasury:

Serves multiple purposes including market stability, funding development and growth, and acting as an emergency reserve.
Its key functionalites are :

Market Stability: Executes strategic buybacks during periods of severe selling pressure to stabilise token value.

Development and Growth: Funds ongoing development, marketing, and operational needs.
Emergency Reserve: Acts as a financial buffer to address unexpected challenges or opportunities, enhancing ecosystem resilience.

Community Pool

Ensures the long-term sustainability and economic stability of the protocol by maintaining a reserve of tokens that supports continuous and proportional emissions. This pool is vital for aligning token supply with the actual demand within the ecosystem, preventing rapid depletion and promoting balanced growth.

Its Key functionalities are :
Sustainability: Replenishes the community pool to ensure there are sufficient tokens available for future emissions. Proportional Emission: Supports the proportional emission mechanism, aligning new token supply with protocol demand.
Economic Stability: Prevents rapid depletion and ensures long-term viability of the tokenomics model.

How the Token Captures Value

The IOTY token captures value through a combination of revenue generation, strategic buybacks, and controlled token release mechanisms. By reducing the circulating supply through buybacks and locking tokens, the ecosystem creates scarcity, which drives up the token’s value. Additionally, distributing tokens to community, treasury, and staking pools ensures that there are continuous incentives for participation and long-term engagement, further stabilizing and enhancing the token’s value over time.

The protocol’s tokenomics are designed to capture and increase the value of IOTY tokens through various revenue streams and strategic buyback mechanisms.

Figure 1 explains that each time the protocol generates revenue, it performs a buyback and releases tokens from the community pool. These tokens are locked in a smart contract and then released progressively into the staking, treasury, and community pools. The buyback involves repurchasing tokens from the secondary market, which increases demand and can support or raise the token’s price. The release of tokens, previously locked in the community pool, increases the circulating supply, aligning with the actual demand generated by the protocol. Below are detailed explanations of each revenue stream and how they contribute to the value capture of the token.

MEMBER FEES

50% of the subscription goes to the treasury and a portion of it is reserved to buy back tokens during severe selling pressure events, ensuring market stability. The remaining revenues are used to buy back IOTY tokens immediately from the secondary market, which are then locked for one year, aligning with the annual renewal cycle of subscriptions, ensuring that the tokens released over time correspond precisely to the value contributed by a user to the ecosystem.

DEVICE CREATION

75% of the revenues are used to buy back IOTY tokens and lock them for three years.The remaining 25% are directed to the treasury, part of these funds are used for buybacks during periods of high selling pressure.

CONNECTIVITY & IOTY Network

50% of the revenues are used to buy back IOTY tokens and lock them for one year. The remaining 50% are directed to the treasury, part of these funds are used for buybacks during periods of high selling pressure.

Data Routing & Storage

100% of the revenues are used to buy back IOTY tokens and are allocated to the staking pool and the treasury. Currently, 50% of the revenues are allocated to the staking pool and 50% to the treasury. This allocation may change in the future through a vote by the DAO.

IOTY Services

100% of the revenues are used to buy back IOTY tokens and are allocated to the staking pool and the treasury. Currently, 50% of the revenues are allocated to the staking pool and 50% to the treasury. This allocation may change in the future through a vote by the DAO.

Impact of Buybacks on Token Price

The buyback mechanism has a direct impact on the token price. By consistently using a significant portion of the revenues to buy back IOTY tokens from the market, the protocol reduces the available supply of tokens. This reduction in supply increases the scarcity of the tokens, which, in turn, drives up their value. The buyback is one of the five strategies employed to create buying pressure on the token, divided into two groups: controllable and non-controllable. Controllable strategies include buybacks, liquidity providing, and Over-The-Counter (OTC) deals. Buybacks involve regularly purchasing tokens from the market using revenue, thereby reducing supply and increasing value. Liquidity providing allocates funds to ensure there is sufficient liquidity in decentralized exchanges, making it easier for users to buy and sell tokens without significant price impact. OTC deals facilitate large token purchases directly between parties, minimizing market disruption and creating strategic alliances. Non-controllable strategies include marketing and market making. Effective marketing promotes the IOTY token and CONNECTIFY ecosystem to attract new users and investors, increasing demand for the token and contributing to price appreciation. Engaging professional market makers helps maintain order book stability and liquidity, ensuring that there is always buying and selling interest in the market, which reduces volatility and maintains a stable token price. By combining these strategies, the protocol ensures continuous buying pressure on the IOTY token, contributing to its long-term stability and value growth. This comprehensive approach balances-controlled mechanisms with market-driven factors to sustain a healthy and thriving ecosystem.

