Achieving a net deflationary supply of AMB has been an important goal of the AirDAO team since AirDAO launched in September; now, with upgraded token economics, we have clarified how we will do it.

Validator nodes play a vital role in the AirDAO ecosystem by securing the network and executing transactions; in return, they receive a block reward as payment for their work. Currently, block rewards are set at 14 AMB per block, increasing the supply of AMB by approximately 7% year-over-year — the same as Ethereum’s historical average supply inflation rate.

AirDAO Tokenomics 2.0 comprehensively upgrades $AMB; establishes a hard cap on the token supply and introduces several deflation mechanisms into the AirDAO ecosystem, each with a unique design, creating a clear path for AMB destruction multiple choices. A key measure of the new token economics’ deflationary supply is the upgrade of transaction fee types – AirDAO now has three different transaction fees.

Like gas fees on other blockchains, base fees are standard transaction fees within the AirDAO ecosystem, and 30% of all base fees will be burned as the token economics are upgraded. One of the new fees in the ecosystem is the “extra fee” – this fee is used to speed up transactions. Additional fees will go into the AirDAO treasury for revenue sharing, or be destroyed. This part of the fee also includes the contract call fee - a variable fee set by the contract deployer that will be transferred to the deployer's address.

DAO Governance is another new feature in the AirDAO ecosystem where the community will be able to use voting to implement or change the burning mechanism. For example, the community can decide whether to burn 30% of the Base Fee, Contract Call Fee, and the entire Extra fee. The community can also decide through governance whether AirDAO Bridge fees are burned or go into the AirDAO Treasury to be redistributed among DAO participants.

There will be governance-related penalties that will help AMB burn. Users will lock AMB and receive veAMB (Vote-Escrowed AMB) to participate in governance. It takes 250,000 block epochs to unlock veAMB and obtain AMB, and the proportion of governance participation rewards accumulated during this waiting period will be destroyed. Any potential penalties DAO participants may incur as a result of misconduct in the governance process will also be burned.

The fee structure and governance upgrades create opportunities for token burns — in addition to ecological burns. 20% of subDAO’s total revenue will be returned to AirDAO – for example, DEX and Bridge transaction fees. Other subDAOs created by AirDAO will have a percentage of revenue burned, and a percentage or all of the fines users generate on subDAO products can also be burned — such as penalties for early exit from lending protocols.

One possible feature of the decentralized exchange (DEX) on AirDAO is to create a burning vault for AMB. Users will lock AMB tokens to earn APY in the DEX’s native token, and allocate additional amounts of native tokens through smart contracts to buy back and burn AMB from the DEX’s market. Finally, other third-party dApps launched on AirDAO in the future may decide to incorporate novel burning capabilities as part of their design, creating endless possibilities within the AirDAO ecosystem to increase deflation of the AMB token supply.

Starting this year, the above-mentioned deflation functionality will be implemented along with all other planned upgrades and new features of AirDAO.

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