Accumulate Tokenomics: Creating a Circular Digital Economy

Written by TJ

On August 16, 2022

The goal of any blockchain or decentralized application’s tokenomics design is to enable the creation of a circular and self-sustaining economy where participants both value and are willing to spend the network’s native currency.   

This presents a challenge for blockchain tokens, as the token is often used initially to subsidize growth through inflation, while the core use cases that are needed to justify spending the currency within the network are not yet fully developed or have not achieved sufficient product market fit. 

Finding the balance between creating a store of value and a currency is one of the hardest problems to solve for any blockchain. Accumulate aims to solve this problem through the novel approach of creating 2 tokens:

  •  The ACME native token, which has a maximum supply of 500 million and is distributed as block rewards to stakers and validators of the Accumulate network. 
  • Credits; A separate utility token used to pay for services (such as generating a new Accumulate Digital Identifier or ADI) on Accumulate that can only be minted by burning ACME. 

What makes ACME a good potential store of value is that it carries deflationary properties, as portions of the tokens supply are burned whenever a new ADI is generated using Credits. 

Credits act more like traditional currencies. They are non-transferable tokens with a fixed USD value. This means that enterprise customers can leverage them for use within the Accumulate network without worrying about regulatory compliance issues. Credits also allow companies to track predictable costs long term by using Credits as the denominator asset for all settled transactions (like USD). 

Burn and Mint

Accumulate’s ‘Burn and Mint’ Equilibrium (BME) model is designed to enable ACME tokens to recycle through the Accumulate ecosystem, creating value in a variety of ways for multiple stakeholders. 

ACME tokens are burned to produce Credits which are used to purchase ADIs as well as other goods and services. Burned ACME tokens are then sent to an unissued pool, where they are released back into the network through minting as block rewards.

A portion of the reissued ACME tokens are rewarded to stakers and validators, while the rest goes towards supporting community development funds and issuing grants to fund new projects on the network. 

Like the Bitcoin network, ACME block rewards will steadily decrease over time as the burn rate increases due to more Credits being minted to pay for ADIs. This tokenomic model should encourage ACME holders to participate in staking by locking up their tokens, driving even more long term value for ACME. 

Value to Enterprises 

Accumulates BME model provides value to enterprises in the following ways:

  • Predictable costs 
    • Having the price of Credits tied to USD enables businesses to earn and spend Credits knowing that they can count on whatever product or service they are exchanging to maintain the same value. This stability is critical for financial planning, budgeting and also creating stable relationships with vendors. 
  • Legal Compliance 
    • Certain private or public institutions cannot legally hold cryptocurrencies. This is due to the ongoing uncertainty around whether some cryptocurrencies are unregistered securities, in addition to the lack of verifiability of counterparties who trade those cryptocurrencies and their legal status. 
      • Credits are treated like a product rather than a security because they are non tradable or transferable. They can only be used to pay for specific services within the Accumulate network, which reduces the risk that they can be leveraged in any way that skirts securities laws.  
    • The use of Credits and the transparent audit trail generated on Accumulate also makes it very convenient for  tax reporting purposes. Enterprises can provide a much clearer record of revenues and expenses using Credits because of their predictable value retention. 
  • Flexible Pricing 
    • Because Credits function like a currency, service providers on the Accumulate network are more free to set flexible pricing for their goods, knowing that demand and supply will not be influenced by fluctuations in the underlying value of the asset. 

Ultimately, Accumulate network’s tokenomics is designed to enable a circular economy that leverages both a stable currency as well as a deflationary store of value. The relationship between Credits and ACME tokens is such that the more demand there is for Credits, the more deflationary ACME tokens become, which puts demand pressure on ACME tokens and subsequently increases its value. 

The increasing value of ACME leads to more Credits being issued for each ACME token that is burned, increasing the supply of currency that can be used to spend within the Accumulate ecosystem. Conversely, if the network experiences a decrease in usage, then the circulating supply of ACME will increase, creating downward price pressure that enables the asset to become cheaper for users to acquire as a way to bring back demand.

This sophisticated design, coupled with the adoption of ADI’s as a means to represent individuals, entities or assets on-chain, is meant to drive market participants towards acquiring ACME tokens for their utility rather than purely for speculation. This is essential for enabling Accumulate to become the most regulatory compliant and enterprise friendly ecosystem.   

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