Locking Tokens and Its Effects

Locking tokens for a specified duration adds another layer of value capture. When tokens are locked, they are temporarily removed from the circulating supply, further increasing scarcity. This mechanism ensures that even as tokens are released, the effective circulating supply remains controlled. The longer lock durations associated with certain revenue streams, such as three years for Model Product and Device Creation, align with the life cycle of these products and provide a long-term reduction in token supply, supporting sustained value appreciation. At each release of tokens, a distribution will occur across the three pools: staking, treasury, and community. We will discuss in more detail below how the tokens will be released.

Methodology for Calibrating the Staking Pool

The staking pool is a critical part of the IOTY tokenomics model, incentivizing long-term participation by offering rewards to users who stake their tokens. These rewards, derived from a significant portion of the protocol’s revenues, are distributed as additional IOTY tokens. Revenues from various channels, such as member fees and device creation, are used for token buybacks, with 50% of these revenues allocated to buying back IOTY tokens and locking them for up to one year. This controlled release of tokens ensures a steady supply of rewards for stakers, maintaining an attractive APR (Annual Percentage Rate) typically between 14% and 20% The remaining 50% of the revenues are directed to the treasury, which supports strategic buybacks during high selling pressure periods, stabilizing the token price and ensuring continuous rewards. This comprehensive approach ensures the staking pool remains attractive and sustainable, fostering a robust and resilient ecosystem.

Debt emission

The first step is to develop a vesting timeline that aligns with the protocol’s growth strategy and the ecosystem’s expected maturation. Starting from the Token Generation Event TGE, tokens released through vesting represent a debt for the protocol, as these tokens must be bought back using generated revenue.

Revenue estimation

Accurately estimating revenues is crucial. This involves projecting income from various streams, such as subscriptions, model products, and device creation. These revenues generate buyback pressure, as a significant portion is used to purchase tokens from the secondary market. Recognizing that tokens released through vesting create a debt to be repaid through revenue generation ensures the protocol’s financial stability.

The forecast over time serves to test the resilience of the staking pool. By comparing the generated revenue against the issued debt, we aim to understand the buying pressure that must be generated by the protocol. This buying pressure consists of tokens purchased to be staked, which will require incentivizing these buyers. This analysis helps in designing strategies to ensure the protocol’s sustainability and attractiveness to stakeholders.

This graph illustrates the monthly buying pressure needed under three different scenarios (Moderate, Optimistic, and Pessimistic) to sustain the protocol. The buying pressure is represented as the difference between debt and revenues. Initially, all scenarios start with a significant positive buying pressure, indicating that the protocol’s debts exceed its revenues.

As time progresses, the buying pressure decreases, and the graph shows when it becomes negative. A negative value indicates that the revenues are starting to exceed the debts, marking the protocol’s transition to profitability. This change occurs because revenues increase over time as the protocol grows and attracts more users and activity. Concurrently, the emission of new debt decreases as the initial costs of bootstrapping and incentivizing early adopters diminish. Identifying this break-even point is crucial for long-term planning and resource allocation.

