PYTH token serves as a "Governance Token" for Pyth Network. Basically, PYTH token enables holders to participate in on-chain governance votes on important matters like fee adjustments and the distribution of rewards.
In November 2023, the PYTH token was introduced with a market capitalization of $468M, following a token airdrop to 90,000 wallets. Since its launch, Pyth and its token have generated significant interest and discussion in the cryptocurrency community, it also hailed as a better version of Chainlink.
This article will provide an in-depth discussion of the PYTH token to give readers a comprehensive understanding of its tokenomics.
Pyth DAO's & PYTH Token's Scope of Governance
The Pyth Network Whitepaper outlines the extent of governance under the Pyth DAO, highlighting that holders of the PYTH token can vote to set key parameters for various network mechanisms.
The document underscores the expectation that on-chain governance will play a crucial role in guiding a wide array of decisions and actions, including:
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Deciding the size of fees update.
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Defining reward mechanisms for data providers.
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Approving software updates.
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Listing new symbols on Pyth, setting reference data standards & permissioning data providers for price feeds.
Additionally, the DAO may establish new governance topics beyond the scope mentioned above.
Why PYTH Token is an Important Part of the Pyth Network?
Essentially, governance token is important because it has the power to vote and decide the future of a project. Besides being a governance token, PYTH is also important because it serves as reward for the most important aspect of Pyth Network, the data providers or "publisher".
Please visit our blog for an in-depth discussion on how the Pyth Network operates.
Publishers publish price data to the Pyth Protocol and receive PYTH tokens as rewards while PYTH holders define the reward mechanism for data providers. Thus, PYTH plays a crucial role in the network operational mechanism, serving both as an incentive for data providers and as a means to determine their reward mechanism.
In addition, PYTH token is also used to promote ecosystem growth by incentivizing various contributors to the Pyth Network, including developers, educators, researchers, strategic contributors, early publishers, and others.
Therefore, PYTH token is essential for Pyth Network operational sustainability and growth.
PYTH Token Distribution
The total supply of PYTH tokens is 10,000,000,000 and will not increase. Initially, 85% of these tokens are locked, unlocking at 6, 18, 30, and 42 months post-launch to gradually increase available supply. The remaining 15% are unlocked from the start.
The PYTH token allocation is divided into five categories: Publisher Rewards, Ecosystem Growth, Protocol Development, Community and Launch, and Private Sales.
Below are the details for the distribution for each category:
Publisher Rewards
Publisher Rewards comprise 22% (2.2B PYTH) of the allocation, targeting Pyth Network data providers. These tokens incentivize publishing accurate and timely price data, supporting the addition of new symbols.
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About 2% (50M PYTH) of these tokens are unlocked, with the rest (2.15B PYTH) vesting as previously described. Rewards will be distributed once unlocked.
Ecosystem Growth
Ecosystem Growth comprises 52% (5.2B PYTH) of the allocation, dedicated to supporting Pyth Network contributors such as developers, educators, and early publishers. Its purpose is to fund research, development, and education to advance the protocol and enhance awareness.
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13% (700M PYTH) tokens are initially unlocked, with the remainder (4.5B PYTH) following the described vesting schedule.
Protocol Development
Protocol Development accounts for 10% (1B PYTH) of the token supply, allocated to core contributors like Douro Labs for developing oracle tooling, products, and infrastructure to enhance the protocol's data services.
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15% (150M PYTH) tokens are unlocked, with the remaining 850M following the vesting schedule.
Community and Launch
The "Community and Launch" allocation is 6% (600M PYTH), reserved for initial launch activities and initiatives (e.g., airdrop), with all tokens unlocked from day one.
Private Sales
Private Sales account for 10% (1B PYTH), representing two past funding rounds for strategic contributors providing advisory and infrastructure support. These rounds are closed, and all tokens are locked, adhering to the previously described vesting schedule.
Conclusion
PYTH token is pivotal to Pyth Network's operations and governance, allowing holders to influence key decisions and reward mechanisms. With a total supply of 10 billion tokens, its distribution supports various roles within the network, from rewarding publishers for their data contributions to fostering ecosystem growth and development.
The strategic allocation and vesting schedules are designed to ensure the network's sustainability and encourage participation from a wide range of contributors. As a governance token, PYTH not only incentivizes accurate data provision but also plays a critical role in the network's expansion and operational effectiveness, making it an essential element for the future growth and success of the Pyth Network.
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