Technical Implementation of Tokenomics 3.0 (Decay Factor)

[Igor]

Hello everyone,

As part of Astar Tokenomics 3.0, we’re preparing a new enhancement to Astar’s inflation system for an upcoming runtime upgrade (exact date TBD). This update introduces a decay rate parameter and a decay factor to the active inflation configuration. Below is a clear overview to help you understand what’s changing and why it matters.

Background

Astar’s Tokenomics 3.0 is the next advancement of our economic model. Its goals are:

• Transition from dynamic inflation to a fixed maximum supply (~10.5B ASTR).

• Introduce gradual emission reduction while sustaining staking and dApp incentives.

• Establish Protocol-Owned Liquidity (POL) to secure Polkadot coretime slots.

• Ensure long-term economic value and independence.

Currently, Astar’s inflation mechanism emits rewards at fixed rates across several pools including the treasury, collators, dApp staking, and bonus rewards. These values are derived from parameters such as max_inflation_rate and the percentage allocations for each destination.

Up to now, inflation has remained constant unless governance updates the underlying parameters directly. This means that emissions do not automatically decrease over time, potentially leading to long-term dilution if no adjustments are made.

The decay factor described below is one of the core mechanisms that makes this transition possible, by enabling smooth, automated emission tapering aligned with Tokenomics 3.0’s fixed-supply design.

Problem

While fixed emissions provide predictability, they also pose challenges:

• Inflation remains constant even after significant issuance growth.
• Reducing inflation requires manual parameter changes via governance.
• There’s no gradual mechanism to taper emissions as the network matures.

Over time, this can create misalignment between network growth, token issuance, and reward sustainability.

What’s New

To introduce flexibility without overhauling the system, we’ve added two key concepts:

1. decay_rate (Per-block rate)

A governance-controlled percentage (0–100%) that determines how the decay factor changes over time.

• 100% (default) = no decay (fixed inflation)
• Any value below 100% triggers decay_factor updates every block (explained in the next section)

2. decay_factor (Compounded multiplier)

A value applied to all reward payouts. It starts at 100% and is updated every block by multiplying it with the current decay_rate (if value <100%).

This factor is applied when rewards are issued to:

• Collators & Treasury in each block
• Stakers and dApps at the start of each new dApp Staking Era
• Bonus pools at the start of each new dApp Staking Period

Automatic Updates

The decay factor is calculated and updated in each block before any rewards are paid. The logic is fully integrated into the ActiveInflationConfig, where decay_factor value can be tracked.

Governance Control

• On the runtime upgrade, the decay_rate and decay_factor are both set to 100%.
• Governance can activate decay later by updating decay_rate via referendum.
• If desired, inflation decay can be stopped at any time by restoring decay_rate to 100%.

Note: Setting decay_rate back to 100% halts further decay, but the current decay_factor remains. If new emissions are needed, governance may also update parameters such as max_inflation_rate or individual reward allocations.

Impact

This feature introduces a smooth, configurable way to taper inflation over time without disrupting existing reward logic or requiring constant governance actions.

Key benefits include:

• Gradual reduction in emissions without abrupt parameter changes.
• Long-term sustainability of inflation and reward pools.
• Ability to pause, resume, or adjust decay as needed.
• Compatibility with current distribution mechanisms.

No change in behavior will occur at runtime upgrade, emissions stay unchanged until governance sets a non-100% decay rate.

Developer Implementation

You can review the full implementation in this linked PR.

Next Steps

We will follow a phased rollout approach to ensure security and economic safety:

1. Shibuya Testnet (soon):

• Activate decay factor for technical testing.
• Validate correctness of block-by-block reward updates.

2. Shiden Network (economic sandbox):

• Real economic testing with live users.
• Measure staking yields, collator behavior, and liquidity impacts.

3. Astar Mainnet (later):

• Deployment when testing on Shibuya & Shiden proves stable.
• Parameters carefully set to align with Tokenomics 3.0’s fixed supply transition.

Once the feature is live, governance will have full flexibility to decide how and when to use it:

• Keep behavior unchanged (default state, no decay).
• Activate emission decay by lowering the decay_rate.
• Pause or adjust decay at any time by restoring decay_rate to 100% or tuning parameters.

This ensures the community has a powerful tool for managing inflation without forcing any immediate policy shift.

If you have any questions or want to explore proposed decay settings, feel free to reach out.

Thank you,
Igor

[Marroz]

In light of what I learned today from Maarten Henskens’ post, I refrain from expressing my opinion at this stage. I will wait until Monday for further details and more specific insights from the RFC report to adequately evaluate the proposal in question. Only after that, if necessary, will I share my observations.

[you425]

Thank you for the explanation. So this is essentially an implementation of the method you previously described, where the inflation rate decreases exponentially, correct? In that case, based on the earlier proposal, I understood the parameter to be set at decay_rate = 99.000002%.

@Mingshi

2. Emission Structure: Dynamic Participation, Gradual Decay

Emissions will continue to adjust dynamically based on staking participation, targeting a 50% network staking rate — but with a new decay function applied.

• Emission Decay Formula: $ E(n) = E_0 \times (1 - r)^n $
  

Where:

• R = 0.000008%, which is emission decay factor per block
• E0= 136.67, which is current baseline emission at 50% ideal staking ratio
• Emissions decrease exponentially at a rate of 0.000008% per block.
• After 1 year: ASTR dynamic emission per block will be ~81% of today’s dynamic emission at 50% ideal staking ratio.

