The Tokenomics of Staking
62 Pages Posted: 6 Apr 2022 Last revised: 16 Feb 2025
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The Tokenomics of Staking
Number of pages: 62
Posted: 06 Apr 2022
Last Revised: 16 Feb 2025
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Date Written: March 16, 2022
Abstract
Tokens offer convenience in digital networks and earn rewards when staked for consensus generation or economic activities. In our continuous-time model, agents dynamically allocate wealth over on-platform transactions and staking. Aggregate staking ratio crucially shapes platform productivity, grows userbase, and links staking to endogenous reward rates and price dynamics. Transaction fees, token issuance, and user heterogeneity all affect platform lifecycle. Empirical findings support the theoretical predictions: (i) correlation between staking ratio and reward rate is cross-sectionally positive, but time-series-wise negative; (ii) staking ratios positively predict excess returns; (iii) the convenience wedge generates UIP violations and significant crypto carry premia.
Keywords: Carry, Cryptocurrencies, DeFi, Inequality, Proof-of-Stake, Redistribution, UIP.
Suggested Citation: Suggested Citation
Cong, Lin and He, Zhiheng and Tang, Ke, The Tokenomics of Staking (March 16, 2022). Available at SSRN: https://ssrn.com/abstract=4059460 or http://dx.doi.org/10.2139/ssrn.4059460
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