A Tokenomics Framing for ATOM
1. Introduction: Why this thread ?
Recent discussions around ATOM tokenomics have been rich and multi-dimensional: urgency and sell pressure, validator sustainability, value capture, enterprise revenues, buybacks, vaults, phased approaches, and longer-term strategy. These perspectives are valuable, but the conversation has also become dense and fragmented.
The intent of this thread is not to propose a new mechanism or a ready-to-implement solution, but to offer a conceptual framing that may help connect many of these ideas at the level of monetary policy. In particular, this is an attempt to clarify how inflation, revenues, and security relate to one another from a protocol perspective.
This is meant as a contribution to the tokenomics research discussion, not as a governance proposal.
2. A shared diagnosis: symptoms vs root causes
Across multiple threads, similar symptoms are repeatedly identified:
persistent sell pressure from stakers and validators,
uncertainty around validator sustainability,
inflation perceived as arbitrary or disconnected from fundamentals,
reliance on market narratives or external catalysts.
Many proposals aim to mitigate these symptoms directly, for example by reducing inflation, introducing buybacks, or creating yield-oriented mechanisms. These approaches may have merit, especially in specific contexts, but they often address outcomes rather than clarifying the structural cause.
This framing does not deny the urgency many have highlighted, but aims to clarify what must ultimately be stabilized for any emergency or phased action to be sustainable.
A recurring underlying question seems to be left implicit: what level of security does the Hub actually need, and how is that security supposed to be funded over time?
3. A conceptual distinction: stocks, flows, and security
A useful starting point is to distinguish between stocks and flows:
Stocks include total supply, circulating supply, burns, and buybacks.
Flows include issuance, staking rewards, validator income, and protocol revenues.
Network security is fundamentally a flow problem, not a stock problem.
Validators require ongoing compensation to operate infrastructure, manage risk, and remain economically viable. That compensation must arrive as a recurring flow, not as a one-off balance-sheet adjustment.
From this perspective:
burns and buybacks affect dilution and scarcity,
but they do not, by themselves, define how security is funded.
This distinction helps explain why stock-focused mechanisms alone often fail to address validator economics in a durable way.
4. Reframing the question: what does “security” actually mean?
Security is frequently discussed as a proxy for price, market cap, or ranking, but these are at best indirect signals.
From a protocol perspective, security can be approximated through observable economic signals rather than price proxies. These include the ability of a representative set of validators to cover their operational costs over time, participation and churn within the active set, concentration metrics, and net staking flows in response to reward changes.
In this sense, validator viability is not about maximizing profit, but about ensuring a sufficient and persistent flow of native tokens to prevent economic attrition and excessive centralization. While the fiat value of this flow is volatile, expressing the requirement in ATOM preserves rule-based issuance and avoids discretionary price targeting.
5. Inflation as a residual, not a target
In the current model, inflation is largely defined ex ante and adjusted through the staking ratio. Security outcomes are then observed as a consequence.
An alternative framing is to reverse this logic conceptually:
start from the security requirement as a flow to be funded,
treat any protocol revenues as potential offsets,
and let issuance emerge as the residual needed to close the gap.
Under this framing, revenues (IBC fees, services, enterprise models, etc.) are neither dismissed nor assumed. They are inputs that may or may not materialize, but which only matter insofar as they reduce reliance on issuance.
This does not imply eliminating inflation, nor does it assume revenues will be sufficient. It simply changes which variable is primary.
6. How this framing relates to current proposals
This perspective is not meant to replace existing ideas, but to contextualize them:
Phased stabilization approaches can be seen as time-structured responses around an underlying security constraint.
Enterprise or B2B revenue models become potential revenue inputs rather than foundations of monetary policy.
Buybacks affect supply dynamics, but do not directly define security funding.
Yield-oriented mechanisms may be appropriate at the ecosystem layer, rather than as protocol primitives.
For readers interested in a more explicit illustration of how this framing could be expressed mechanically, a minimal three-pillar sketch (security budget, revenue substitution, staking guardrail) was previously shared in the Tokenomics Research Kickoff thread ( ATOM Tokenomics Research Kickoff - #64 by Gregory_C ). That example is meant as an illustration, not as a proposal.
In this sense, the framing offers a way to evaluate proposals along a common axis, rather than competing narratives.
7. Open research questions for the community
If security requirements are treated as a first-class concept, several research questions naturally follow:
Which metrics best approximate validator sustainability in practice?
How should decentralization be reflected in security assessment?
What signals indicate over, or under, funding of security?
At what scale do revenues materially affect issuance dynamics?
These are empirical and methodological questions, well suited for the current research workstream.
8. Conclusion : Scope and intent
This thread is not a proposal for immediate action, nor a call for governance changes. Its sole purpose is to suggest a framing that may help structure ongoing research and discussion.
If anything, the goal is to help future proposals be compared on what variable they truly act upon: security requirements, revenue inputs, or distribution mechanics.
Feedback, critique, and alternative framings are very welcome. The goal is not convergence on a solution, but clarity on the questions we are collectively trying to answer.