Co-authored by Fraser Edwards and Javed Khattak
Tokenomics are typically documented and distributed via a dedicated whitepaper. However, since a large proportion of the tokenomics for cheqd directly relate to governance and our tokenomics will be a constant iteration, we incorporated them into the cheqd network’s Governance Framework, which will also be continuously updated. We can then continue using blogs to explain the initial and updated tokenomics in an easier to digest format.
Part 1 of cheqd’s tokenomics covered the context/background, utility through parameters such as initial supply and inflation, and governance tokenomics. It’s now time to complete the picture with distribution/allocations.
Part 3 of cheqd’s tokenomics covers the payment rails.
Firstly, let’s start with a brief summary for those with little time to spare. The main groups are broken into:
- Community and grants: Token rewards for our incredible community, especially those who have been with us since the start and who are key to the adoption of self-sovereign identity (SSI). This also includes grants for the SSI community so they can immediately use and vote on the network.
- Foundation: The treasury will be used to support cheqd’s mission as well as vote on the direction of the protocol.
- Contributors: The core team and those who have supported us in executing, including our exceptional advisors.
- Shareholders: Our investors, as mentioned in our announcement here, who supported us when our mission was simply to establish the payment rails and commercial models for self-sovereign identity without us knowing where this would take us. Again, a huge thank you!
Vesting: Based on our analysis, it is possible to both stake unvested tokens and receive staking rewards for those unvested tokens, helping secure the network.
Circulating supply at Token Generation Event: Our distributions and calculations put the maximum circulating supply at 5.42% including treasury provided liquidity.
Community and grants
The token and identity communities are both absolutely critical for us and the adoption of SSI and trusted data. We have the opportunity to not just achieve success for cheqd but the paradigm as a whole — data control back to individuals.
cheqd is committed to launching the network in a regulatory compliant fashion, so any offerings will target to fit within the laws set out within each geography. The current paradigm of identity is a problem globally, and we can only work at that scale if we are not excluded from certain countries or geographies.
That being said, we fully intend to reward our community for their support, both until now and in the future, as we wouldn’t be where we are without our earliest members. We hope the cheqd community will spread the paradigm far and wide, demanding companies to adopt the technology, educating friends and family, introducing the concept into their workplaces so that everyone can get back their privacy.
We would remind everyone to join our Telegram and Twitter to keep an eye out for our news and surprises.
SSI & validator grants
To make adoption as easy as possible for the SSI community, we provide token grants to the companies developing in this space. These grants will smooth the transition to using a token-based network and provide them with stakes, which can generate token rewards, helping to offset the cost of using the network.
We are already seeing the impact of these grants on the SSI community’s ability and willingness to adopt the network, which I look forward to Tobias Halloran (Head of Partnerships) sharing in the coming weeks and months.
It will also provide us with a window to establish the necessary partnerships with custodians, exchanges and OTC desks such that their end clients do not need to worry about handling tokens at all.
As with most other projects, the focus of the foundation, managing the cheqd treasury, is to maintain and accelerate the adoption of the network primarily through: further feature development, business & partnership development, and marketing. In addition to this, we will likely establish further grants and further advisor agreements where necessary. As per our governance framework, we will only be one vote of many on the network but want to be a major contributor guided by the community.
Beyond the initial distribution, we expect proportionate staking rewards to flow back to the treasury to maintain a constant supply to maintain the team.
Our priority here is ensuring we have sufficient treasury to support the project’s development and its team for an extended period.
As you have spotted, we have a variety of vesting periods over the groups, which naturally impact the circulating supply of tokens. In addition to vesting, block rewards will also increase that circulating supply. Naturally, it’s up to each token holder how much comes into circulation but the graph below outlines the maximum circulating supply at each stage.
Part 1 of cheqd’s tokenomics covers the context/background, utility through parameters such as initial supply and inflation, and governance tokenomics.
Part 3 of cheqd’s tokenomics covers the payment rails.
Now and next
As always, we would love to know your thoughts or feedback on our decisions and direction as comments on the article or via any of our other channels, take your pick! Have we missed something? If so, let us know!
Make sure to join our rapidly growing Telegram community to stay updated with our most recent news and insights.
P.S. We’re also on Twitter and LinkedIn, make sure to cheq in!