During the initial phase, known as bootstrapping, it is critical to have enough incentives in place to drive user engagement and transaction volumes, which are necessary for the protocol’s growth. The graph shows that, under the most optimistic scenario, the protocol may become profitable around the 25th month. Therefore, to ensure the protocol remains healthy and achieves sustainability, we must plan for at least 25 months of incentives. This involves allocating enough resources to cover the expected buying pressure, which includes purchasing tokens and staking them to incentivize users effectively. Additionally, we must ensure that the depletion of the provision is planned to last at least 25 months to guarantee that the bootstrapping phase of the incentives covers a sufficient duration before the protocol is capable of self-financing. This careful planning ensures that the protocol can maintain user engagement and transaction volumes until it reaches a point of financial self-sufficiency.

Creating a sustainable economy is paramount. By accurately forecasting and preparing for the required incentives, we can create a stable and predictable economic environment for the protocol. This preparation helps prevent sudden shortfalls that could disrupt operations and erode user trust. Ensuring that the protocol has the necessary support for 25 months aligns with our goal of building a robust and resilient ecosystem. The 25-month period is derived from optimistic projections indicating when the protocol may become profitable; however, it is not a fixed duration and may vary depending on actual performance and market conditions. Managing the protocol’s debt is particularly important during the initial bootstrapping phase when revenue may not suffice to cover the debt from token emissions. Introducing staking as a mechanism to create new debt helps manage this initial debt by delaying its repayment through the creation of new, longer-term debt in the form of locked tokens.

Revenue Sharing Mechanism

Having inflationary rewards is beneficial for the initial stages, but it is not sustainable and can be unhealthy for the protocol in the long term. The goal is to bootstrap the protocol to the point where it can repay its debts and then generate more revenue. Once the debts are paid off, the protocol will reward stakers through its revenues. We will refer to these rewards as “inflationary rewards” for the initial inflationary remunerations and “aligned rewards” for the rewards derived from revenue.

The revenues from the different revenue streams of the protocol will be shared among three different pools: the treasury pool, the staking pool, and the community pool. We will explain in more detail the role of the community pool, which orchestrates the dynamic emission mechanism based on demand.

As revenues increase, the rewards given to stakers also increase. This leads to a rise in the earning per share (how much a unit of staked token earns), which in turn results in an increase in the token price. This is a way to link the token price to its intrinsic value.

By implementing this revenue-sharing mechanism, we aim to create a sustainable and healthy economic model for the protocol. Initially, inflationary rewards help bootstrap the protocol by attracting and incentivizing participants. However, as the protocol matures and generates sufficient revenue, aligned rewards will ensure that stakers are rewarded based on the protocol’s actual earnings. This transition from inflationary to aligned rewards will strengthen the protocol’s economic stability and promote long-term growth.

Token Inflation and Its Importance for Ecosystem Balance

The IOTY protocol employs a mechanism for generating controlled inflation to maintain economic stability and ensure the sustainability of the ecosystem. When users interact with the IOTY protocol, the revenues generated are used to buy back IOTY tokens from the secondary market, which are subsequently locked for a specified duration depending on the revenue channel. Additionally and simultaneously , new tokens are released in a manner proportional to the number of tokens locked in the contract, aligning the inflation rate with the actual demand.

Dynamic inflation is crucial for the balance of the ecosystem. In a deflationary economy, consumers are disincentivized to spend, which can lead to decreased economic activity and slow down growth. Conversely, an economy with managed inflation encourages spending and investment, fostering economic growth. By ensuring that the inflation rate is aligned with the growth of the protocol, the IOTY tokenomics model prevents the protocol from becoming deflationary.

The controlled inflation mechanism helps stabilize the token’s value by ensuring that the new supply matches the market conditions. This balance is essential for market stability, as it prevents excessive inflation that could devalue the token while also avoiding deflation that could stifle economic activity within the protocol.

Strategic Lock Duration and Demand Alignment

The lock duration of tokens is carefully designed to match the frequency of user purchases, ensuring that the generated inflation is always tied to the real demand of the protocol. For subscriptions, the lock duration is set to one year, aligning with the annual renewal cycle. This ensures that the tokens released over time accurately reflect the value contributed by a user to the ecosystem.