I also think it’s a good approach that the inflation parameters can be adjusted through governance, as this provides flexibility for the future. Of course, it will remain important to ensure governance is maintained in a healthy manner (as it always has been).

From your explanation, it seems that the implementation burden is relatively low. Does that mean we can expect this to be implemented much earlier compared to the original roadmap?

@Mingshi

Roadmap

While this is a temp check with the Astar collective, the implementation roadmap would like as follows:

• [2025-04] - Temp check
• [2025-05] - Start of the concept building of new tokenomics
• [2025-07] - Share design sketch with Astar Collective and further finetune
• [2025-10] - Implement in a revamp of our tokenomics
• [2025-11] - Added tokenomics specialists to our project, including budget allocation.
• [2026-02] - Showcase the complete research & design that has been done around Astar new tokenomics 3.0
• [2026-03] - Technical Implementation starts
• [2026-04] - Deployment on testnet, including audit start
• [2026-05] - Audit completion
• [2026-06] - Set parameters and deploy on Astar & Shiden

[Igor]

@you425

So this is essentially an implementation of the method you previously described, where the inflation rate decreases exponentially, correct? In that case, based on the earlier proposal, I understood the parameter to be set at decay_rate = 99.000002%.

Yes, the inflation rate follows an exponential decrease toward zero. If the target rate is R = 0.000008%, then the corresponding parameter should be set to decay_rate = 99.999992%.

@you425

From your explanation, it seems that the implementation burden is relatively low. Does that mean we can expect this to be implemented much earlier compared to the original roadmap?

We implemented the proposal with minimal protocol changes, so we’re prepared to support the new tokenomics at any chosen activation time. However, the roadmap includes more than just technical adjustments, so I can’t comment on timelines for non-technical aspects.

[ERC20s]

Seems like a simple solution but I think its just covering up a bigger problem..

Looking forward to see the whole 3.0 details..

I think that the staking mechanism needs to be simplified.. In 2019-2020 when astr was launching.. It was very different times.. People were excited to dig into the details of a token and understand all of the tokenomics but most new investors have gotten tired of that (which is why memecoins have exploded). And having to explain all of astars tokenomics with the multiple layers to someone new in hopes that they invest is very niche.. And if they keep up with all the dapps and integrate into the forums as well then we should consider ourselves lucky to have these people.. Not try and force them away with unlocking delays and slashing..

We want these kind of people to come and thrive but they’re becoming unicorns..

What people want now is simplicity and ease of use..

My unofficial suggestion is to start focusing on the liquid staking mechanism to start earning yield in many different ways.. This will allow users more freedom over their financial experience with astar..

Liquid staking ASTR discussion

Can we build liquid staking directly into the dapp staking portal? (A mechanism that is supported and backed by ASTAR). Staking via independent dapps can create multiple risks. Independent projects could neglect their project and make it difficult to unstake. Bad code could result in hacks. Malicious code could result in rugs. Multi-sigs could be socially engineered. Would be good if it was built directly into the dapp staking. Thoughts?

[Matt]

Thanks for the clear update, Igor! A couple of quick questions to spark discussion:

• Do we have simulations showing how different decay_rate values (e.g. 99.9% vs 99.99%) impact annual emissions?

• How might this affect staking yields and dApp rewards in the near term vs. long term?

• If needed, could governance still raise inflation again, or is the plan to strictly follow the fixed-supply path?

Curious how the community feels about balancing predictability with flexibility here.

[you425]

@Igor

Yes, the inflation rate follows an exponential decrease toward zero. If the target rate is R = 0.000008%, then the corresponding parameter should be set to decay_rate = 99.999992%.

My apologies, you’re right—it is indeed decay_rate = 99.999992%.

@Igor

We implemented the proposal with minimal protocol changes, so we’re prepared to support the new tokenomics at any chosen activation time. However, the roadmap includes more than just technical adjustments, so I can’t comment on timelines for non-technical aspects.

I understand that as well, thank you.

[you425]

@Igor
I’ve realized something important.

In the previous proposal, the decay_rate was calculated based on a 12-second block time.
If it’s set to 99.999992%, the inflation will decrease much faster than intended.
Therefore, with the current 6-second block time, the decay_rate needs to be adjusted to 99.999996% to achieve approximately the same rate of inflation decline.

[you425]

@Matt

@Matt

Do we have simulations showing how different decay_rate values (e.g. 99.9% vs 99.99%) impact annual emissions?

For reference, here’s a comparison between decay_rate = 99.999996% and decay_rate = 99.99999%:

Regarding your example of “99.9% vs 99.99%,” the inflation rate would actually drop to 0% within a year unless it’s set below 99.9999%.
Since the reduction by decay_rate occurs every block, the inflation rate decreases exponentially over time.

@Matt

How might this affect staking yields and dApp rewards in the near term vs. long term?

The change in APR follows the same exponential decay curve as the inflation rate.
Because APR varies depending on the staking ratio, it’s not possible to define a fixed rate.
However, if we assume the current rate (at the time of the Tokenomics update) as 100%, it decreases by roughly 20% each year.
Including the current bonus rates, the variation looks like this: