The Comprehensive Guide to Pyth Tokenomics

The Pyth tokenomics is a complex system, but don't worry, we'll break it down in a way that's easy to understand.

The total supply of Pyth tokens is capped at 10 million, which is designed to prevent inflation and maintain the token's value. This cap also helps to ensure that the token's scarcity is preserved.

Pyth tokens are used to pay for data feeds, which are provided by a network of data providers. The data providers are incentivized to provide accurate and reliable data through a reward system.

The reward system is based on a proof-of-stake consensus mechanism, where validators are chosen to create new blocks based on the amount of Pyth tokens they hold. This ensures that the most valuable validators have the greatest influence on the network.

The pyth tokenomics are designed to ensure a healthy and sustainable ecosystem for the PYTH token.

The token has a max supply of 10,000,000,000 PYTH.

The initial circulating supply is 1,500,000,000 PYTH, which is 15% of the total max supply.

85% of the PYTH tokens are initially locked, with a vesting schedule that unlocks tokens every 6, 18, 30, and 42 months after the initial token launch.

52% of the token supply, which is 5,200,000,000 PYTH, is allocated to the token distribution.

The Ecosystem Growth allocation is a strategic portion of tokens set aside for contributors to the Pyth Network, including developers, educators, researchers, and more.

This allocation aims to facilitate practical initiatives such as funding research projects and incentivizing developers to build complementary tooling and resources.

13% of the 5.2B PYTH Tokens are unlocked, specifically 700M tokens.

The remaining 4.5B tokens are subject to the unlock schedule described above.

The Ecosystem Growth category represents two historical funding rounds to strategic contributors who add value to the network in terms of advisory and infrastructure support.

These funding rounds have closed and the allocation has been finalized.

The Pyth Network's governance model is quite unique, as it's permissionless, meaning anyone can participate. This is made possible by the PYTH token, an SPL-based asset on Solana, which allows token holders to vote on governance proposals.

Token holders can vote on issues such as price feed management, update fees, and publisher rewards through a staking program that operates on weekly epochs. This means that votes are cast and counted on a regular schedule.

The governance decisions are binding, with proposals automatically executed through smart contracts upon approval. This ensures that the decisions of the token holders are carried out efficiently and effectively.

In the protocol development aspect of Pyth, 15% of the 1 billion PYTH Tokens have been allocated to core contributors focused on building oracle tooling, products, and infrastructure.

These contributors are working to expand the protocol's suite of decentralized data services, such as Douro Labs.

The remaining 850 million tokens are subject to the unlock schedule described in the tokenomics section, which outlines the gradual release of tokens over time.

This allocation of tokens to core contributors is a key part of the protocol's growth and development, allowing them to build and improve the decentralized data services offered by Pyth.

Governance is a crucial aspect of Pyth Network, and it's done through a permissionless mainnet launched in 2023. Token holders vote on governance proposals through a staking program.

The PYTH token, an SPL-based asset on Solana, is at the heart of this governance model. Token holders can cast votes on issues such as price feed management, update fees, and publisher rewards.

Governance decisions are binding, with proposals automatically executed through smart contracts upon approval. This ensures that the community's decisions are implemented promptly.

The Pyth DAO LLC, a decentralized autonomous organization registered in the Marshall Islands, supports Pyth Network's governance framework.

Pyth has significant token unlocks every year on May 20 for the next 4 years. This means that there will be a steady release of tokens over time, rather than a single large dump.

Chainlink is nearly all vested, with no significant unlocks left, which reduces the risk of sell pressure. This is in contrast to Pyth, which has a more gradual release of tokens.

52% of the Pyth supply is controlled by the team, dedicated to ecosystem growth, which gives them flexibility to manage token releases. This means they can choose not to release tokens if they don't see valuable investments to be made.

Only 10% of the Pyth supply, worth $136M, will unlock on May 20, 2024, which is a relatively small amount compared to the daily trading volume of ~$200M. This suggests that the market should be able to absorb the sell pressure without a massive collapse.

Large token unlocks that are more than 100% the daily trading volume can lead to significant price collapse, but in Pyth's case, the unlock is less than 1% of the daily trading volume. This reduces the risk of a large price drop.

Crypto traders who use technical analysis patterns to invest can actually see the token unlock as a predictable event, with a potential drop in price followed by a recovery. This means that traders may be more likely to invest in Pyth during the unlock period.

Pyth tokenomics is a fascinating topic that has gained significant attention in the cryptocurrency space. Pyth is a decentralized oracle network that provides real-time market data to various blockchain applications.

The Pyth token, also known as PYTH, is the native cryptocurrency used within the network. It serves as a reward for validators who contribute to the network's integrity and accuracy.

One of the key features of Pyth tokenomics is the concept of "lockup periods", which incentivize validators to act honestly and maintain the network's integrity.

Tokenomics design is a crucial aspect of crypto-currencies, and it's essential to understand its impact on value creation.

Regardless of your role in the crypto space, whether you're an investor, trader, or web3 entrepreneur, tokenomics design can have lasting effects on the value creation of crypto-currencies.

Crypto investors and traders need to be aware of tokenomics design to make informed decisions about their investments.

The tokenomics design of Chainlink on Ethereum and Pyth Network on Solana will be assessed in this blog post.

Pyth Network is expected to financially outperform Chainlink in the next 2 years during the bull cycle, with potential for up to 30X growth for $PYTH (~$15) versus 10X for $LINK (~$150) sometime during 2025.

Both Pyth and Chainlink are valid technology stacks that solve a real problem, and they should gain additional market adoption as more legitimate businesses move into crypto.

Pyth may be the only solution for a certain segment of customers that need high throughput of data feeds.

Chainlink may be acceptable for most other customers, but it's unclear if pricing optimization will be needed to attract and retain customers.

The unlock schedule of Pyth is very different from most tokenomics designs in the industry, which may favor more trading volume and price recovery.

If this caught your attention, see: Chainlink Tokenomics

The Publisher and Investor Incentives for Pyth Tokenomics are designed to encourage participation and growth.

With a 2% fee on all transactions, publishers are incentivized to create and share high-quality data feeds.

This fee is allocated to the validators, who are responsible for verifying and securing the network.

The remaining 98% of the transaction fee goes to the liquidity providers, who are rewarded for providing liquidity to the market.

Publisher Rewards are a key incentive for publishers to join the Pyth Network, with 22% of the total token supply, or 2.2 billion PYTH, allocated for this purpose.

This allocation is designed to encourage publishers to publish accurate and timely price data, which is essential for the Pyth Protocol to provide reliable price updates.

22% of the total token supply is a significant portion, indicating the importance of publisher rewards in the Pyth Network.

The remaining 2.15 billion PYTH tokens are subject to a vesting schedule, meaning they are locked and can only be distributed to publishers once they are unlocked.

~2% (50M) of the 2.2B PYTH Tokens are already unlocked, making them available for distribution to publishers who are contributing to the network.

The Pyth Network is grateful to the Pythian community for their patience and continued support throughout the years, as mentioned in the article.

Pyth Network sold 10% of its supply to private investors, but the exact amounts are undisclosed, making it difficult to assess the likelihood of them selling for a profit.

The project launched with a massive market cap, putting these investors in a significant green territory, but it's unclear if they'll sell on the open market or engage in OTC deals with other private investors.

In this case, the market may absorb any potential selling pressure adequately, which could benefit these investors without enriching venture capitalists more than necessary.