For model products and device creation, the lock duration is three years, which corresponds to the average lifespan of these products. By matching the lock duration with the product lifecycle and user engagement patterns, the IOTY ecosystem ensures that inflation is directly linked to actual demand. This approach helps maintain a stable and balanced economic environment, as the release of tokens is synchronized with the natural growth and activity within the ecosystem.

Reason for Releasing Tokens Only for Specific Revenue Streams

The decision to release tokens for specific revenue streams is rooted in the need to accurately reflect the ongoing and recurring value these streams bring to the ecosystem. By focusing on Subscriptions, Connectivity and IOTY Network, and Device Creation, the IOTY tokenomics model ensures that inflation is closely tied to real, sustained demand.

Member Fees

When a user subscribes to the platform, they pay a yearly membership fee with no obligation for renewal. However, the potential for long-term engagement is significant, as users often continue their subscriptions to maintain access to valuable services. This recurring revenue stream reflects sustained demand and justifies generating inflation.

Device Creation

Device creation involves a non-recurring, unitary cost for creating a digital passport for the device on the blockchain. This initial revenue event is crucial, but the value extends far beyond the initial creation. Once devices are created, they continuously generate messages and additional revenues through their operations and interactions on the network. These devices also drive further engagement with connectivity services, as users need to maintain their devices’ connectivity to leverage their full potential. Releasing tokens based on device creation revenues ensures that inflation mirrors the ongoing economic activity and value these devices bring to the protocol.

Connectivity and IOTY Network

As device adoption increases, so does the usage of connectivity services, creating a cascade effect of revenue. Users initially subscribe for connectivity but eventually engage in additional services like message routing and other value-added services offered by CONNECTIFY. This extended and recurring engagement supports the decision to release tokens in response to connectivity revenue, aligning inflation with real, ongoing demand.

Cascading Revenue Model

The revenue model of our platform is designed to capture value through a series of cascading interactions. It begins with a yearly membership fee that initiates the user’s journey within the ecosystem. This subscription generates direct revenue and sets the stage for further engagements. As users progress, they incur additional costs through the creation and utilization of devices, leading to the purchase of essential connectivity services. This creates a steady stream of continuous revenue. Over time, users are drawn into engaging with various extended services offered by the IoTy Network, such as advanced IoT functionalities, further enhancing revenue generation. This multi-layered approach ensures long-term value capture from each user, starting from their initial subscription and expanding through their ongoing interactions within the ecosystem.

The Role of Locked Tokens as a Primary Reference Point

The total number of tokens locked serves as a primary reference point in the IOTY tokenomics model. This number is a direct reflection of the protocol’s revenue and demand correlation. As the protocol generates revenue, these funds are used to buy back tokens, which are then locked. The greater the number of locked tokens, the higher the generated revenue, which reflects increased demand for the protocol. A higher number of locked tokens signifies greater user engagement and revenue generation. By tying token emissions to the number of locked tokens, the protocol accurately reflects the real demand for its services and products.

Advantages of Using an On-Chain Indicator

Using the total number of locked tokens as an on-chain indicator offers several advantages for the IOTY ecosystem. Firstly, it provides a direct and real-time reflection of demand for the protocol’s services and products, ensuring that the tokenomics model is aligned with actual user activity and revenue generation. This method eliminates the need for external oracles to supply demand information, which can introduce points of failure and complexity. By removing this dependency, the system becomes more robust and secure. On-chain metrics are transparent, immutable, and verifiable by anyone, which increases trust and reduces the risk of manipulation or inaccuracies.

Unlocking Mechanism

The locked funds are unlocked gradually on a monthly basis. The unlocked tokens are then redirected to the following three primary pools, each serving a crucial function in maintaining the health and sustainability of the IOTY ecosystem:

1. Staking Pool:

The first portion of the unlocked tokens is allocated to the staking pool. This pool allows stakers to earn rewards through revenue sharing, incentivizing long-term participation and investment in the protocol. By providing regular staking rewards, we encourage users to continue supporting the network, thereby fostering stability and engagement.

