How to Design a Rollup Tokenomics Model

A rollup's tokenomics model defines the economic rules governing its native token. Unlike a Layer 1 blockchain, a rollup's primary function is execution, not consensus or data availability. Therefore, its token must create value beyond simple speculation. The core design pillars are: fee payment, sequencer/prover incentives, governance, and value accrual. Successful models, like Arbitrum's ARB for governance or Starknet's planned STRK for fee payment, align these pillars to secure the network and drive sustainable usage.

The first decision is selecting a fee token. You can use the underlying L1's asset (e.g., ETH on Ethereum) or a dedicated rollup token. Using ETH simplifies user onboarding but limits the rollup's economic sovereignty. A dedicated token allows for custom fee discounts, staking rewards, and treasury control. For example, a model might burn a portion of fees paid in the native token, creating deflationary pressure. The fee structure itself must balance affordability with the cost of posting data to the L1, which is the rollup's primary operational expense.

Sequencer and prover incentives are critical for network security and liveness. In an optimistic rollup, sequencers order transactions and validators submit fraud proofs. In a ZK-rollup, provers generate validity proofs. Your tokenomics must reward these actors. A common model involves staking: sequencers/provers bond tokens as a security deposit, which can be slashed for malicious behavior, and earn fees/rewards for honest work. The staking yield must be competitive enough to attract capital without causing excessive inflation. The size of the stake also acts as a barrier to entry, preventing Sybil attacks.

Governance determines who can upgrade the rollup's contracts, modify fee parameters, or manage a treasury. Token-based governance, like Arbitrum's Arbitrum DAO, decentralizes control over the protocol's future. However, you must design proposal and voting mechanisms carefully to avoid voter apathy or capture by large holders. Consider a timelock on executable code and a minimum proposal threshold. The treasury, often funded by sequencer fees or a token allocation, is used for grants, developer incentives, and security audits, fueling ecosystem growth.

Finally, the token distribution and emission schedule must be fair and sustainable. A typical allocation includes segments for the team, investors, community/ecosystem, and foundation. Vesting schedules for insiders (often 3-4 years) build long-term alignment. Public distribution might occur via an airdrop to early users or a liquidity bootstrapping pool (LBP). Emission of new tokens for staking rewards or grants should have a clear, decreasing schedule over time, transitioning the protocol's security to be backed by fee revenue rather than new token issuance, a concept known as the security budget.

The first prerequisite is defining the rollup's sequencing model. This determines who has the right to order transactions and produce blocks, which is the primary source of revenue and control. You must choose between a permissioned sequencer (a single entity or a known set, common in early-stage rollups for simplicity) and a permissionless, decentralized sequencer set (where the native token is used for staking and slashing to participate). This choice dictates whether the token's primary function is for governance and fee payment or for staking and consensus.

Next, establish the data availability (DA) solution, as it is the largest operational cost. Will the rollup post data to Ethereum as calldata or blobs, use a validium with an external DA layer like Celestia or EigenDA, or adopt a hybrid model? The cost and security profile of the DA layer directly impacts the fee structure for users and the revenue requirements for sequencers. A model using Ethereum for DA needs to cover high, variable gas costs, while a validium model trades off some security for lower, more predictable costs.

You must also map the key economic actors and their incentives. The core participants are: users who pay fees, sequencers who order transactions and pay for DA, provers (in ZK-rollups) who generate validity proofs, and stakers/delegators in decentralized models. A sustainable model must ensure sequencer revenue (fees + potential MEV) exceeds their costs (DA + proving), while keeping user fees competitive. Failing to align these incentives leads to centralization or protocol insolvency.

Finally, a critical assumption is the initial distribution and supply schedule. Will there be a fair launch, a venture-backed pre-mine, or an airdrop to a specific community? The initial allocation between team, investors, community, and treasury sets long-term power dynamics. Furthermore, you must decide on inflation schedules for staking rewards or sequencer subsidies and burn mechanisms (e.g., EIP-1559-style fee burning) to manage supply. These parameters are hard to change post-launch, so they must be calibrated against long-term growth projections.

A rollup's fee mechanism dictates the economic relationship between users, sequencers, and validators. The fundamental choice is between a single-token model, where users pay fees exclusively in the rollup's native token (e.g., $ARB on Arbitrum), and a multi-token model, where users can pay with the base layer's gas token, like ETH. The single-token model creates direct demand for the native asset but adds user friction. The multi-token model, used by Optimism and zkSync, offers better UX by allowing users to transact with the asset they already hold, but requires a sophisticated system to convert fees and distribute value back to the rollup's stakeholders.

For a multi-token model, you must design a secure fee abstraction or gas sponsorship system. When a user pays with ETH, the sequencer must handle the conversion. One approach is a trusted Fee Vault contract that accumulates base-layer tokens and uses a decentralized exchange (DEX) pool, like a Uniswap V3 pool for ETH/ROLLUP, to swap them for the native token. The converted tokens are then distributed according to the tokenomics model, such as being burned, staked for security, or sent to a treasury. This design introduces dependencies on external liquidity and price oracles, which are critical attack vectors to secure.

The technical implementation involves modifying the core transaction processing logic. In the rollup's sequencer node, the acceptTx function must calculate the fee in the user's chosen token and verify the payment. The state transition function must then credit the fee value to the designated Fee Vault address in the rollup's state tree. Smart contracts on L1, like the L1FeeVault.sol, need to periodically bridge these accumulated fees and execute the conversion and distribution logic, often via a keeper or relayer network incentivized by the protocol.

Key design parameters must be explicitly set: the fee token whitelist (e.g., ETH, USDC, rollup token), the conversion path (direct pool or via WETH), the conversion frequency (per block vs. batch), and the security model for the vault (multisig, timelock, governance). For example, Polygon zkEVM uses a gas token system where MATIC is used for gas, but the sequencer accepts ETH, which is then swapped via a bridge liquidity pool. These parameters directly impact the token's velocity and the stability of its fee-derived revenue stream.

Ultimately, the chosen mechanism must align with the rollup's strategic goals. A focus on maximizing token capture favors a single-token model, while maximizing user adoption favors a multi-token model with seamless abstraction. The design must be sustainable, ensuring that the value extracted from fees sufficiently compensates sequencers for execution and validators for proof submission to L1, securing the network's economic future.

The sequencer is the node responsible for ordering transactions and submitting compressed batches to the base layer (L1). Its primary failure modes are censorship and liveness attacks. To mitigate these, sequencers must post a substantial bond, or stake, which can be slashed for malicious behavior. For example, if a sequencer withholds transactions or goes offline, a portion of its stake is burned, and a new sequencer from the validator set takes over. This stake also acts as a re-staking mechanism, securing the rollup's data availability and execution.

Provers (or validators) are responsible for generating cryptographic proofs that attest to the correctness of state transitions. Their stake secures against fraudulent proofs. In a zkRollup like zkSync Era or Polygon zkEVM, a prover that submits an invalid zero-knowledge proof must be penalized. The staking model here must balance the high computational cost of proof generation with the severe penalty for dishonesty. A common design is to require a high minimum stake with a long unbonding period, ensuring provers have significant "skin in the game."

A dual-staking model often emerges, where sequencer and prover roles may be separate or combined. In optimistic rollups like Arbitrum, validators perform both sequencing and fraud proof generation, so a single stake covers both functions. In modular stacks like EigenLayer, rollups can leverage re-staking from Ethereum, where ETH stakers can opt-in to secure additional services, providing a shared security pool. Your design must specify staking parameters: minimum stake amounts, reward schedules (from transaction fees and MEV), slash conditions, and the delegation mechanics if applicable.

The economic security of your rollup is quantified by the Total Value Secured (TVS). If the maximum potential profit from an attack (e.g., stealing funds from a bridge) exceeds the total slashable stake across sequencers and provers, the system is vulnerable. Your tokenomics must ensure TVS consistently outweighs attack value. This involves dynamic calculations, potentially adjusting rewards to incentivize more staking during periods of high network value, similar to how protocols like Lido manage staking ratios.