The values and statements made above are indicative only and should not be misconstrued as an offer or guarantee. As we have stated we are always open to feedback and hence these numbers and distributions are subject to change based on that feedback.
About this Document
This distribution document sets out the aims and intentions of the core cheqd team, based on the current state of its ecosystem in October 2021, prior to the launch of the cheqd main-net. These evaluations are subject to change for technical, legal, business and other reasons. We will make our best efforts to keep the entire cheqd community informed and updated with changes to this distribution strategy.
Integral to cheqd is the concept of decentralised Governance, explained in full detail in our Governance Framework. This is important because the content of the cheqd tokenomics and this distribution document are subject to change if the governance mechanism opts to make Major Network Changes. Such governance decisions are outside of the direct control of the core team. As such, changes may affect (among other things) the token ($CHEQ) price, the specifics of token distribution and the network parameters.
Legal Uncertainty as a Risk Factor
There is underlying legal uncertainty in the nature of blockchain projects due to how quickly the industry is evolving and how legal regulations and frameworks need to adapt to keep up. For this reason, it is reasonably foreseeable that there will be further guidance and regulations on digital assets, cryptocurrency, Decentralised Autonomous Organisations (DAOs) and digital identity going forward. cheqd’s core team has made the best efforts to build cheqd in a generative way to develop alongside updates in the law. This notwithstanding, there is still a surface area of risk, where future or existing legal regulations could have a negative effect on the proper functioning of the project and on the value of $CHEQ.
No regulatory authority in Singapore, including the Monetary Authority of Singapore, has reviewed or approved the $CHEQ tokens or any of cheqd’s documentation, including blog posts, website material, webinars, events, videos or other graphics (the “Information Material”). The acquisition of tokens is subject to a potential acquirer’s compliance with the laws and regulations in the jurisdiction they reside in.
Acquisition as a Risk Factor
The acquisition of $CHEQ tokens carries with it significant risks. Prospective acquirers should carefully assess and take into account such risks prior to acquiring $CHEQ tokens. cheqd’s initial core team and all of their collective past, present or future officers, directors, managers, employees, agents, advisors or consultants, or any other person (collectively, “cheqd”), expressly disclaims any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from: (a) reliance on any information contained in the Information Material; (b) any error, omission or inaccuracy in any such information; and © any action resulting therefrom. cheqd does not guarantee the accuracy of the statements made or conclusions reached in the Information Material and does not make, and expressly disclaims, all representations and warranties (whether express or implied by statute or otherwise). The Information Material does not constitute advice, nor any recommendations or an offer, by cheqd or any of its affiliates and all of their collective past, present or future officers, directors, managers, employees, agents, advisors or consultants, or any other person, to any recipient of the Information Material.
The Use Case as a Risk Factor
The $CHEQ token is worthless in itself and gains potential value only through the protocol, its use and through continual use of Verifiable Credentials utilising cheqd payment functionality. Therefore, the success of the coin depends on multiple factors, including but not limited to, the health of the overall cryptocurrency market, the resilience of the cheqd protocol, and the success of Self-Sovereign Identity vendors in implementing real-world use cases.
$CHEQ must also be held within a wallet that can, ideally, consume Verifiable Credentials as well as $CHEQ tokens. This relies on the work of third parties to facilitate a functioning and healthy ecosystem.
In order to trade the tokens between wallets, it is essential that cheqd engages centralised or decentralised exchanges to list and facilitate the trade of tokens. The dependence on exchanges to recognise and list $CHEQ is a large risk vector. The likelihood of (specifically centralised) exchanges listing cheqd is directly correlatable to the size and activity of the cheqd community and the functional capabilities of the protocol and its governance model.
Security of Technology as a Risk Factor
Blockchains are not infallible to risk; nor is the storage of private keys for the purposes of owning $CHEQ and Verifiable Credentials. The wallet and the tokens it contains can only be accessed using the corresponding private keys. The owner of the tokens is solely responsible for keeping their private keys safe and protecting the safekeeping and protection of the private keys for the wallet against unauthorised access. While there will be safeguards put in place to help prevent such loss, the issue cannot be ruled out.
51% Proof of Stake attacks as well as rogue, malicious Governance proposals could be damaging to the proper functioning of cheqd as a protocol and as a community. It can also not be ruled out that blockchains generally, the cheqd Network, or other decentralised protocols become the target of attacks by hackers — alongside the further development of new technologies such as quantum computing.