The staking mechanism operates as follows: stakers receive rewards on a monthly basis as long as their tokens remain staked. Once tokens are staked, they cannot be unstaked until a lock-up period of 6 months has elapsed.

2. Treasury:

The second portion of the unlocked tokens is directed to the treasury. The treasury serves multiple purposes, including:

1. Market Stability: Funds in the treasury can be used for strategic buybacks during periods of severe selling pressure, helping to stabilize the token’s value.
2. Development and Growth: The treasury funds ongoing development, marketing, and operational needs, ensuring the protocol’s continuous improvement and expansion.
3. Emergency Reserve: The treasury acts as a financial buffer to address unexpected challenges or opportunities, enhancing the overall resilience of the ecosystem.

3. community pool:

The final portion of the unlocked tokens is redirected to the community pool. This pool is crucial for maintaining the sustainability of the emission mechanism. The community pool is designed to control inflation and is held by the protocol. Its sole purpose is to release tokens to the staking and treasury pools. The community pool’s primary functions include:

Sustainability: Replenishing the community pool ensures that there are sufficient tokens available for future emissions, maintaining the balance between supply and demand.

Proportional Emission: By continuously topping up the community pool, we can sustain the proportional emission mechanism, aligning new token supply with protocol demand.

Economic Stability: A well-maintained community pool prevents rapid depletion and ensures the long-term viability of the tokenomics model.

Staggered Release

The release of inflation is staggered over time to foster retention and loyalty among stakers. This mechanism ensures that stakers remain committed to the ecosystem even during periods of declining revenue or external events that might affect the token’s price.

Mechanism of Staggered Release

Tokens are released over a period ranging from 12 to 36 months, depending on the type of revenue, with the total amount being released monthly. This gradual, monthly release creates friction in exit, compelling stakers to stay longer to capture all potential revenues. By staggering the release of tokens over an extended period, the system creates a natural retention mechanism. Stakers are incentivized to remain invested for longer periods to fully benefit from the released revenues. The anticipation of future rewards ensures that stakers have a continuous incentive to remain engaged with the ecosystem, reducing the likelihood of mass exits, which could destabilize the token’s value and the ecosystem.

Managed inflation through the gradual release of tokens ensures careful control over supply, preventing sudden spikes that could negatively impact the token’s price. By aligning the minting process with the protocol’s demand, the ecosystem fosters a stable and predictable growth environment. This strategy also enhances long-term commitment from users and investors, as the responsible management of token supply builds trust and encourages stakeholders to remain invested, thereby contributing to the sustainability and health of the tokenomics model. Additionally, the staggered release approach mitigates market volatility by spreading out token releases over time, thus avoiding large, sudden influxes that could disrupt market dynamics. This careful management of token supply supports a more stable token value, benefiting the entire ecosystem by ensuring steady growth and reducing the risk of sharp price fluctuations.

Community Pool and Reserve Ratio

The reserve ratio of the community pool is a vital metric for maintaining the pool’s health and ensuring its sustainability. The reserve ratio is calculated as the number of tokens currently in the community pool divided by the pool’s maximum supply.

This ratio is crucial because it helps prevent the community pool from depleting too rapidly. By maintaining a healthy reserve ratio, the protocol ensures that there are always sufficient tokens available to meet varying levels of demand. This stability is essential for the long-term viability of the tokenomics model, as it prevents sudden shortages and supports consistent token emissions aligned with the protocol’s needs.

By continuously monitoring the reserve ratio, we can regulate the emission rate of new tokens. If the reserve ratio falls too low, it indicates that the community pool is being depleted too quickly. In such cases, the emission rate can be adjusted to slow down the release of new tokens, preventing rapid depletion. This proactive adjustment helps maintain a healthy reserve, ensuring the community pool can support the protocol through periods of high demand and market fluctuations.

Mathematical Formula for Token Emission

To define a generalized formula for the emission of tokens over time, considering the total locked tokens, the reserve ratio, and an emission constant, we can create a model that encapsulates these elements. Let’s denote the following variables:

L(t): Total number of locked tokens at time t.

R(t): Reserve ratio at time t.