Finally, implement these mechanics in smart contracts. Below is a simplified Solidity structure for a staking contract, outlining key functions for depositing stake, tracking slashable offenses, and initiating unbonding.

solidityCopy
// Simplified Staking Contract Skeleton
contract RollupStaking {
    mapping(address => uint256) public stakes;
    mapping(address => uint256) public slashableUntil;
    uint256 public minSequencerStake;
    uint256 public unbondingPeriod;

    function stake() external payable {
        require(msg.value >= minSequencerStake, "Insufficient stake");
        stakes[msg.sender] += msg.value;
        slashableUntil[msg.sender] = block.timestamp + unbondingPeriod;
    }

    function slash(address _maliciousActor, uint256 _penalty) external onlyGovernance {
        require(block.timestamp < slashableUntil[_maliciousActor], "Not slashable");
        stakes[_maliciousActor] -= _penalty;
        // Transfer slashed funds to treasury or burn
    }

    function initiateUnbonding() external {
        slashableUntil[msg.sender] = block.timestamp + unbondingPeriod;
    }
}

This contract framework shows the core logic for binding economic value to honest behavior, which must be integrated with your rollup's node software and governance system.

Governance is the primary utility for most rollup tokens, transitioning control from the founding team to the community. This involves voting on critical protocol parameters like sequencer selection, fee structures, and treasury management. For example, Optimism's OP token governs the Optimism Collective, voting on grants, protocol upgrades, and retroactive public goods funding. Effective governance requires a clear, on-chain proposal and voting system, often implemented via a governor contract from frameworks like OpenZeppelin or Compound's Governor Bravo.

To ensure long-term alignment, you must design robust ecosystem incentives. This includes programs to bootstrap network activity and reward valuable contributions. Common models are: sequencer fee sharing, where a portion of transaction fees is distributed to stakers; developer grants funded by a community treasury; and user airdrops or retroactive funding for early adopters. Arbitrum's DAO exemplifies this, using its treasury to fund ecosystem projects through a transparent grants program, directly linking token value to ecosystem health.

The token must also secure the network's economic safety. For optimistic rollups, this involves staking tokens to back fraud proofs, where malicious validators are slashed. zk-Rollups like zkSync use staking for validator set security. Design your staking model carefully: determine minimum stake amounts, lock-up periods, slashing conditions for provable malfeasance, and reward distribution. The goal is to make honest participation profitable while making attacks economically irrational.

Finally, analyze the token supply and distribution. A typical model allocates portions to: core team (with multi-year vesting), investors, community treasury, and ecosystem incentives. Transparent vesting schedules are critical for trust. Avoid excessive inflation; consider a capped supply with emissions directed toward stakers and grantees, or a low, predictable inflation rate that funds ongoing incentives. The token's value should ultimately be backed by the utility and fees generated within the rollup's ecosystem.

Designing effective rollup tokenomics is an iterative process that balances technical constraints, economic incentives, and long-term sustainability. Start by defining your protocol's primary value proposition: is it ultra-low-cost transactions, high-speed finality, or specialized application support? Your token's utility must directly reinforce this goal. For a general-purpose rollup, the sequencer fee token model is foundational, but you must also plan for decentralized sequencing, staking for data availability, and a governance framework from day one.

Before finalizing your model, conduct extensive simulations. Use agent-based modeling tools like CadCAD or TokenSPICE to stress-test your economic assumptions. Model scenarios including a 90% drop in transaction volume, a malicious actor acquiring 34% of the stake, or a competing rollup launching with zero fees. These simulations will reveal vulnerabilities in your inflation schedule, staking rewards, and fee market dynamics that aren't apparent in static analysis.

Consider the launch sequence carefully. A common approach is a phased rollout: 1) Centralized sequencer with a pure fee token, 2) Introduction of staking for provers or a security council, 3) Gradual decentralization of the sequencer role via permissioned nodes, and 4) Full community governance and slashing mechanisms. Each phase should have clear, measurable milestones for decentralization, such as the percentage of blocks produced by independent operators or the time-to-finality for fraud proofs.

Engage with your community early on token distribution. A transparent plan is critical for credibility. Allocate portions of the supply to: a core development treasury (vested over 4+ years), ecosystem grants, a foundation for public goods funding, and a user/community airdrop. Avoid excessive allocations to private investors. Tools like Sablier for streaming vesting and Llama for treasury management can enforce transparency. Publish your full tokenomics on a dedicated page, similar to Arbitrum's documentation.

Finally, treat your tokenomics as a live system. Monitor key metrics post-launch: daily active fee payers, staking participation rate, governance proposal turnout, and the health of the secondary market for sequencer slots. Be prepared to adjust parameters via governance—such as tweaking staking yields or fee burn rates—based on real-world data. The most successful rollups view their token not as a fundraising tool, but as the programmable coordination layer that aligns all network participants toward sustainable growth.