Endogenous Token Supply Stability in Algorithmic Blockchain Protocols

Authors:
Kislyuk L.S.
Abstract:

Three flows govern token supply in blockchain protocols: issuance, burning, and staking lock-ups. We study this supply adjustment mechanism in isolation from price dynamics, treating market returns and on-chain activity as predetermined observables. This design permits analytical examination of supply-side feedbacks without modeling price endogeneity. A representative staker's utility maximization problem yields an equilibrium staking function with a linearly decreasing dependence on market return. From this microeconomic foundation we derive a first-order ordinary differential equation (ODE) for circulating supply with endogenous feedbacks from all three supply channels.

Key words:
tokenomicsblockchaincirculating supplystakingstability analysisLyapunov functionstochastic differential equationEthereumEIP-1559algorithmic monetary policy
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