As every financial instrument Toncoin’s price depends on balance of Demand and Supply. When Supply decreases (as it happened with a change of TON’s ticker on OKX), price goes up and vice versa.
Although, mining of Toncoin was possible since initial supply of 5 bln tokens had been moved to smart-contracts Proof-of-Work Giver, mining of Toncoin began to be widely discussed when givers kept near 50 mln of coins (it’s 1% from total emission of 5 bln).
Early miners hold their coins to keep networks’s performance or have never used it (about more than 3 bln of coins). At the same time during 9 months of public mining 1% of total emission will be mined. These coins are steadily being transferred to the market and this permanent inflow of liquidity puts pressure on Toncoin’s price.
As it was repeatedly counted, in summer 2022 mining of Toncoin will be ended. After all givers empty, the influence of mining on Toncoin’s price will also come to it’s end.
But it’s not the only emission that will be putting pressure on the market. Annual inflation of 0,6% is laid down in TON – the percentage of extra emission is written in blockchain, the amount can be changed by validators’ voting.
For what do we need inflation if the inflow of extra liquidity is bad for Toncoin’s price?
The performance of the Network is maintained by validators. In order to keep them interested in locking their tokens and keeping the performance of the validation itself, they need to get a reward for this (the same concerns their nominators).
Actual yield of validator is about 13%. The part of it they take for themselves, the rest they give to nominators (those who send their TONs in validators’ staking).
The commissions for users’ transactions + 0,6% of inflation are used for paying out the rewards. The biggest part of validators’ yield consists of extra emission (0,6% of inflation are 98% of current validators’ yield) what lets TON have very low commissions. It can be said that the Network pays to validators itself by extra emissions, making steadily low commissions for the users of blockchain.
The key concept of TON like all post-Ethereum blockchains that began to develop after 2017 – high speed of transactions, low commissions, high throughput of the Network. The same refers to TON smart-contracts (cheap and fast).
Only under such conditions DeFi ecosystem can be built, and previous blockchains concede catastrophically to centralised financial systems precisely because of high commissions and low speed.
For example, 2000 Toncoin need to be paid for minting a collection of 10 000 NFT. It is quite a few but without inflation the commission would be much higher.
So, extra emission is needed for payments to validators. The users would have to pay much more commissions if there were no inflation.
Let’s analyse in more details the validation economics in TON.
Who gets these 13% which are included in 0,6% of emission: it’s obtained by those who has put their Toncoin in staking, it means it’s not distributed among all 5 bln of initial emission but only among the amount locked in validators.
The Network can be governed only by 5 mln of coins only if these 5 mln are in validators. And 0,6% of annual inflation (from all 5 bln) will be distributed among owners of these 5 mln coins – then the yield can be even hundreds %.
The more Toncoin are put in validation, the lower become it’s yield-0,6% of emission are distributed among overall volume of staked funds. It means that with an emergence of official smart-contract of nominators the volume of nominated coins will increase well then validators’ yield will decrease.
The amount of funds in stacking will increase, but the number of coins in circulation will decrease. This will have a positive effect on Toncoin’s price.
How will it be working in case of Toncoin’s price growth?
If the token’s price grows, the commissions for transactions and validators’ yield in dollar equivalent will increase as well, the throughput of the Network remains the same.
