Graph Tokenomics

Consumers pay for queries using GRT. Fees are distributed to Indexers, Curators, and Delegators based on their contributions. This creates a direct economic loop where data usage funds the network's infrastructure.

• Mechanism: A portion of each fee is burned, introducing a deflationary pressure.
• Example: A DeFi frontend pays GRT to fetch real-time trading data from a subgraph.

Indexers must stake GRT to provide indexing and query processing services. Their stake acts as collateral for honest work; malicious behavior can lead to slashing. The amount staked influences their potential query fee earnings and work allocation.

• Purpose: Secures the network and aligns incentives for reliable service.
• Outcome: Higher stakes generally lead to more assigned subgraphs and higher rewards.

Curators signal on subgraphs by depositing GRT, guiding Indexers to valuable data. They earn a share of query fees proportional to their signal. This bonding curve mechanism allows early curators to earn more for identifying high-quality APIs.

• Function: A decentralized discovery system for important data.
• Risk/Reward: Curators' GRT is locked and subject to a deposit tax if they withdraw early.

Token holders who do not run a node can delegate their GRT to an Indexer. Delegators share in the Indexer's rewards and risks (including slashing) without operational overhead. This mechanism broadens participation and secures the network further.

• Incentive: Earn a portion of indexing rewards and query fees.
• Consideration: Delegators must research Indexer performance and commission rates.

GRT is the governance token for The Graph Protocol. Holders can participate in Graph Governance to vote on protocol upgrades, parameter changes (like fee structures), and treasury management. Governance rights are typically exercised by staking or delegating.

• Scope: Covers technical upgrades and economic parameter adjustments.
• Goal: Ensures the protocol evolves in a decentralized, community-led manner.

Collectively, these utilities use GRT to create cryptoeconomic security. Staking and delegation form a substantial stake that secures the network. All rewards are denominated in GRT, ensuring all participants are economically aligned with the long-term health and accuracy of The Graph.

• Result: A self-sustaining ecosystem where service quality is directly tied to financial incentive.

The Graph Token (GRT) is the protocol's utility and work token. Its primary functions are:

• Indexer Staking: Indexers stake GRT to provide indexing and query processing services, earning query fees and indexing rewards.
• Delegation: Token holders can delegate GRT to Indexers, sharing in their rewards without running infrastructure.
• Curator Signaling: Curators stake GRT on subgraphs to signal high-quality data, directing Indexer resources and earning a share of query fees.
• Payment: GRT is used to pay for query fees on the network.

Indexers are the network's backbone, operating nodes to index blockchain data. They are incentivized through:

• Query Fees: Paid by consumers (dApps) for each query, distributed to Indexers and their Delegators.
• Indexing Rewards: New GRT is minted and distributed to Indexers based on their proportional work and stake, following an exponential decay model.
• Slashing: Malicious behavior (e.g., serving incorrect data) can lead to a slash of the Indexer's and their Delegators' staked GRT, securing the network.

Curators are subgraph developers or data consumers who signal on high-quality subgraphs using Curator Shares.

• Bonding Curve: Staking GRT mints non-transferable shares in a subgraph's bonding curve. Early, accurate signalers receive a larger share of future query fees for that subgraph.
• Economic Alignment: This mechanism efficiently allocates indexing resources to the most useful data, as Curators are financially incentivized to identify valuable subgraphs early.
• Withdrawal Tax: A curation tax (currently 1%) is levied on withdrawn GRT to prevent spam and short-term speculation.

Delegators secure the network by allocating stake to Indexers without running a node.

• Passive Participation: They delegate GRT to trusted Indexers, sharing in both query fees and indexing rewards proportional to their stake.
• Risk/Reward: Delegators earn rewards but also share in the risk of slashing if their chosen Indexer acts maliciously.
• Protocol Fee: A small protocol-wide delegation tax (currently 0.5%) is applied to all delegation rewards, funding the Graph Council and ecosystem development.

GRT has a capped supply with controlled inflation and deflationary pressures.

• Initial Supply: 10 billion GRT at mainnet launch.
• Annual Issuance (Inflation): New GRT is minted at a yearly rate starting at 3%, distributed as indexing rewards. This rate decreases over time.
• Burn Mechanisms: GRT is burned through:
  • Query Fee Burning: A portion of all query fees is burned.
  • Slashing: Slashed GRT is burned and removed from circulation.
• Target: These mechanisms aim for a net inflationary rate of ~1% long-term to sustainably reward network participants.

GRT facilitates decentralized governance of The Graph Protocol.

• Graph Council: A decentralized body (initially the Graph Foundation) manages a community treasury funded by protocol taxes (e.g., delegation tax).
• Governance Proposals: GRT holders can participate in governance votes to direct treasury funds, upgrade protocol parameters (like inflation rates, taxes), and guide ecosystem development.
• Ecosystem Funding: The treasury funds grants, bug bounties, and public goods to support the network's long-term health and decentralization.

Indexers must stake GRT tokens as collateral to provide indexing and querying services. This economic security mechanism ensures good behavior. Malicious or faulty service can result in slashing, where a portion of the bonded stake is burned. The challenge is setting the optimal bond size to be high enough to deter attacks but low enough to allow for network participation and growth.

Delegators stake GRT with Indexers to earn rewards without running infrastructure. Key challenges include:

• Preventing free-riding where Indexers attract delegation based on past performance without maintaining quality.
• Mitigating principal-agent problems where Indexer actions (e.g., cutting corners on service) may not align with Delegator interests.
• Designing a reward cut model that adequately compensates Indexers for operational costs while remaining attractive to Delegators.

The protocol must efficiently price and distribute fees for data queries. Challenges involve:

• Creating a market-based pricing mechanism for queries that reflects computational cost and data demand.
• Designing a multi-party fee-splitting model that fairly rewards Indexers, Delegators, and Curators (who signal on valuable subgraphs).
• Ensuring the system is resistant to manipulation, such as Indexers colluding to inflate prices.

Curators signal on valuable subgraphs by depositing GRT, guiding Indexers to what data to index. They use a bonding curve model where early signalers get a larger share of future query fees. Design challenges include:

• Preventing front-running where actors copy curation signals without adding value.
• Managing the withdrawal process from bonding curves to avoid destabilizing a subgraph's economic viability.
• Ensuring signaling is a meaningful signal of quality, not just speculative gambling.

The protocol uses indexing rewards (new token issuance) to bootstrap the network. Key challenges are:

• Calibrating the inflation rate and reward distribution to sufficiently incentivize work without causing excessive dilution or unsustainable sell pressure.
• Designing a token sink/burn mechanism (e.g., from transaction fees or slashing) to create deflationary pressure and long-term value accrual.
• Managing the transition from high inflation for growth to a more stable, fee-driven reward system.

Many critical economic parameters (inflation rate, slashing penalties, fee cuts) are set via protocol governance. Challenges include:

• Avoiding governance capture by large token holders (whales) or a single entity.
• Ensuring parameter updates are based on robust, on-chain data and economic models, not sentiment.
• Managing the complexity so that governance participants can make informed decisions about intricate economic levers.