C: Emission constant.

The token emission rate E(t) can be expressed as a function of these variables. One possible form of the emission formula could be:

Where:

L(t): Represents the dynamic value of locked tokens at time t, reflecting ongoing user engagement and demand.

R(t): The reserve ratio at time t, ensuring that the community pool has sufficient reserves.

C: A constant that calibrates the overall emission rate, ensuring that the model aligns with the desired inflation targets.

Mathematical Formula for Total Number of Locked Tokens: To define a formula for the total number of locked tokens, we need to account for the revenue generated by the protocol, the allocation of that revenue towards buying and locking tokens, and the duration for which tokens are locked. Let’s denote the following variables:

L(t): Total number of locked tokens at time t.

R(t): Revenue generated by the protocol at time t.

α: Proportion of revenue used to buy back and lock tokens.

D: Duration for which tokens are locked.

We can express the total number of locked tokens L(t) as the integral of the revenue allocated for locking tokens over time, considering the duration D:

Conclusion

The IOTY Tokenomics model exemplifies a forward-thinking approach to creating a sustainable and resilient economic environment within the IoT ecosystem. By aligning token emissions with real demand through strategic locking durations and proportional buybacks, the IOTY Protocol ensures that inflation is controlled and reflective of actual usage. This intricate system of revenue generation, token buybacks, and treasury management not only supports market stability but also incentivizes user engagement and long-term investment.

The introduction of the community pool and reserve ratio mechanisms further bolsters the protocol’s ability to adapt to market fluctuations and maintain economic balance. The community pool serves as a critical reservoir for future token emissions, ensuring that new supply is always aligned with actual demand. Meanwhile, the reserve ratio provides a real-time indicator of the protocol’s health, enabling proactive adjustments to emission rates to maintain stability.

Additionally, the comprehensive approach to creating buying pressure through controllable strategies like buybacks, liquidity providing, and OTC deals, along with non-controllable strategies such as effective marketing and engaging market makers, ensures a steady demand for IOTY tokens. This dual approach balances-controlled mechanisms with market-driven factors, fostering a robust and active community while supporting the token’s value.

The strategic management of the staking pool, with its attractive APR derived from well-planned revenue allocations, encourages long-term staking and reduces circulating supply. This further stabilizes the token’s value and ensures continuous rewards for participants. The careful planning to support the protocol for at least 25 months, derived from realistic profitability projections, provides a buffer during the bootstrapping phase, ensuring sufficient incentives are in place to drive engagement and transaction volumes.

Moreover, the decentralized governance system empowers the community with a transparent and democratic decision-making process regarding treasury funds, ensuring that early buyers have significant voting power initially and that future vote delegation will enhance representation and flexibility.

As the IOTY ecosystem continues to grow, the strategic interplay of these components will be pivotal in fostering continuous engagement, enhancing token value, and ensuring the overall success and sustainability of the protocol. The dynamic inflation mechanism, staggered release approach, and strategic reserve management collectively create a stable and predictable economic environment. This not only mitigates volatility but also builds trust among stakeholders, encouraging their long-term commitment to the ecosystem.

In conclusion, the IOTY Protocol’s innovative tokenomics model, with its well-structured revenue channels and strategic incentive mechanisms, provides a solid foundation for a sustainable and thriving IoT ecosystem. By ensuring that token supply is meticulously managed and aligned with actual demand, the IOTY Protocol paves the way for continuous growth, stability, and resilience in the rapidly evolving Web3 space.

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This article, written under the guidance of Jaafar SAIED, Co-founder at Dar Blockchain , is the result of a collaboration of Dar Blockchain Token Economy team and Connectify & IOTY PROTOCOL Founders, Pierre FOURMESTAUX and Rejeb ZORGANI.

Disclaimer : All the information presented in this document reflects the orientation that the founders are giving to the project under development and the foundations of the tokenomics of the CONNECTIFY project and the IOTY Protocol. As the project may evolve, this information remains indicative for the sake of full transparency with investors, and may change in the future.