SXP is the native utility token of the Solar blockchain. It is an integral part of the ecosystem, providing security, functionality, and decentralized governance of the network. The tokenomics of SXP includes both inflationary and deflationary mechanisms designed to stimulate participation and maintain value.
Key Functions of the SXP Token:
Transaction Fees (Gas): SXP is used to pay all transaction fees on the Solar blockchain. Fees for sending SLP tokens (Side Ledger Protocol) are dynamic and usually less than 0.2 SXP, making transactions very cheap.
Fee Burning Mechanism: All transaction fees paid in SXP, as well as fees for creating new tokens (Genesis Fees) through SLP, are burned (destroyed forever). This is a key deflationary mechanism that reduces the total supply of SXP over time. The more activity in the network (transactions, creation of new tokens/NFTs), the more SXP is burned.
Staking and Network Security (DPoS): SXP is used for staking within the Delegated Proof of Stake (DPoS) consensus mechanism.
Voting for Delegates: SXP holders can vote for 'Block Producers' (Delegates) who secure the network, verify transactions, and create new blocks. The more SXP delegated to a specific Delegate, the higher their chances of being elected and receiving rewards.
Staking Rewards: Delegates who successfully produce blocks receive rewards in SXP. These rewards are then distributed among Delegates and those who voted for them (delegators) proportionally to their contribution.
Governance: SXP token holders have voting rights in the Solar decentralized autonomous organization (DAO). This allows them to participate in making key decisions about the future of the protocol, such as:
Changes to the codebase and network updates.
Adjusting protocol parameters.
Distribution of treasury funds.
Other important community initiatives.
Creation of Tokens and NFTs: To create new fungible tokens or NFTs using the Side Ledger Protocol (SLP), a fee in SXP must be paid (for example, 5 SXP for creating a token or NFT). These fees are also burned.
Tokenomics and SXP Supply:
Maximum Supply: Initially, SXP did not have a hard maximum supply, but with the transition to the Solar Network, a maximum supply of 500,000,000 (500 million) SXP was established. However, some sources indicate that the current circulating supply may exceed this number, which is subject to ongoing updates and clarifications from the Solar team. (It is important to note that different figures for 'Total supply' and 'Max supply' may appear in search results, which could be related to the dynamics and transition from Swipe to Solar, but it is officially stated that the maximum supply is 500M SXP).
Inflationary Reward Issuance: Each round (53 blocks) generates 530 SXP, which is distributed among Delegates. This creates constant inflation, which is, however, offset by burning mechanisms.
Deflationary Mechanism: Burning all transaction fees and asset creation fees is intended to make SXP deflationary in the long term, if network usage is sufficiently high.
The tokenomics of SXP is designed to encourage active participation in the network, ensure its security through staking and voting, and create scarcity through the burning mechanism, which developers and the community hope will contribute to the token's value growth.
