SMP-4: Tokenomics 2.0 Governance Proposal

SubQuery Foundation
1

Author: Ian He

Created: 2025-11-28

Status: Draft

Motivation/Purpose

Current Challenges

The SubQuery Network currently operates under an inflationary tokenomics model that presents several significant challenges to long-term sustainability and value accrual:

Key Issues with Current Model:

  • Excessive Inflation: 1% annual inflation rate with compound effect results in 100M+ new SQT tokens minted annually

  • Undistributed Inflation: Significant portion of inflation remains undistributed, creating unnecessary token dilution

  • Value Dilution: Continuous token printing pressure undermines token value and holder interests

  • Unsustainable Economics: Network rewards disconnected from actual usage and revenue generation

Purpose

This proposal aims to establish a sustainable, non-inflationary tokenomics model that:

  • Eliminates token inflation and fixes total supply

  • Absorb network usage risks via the foundation

  • Enhances community ownership and decentralization

  • Creates long-term value appreciation potential for SQT holders

Description

Core Strategy

Transition from an inflationary reward system to a revenue-backed model through immediate implementation of the following key changes:

Primary Changes:

  1. Zero Inflation: Reduce network inflation to 0% immediately

  2. Fixed Supply: Lock total supply at 10.2 Billion SQT tokens

  3. Foundation Backed Rewards: Replace rewards source from inflation to foundation. Foundation will use its revenue to buyback to maintain the account balance.

  4. Enhanced Community Ownership: Increase community control over network economics

Reward Source Transformation:

  • From: Network inflation (token printing)

  • To: Phased transition to multi-source approach:

  • Phase 1 (Initial): Foundation treasury reserves primarily fund rewards using existing token balances

  • Phase 2 (Transition): Gradual integration of protocol revenue (fees, premium services, enterprise tiers)

  • Phase 3 (Mature): Full protocol revenue backing with Foundation reserves as supplemental buffer

Community Ownership Enhancement:

This transformation directly increases community ownership percentage because:

  • Foundation tokens are distributed as rewards instead of being held

  • As Foundation reserves decrease through reward payments, community token ownership proportionally increases

  • Foundation ownership percentage naturally declines while community ownership rises

  • Creates true decentralization through economic incentive alignment

Economic Principles

  • Sustainability: Rewards scale with network adoption and usage

  • Value Accrual: Token value tied to network success and revenue generation

  • True Decentralization: Community-driven network growth and governance

  • Market Efficiency: Rewards based on economic contribution rather than token printing

Network Benefits

Enhanced Decentralization:

  • True decentralization through reduced Foundation control

  • Network rewards tied to actual usage, not artificial inflation

  • Community-driven governance and decision-making

Sustainable Economics:

  • Rewards scale with network adoption and usage growth

  • Long-term economic stability through revenue generation

  • Reduced token dilution and value appreciation potential

Value Accrual:

  • Token value directly correlated with network success

  • Revenue sharing creates positive feedback loop

  • Buyback programs support token price stability

Implementation(Post Snapshot Vote)

Implementation Steps

Step 1: Disable Token Minting

  • Foundation admin multisig will update Ethereum mainnet SQT contract minter to zero address (0x0000000000000000000000000000000000000000)

  • This immediately halts all new token minting and inflation

  • Total supply becomes fixed at current level (10.19 Billion SQT)

Step 2: Treasury Wallet Management

  • Foundation team implements automated monitoring for treasury wallet balance

  • Maintain treasury wallet balance above 30M SQT threshold

  • Foundation wallet will automatically supplement to maintain reward stability

  • Ensures uninterrupted reward payments during revenue transition

This implementation plan ensures a smooth transition to a sustainable, community-owned network while protecting current operator interests and positioning SubQuery for long-term success and growth.

Snapshot Vote is now open: https://snapshot.box/#/s:subquerynetwork.eth/proposal/0x53c18a2c327d317637a9f30432a8ede93abb642a56644e39798d85658d40a9d5

2

What is the solution for Node Operators?
Is the revenue from SubQueryNetwork not enough to cover infrastructure costs?
The eternal problem!

3

No operators are needed. Operators will keep running at a loss until the product becomes demanded — and that may never happen. Turn off your operator already and stop crying in public. The team can run operators in different parts of the world, and our role will remain that of delegators (SQT token holders — shareholders of the company). We will receive a percentage of the company’s revenue.
Alternatively, something like “light operators” could be invented, where any participant with a sufficient number of tokens can run their own node at their discretion.