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Staking

Unlike the old L1 Fuse Network, staking on the new L2 Fuse Ember network will have a fundamentally different profitability mechanism.

The Fuse team propose the creation of a native revenue share token on the Fuse Ember network, called stFUSE, which will distribute revenue from various activities across the network. This token will also enable liquid staking, allowing rewards to auto-compound, be (re)staked, and remain compatible with DeFi. In doing so, stFUSE introduces both a new governance model and a new revenue model to the Fuse ecosystem.

Moving away from the legacy inflationary model, this proposal suggests a sustainable and secure approach, where rewards are tied to real network activity.

stFUSE token​

stFUSE is a receipt token for locking FUSE. Locking for longer periods will give you more tokens, similar to vote escrow tokens. Locking intervals will range from 1 month to 2 years.

By holding stFUSE, users tap into multiple revenue streams on the Fuse Ember network and can auto-compound their rewards.

The stFUSE token can be used in DeFi and in future (re)staking activities.

Voting Power Delegation​

By locking Fuse tokens in stFUSE, users select a Data Availability (DA) node operator and delegate Voting Power to it. Only DA node operators can vote on changes to the network.

Revenue Streams​

Holding stFUSE entitles users to a share of revenue generated from various network activities. Rewards are collected into a dedicated vault. stFUSE holders can claim their share of the accumulated rewards at regular intervals.

There are several sources for generating revenue that stakers can benefit from on Fuse Ember:

  • Node Sale revenue share: A share of the revenue received by Fuse Foundation during the Node Sale will be allocated to boost the staking reward on the first year after the mainnet launch.
  • Sequencer fees: stFUSE holders receive 10% of sequencing fees. Sequencing fees are paid by the network users to have their transaction included in the L2. They are similar to validation fees on the L1.
  • Liquid Staking, Re-Staking tokens and Real World Assets yield: On a completely new staking dApp, users can stake the most popular LST, LRT and RWA tokens directly on the Fuse Ember network without having to bridge funds to other networks. The team of the product will take responsibility for finding the best APYs on the market. For using this service, the Fuse team takes a small commission from the user's staking yield and shares 10% of this revenue with stFUSE stakers.

Current Tokenomics Model​

The table below shows key details about the current token model for Fuse, including the number of new FUSE tokens created each year, the total number of tokens in circulation, and the annual growth rate of tokens from August 2023 to August 2034, based on the proposals set in Fuse Request for Comments 02.

PeriodInflationTokens Issued*Cumulative Burned TokensNet Total SupplyMinted Tokens
08/20235%364,651,875-8,173,861356,478,01418,232,594
08/20243%382,884,469-8,173,861374,710,60811,486,534
08/20251.5%394,371,003-8,173,861386,197,1425,915,565
08/20261%400,286,568-8,173,861392,112,7074,002,866
08/20270.75%404,289,434-8,173,861396,115,5733,032,171
08/20280.50%407,321,604-8,173,861399,147,7442,036,608
08/20290.50%409,358,212-8,173,861401,184,3522,046,791
08/20300.50%411,405,003-8,173,861403,231,1432,057,025
08/20310.50%413,462,028-8,173,861405,288,1682,067,310
08/20320.50%415,529,339-8,173,861407,355,4782,077,647
08/20330.50%417,606,985-8,173,861409,433,1252,088,035
08/20340.50%419,695,020-8,173,861411,521,1602,098,475

8,173,860.51897 FUSE tokens were burned in 2020

Overview​

There are two migration options for FUSE holders:

  • 1:1 Swap: Exchange your old tokens for new ones straight away, keeping the same amount.
  • Stake in the stFUSE Contract: Lock your tokens in a new staking contract with different time periods (3 months to 2 years) and earn rewards. The longer you lock your tokens, the higher the annual percentage yield (APY) you receive. Distribution of the supply bonus will take place after 1 year.

Reward Options:

  • 3-month lock: base staking APY + minimum 2.5% bonus issued after 1 year.
  • 6-month lock: base staking APY + minimum 4% bonus issued after 1 year.
  • 1-year lock: base staking APY + minimum 5.5% bonus issued after 1 year.
  • 1.5-year lock: base staking APY + minimum 7% bonus issued after 1 year.
  • 2-year lock: base staking APY + minimum 8.6% bonus issued after 1 year.

An extra bonus will be given after one year based on the lock-up period chosen.

  • Limited-Time Rewards: Extra rewards are only available in the first 3 months after Fuse Ember mainnet launches, with a maximum rewards pool of around 33 million tokens.
  • Additional Token Lock: Fuse will lock up 81,805,834 FUSE tokens for one year, further reducing the number of tokens in circulation and reinforcing the deflationary effect.

This setup is designed to create long-term value and stability for FUSE holders as the network transitions to Fuse Ember.

Rewards Pool Mechanism:​

In January 2025, the total number of FUSE tokens will be 386.7 million. The new Fuse Ember network will have a maximum supply of 420 million tokens. The difference (33.3 million tokens) will be used as a rewards pool to encourage users to stake their tokens during the migration to the new network.

Bonus rewards:

  • The 8.6% bonus for locking FUSE for 2 years comes from this 33.3 million reward pool.
  • Bonuses will be given out after the first year to users who choose lock-up periods of 1 year or more.

What happens to unclaimed tokens:

  • The Fuse Foundation will use 10% of any unclaimed tokens for network growth and support.
  • The rest of the unclaimed tokens will be permanently removed ("burned"), reducing the overall supply.

Scenarios​

We have developed three possible scenarios for the Token Migration:

Scenario 1. 1:1 Migration (no staking)​

  • All users choose to move their tokens directly to the new network without staking.
  • The Fuse Foundation locks 81.8 million FUSE for one year, temporarily reducing the supply.

Supply Changes:

  • 2025: Total supply drops to 305 million FUSE.
  • 2026: The locked tokens are released with a 5.5% APY bonus for 1 year, raising the total supply to 392 million FUSE.

Scenario 2. 50% Staked migration​

  • Half of the migrating tokens are staked, split across different lock-up periods:
  • 20% for 3 months (2.5% rewards)
  • 20% for 6 months (4% rewards)
  • 30% for 1 year (5.5% rewards)
  • 15% for 1.5 years (7% rewards)
  • 15% for 2 years (8.6% rewards)

Supply Changes:

  • 2025: As shorter-term staked tokens unlock, the supply gradually increases.
  • 2026: All remaining staked tokens and rewards are released.

Scenario 3. 85% Migration with mixed staking​

  • 85% of the total supply migrates to the new network, with a similar mix of lock-up periods as Scenario 2.
  • 15% of users choose not to migrate.

Supply Changes:

  • 2025: The available supply drops significantly due to a large amount of staked tokens.
  • 2026: Staked tokens and rewards are gradually released, increasing the total supply.

Each scenario outlines a different path for how the total number of FUSE tokens in circulation could change based on how users choose to migrate and stake their tokens.

Charts​

Total Supply Over Time: Compares the total supply for both the old model and the new migration scenarios.

Conclusion​

The new token model looks at different ways FUSE tokens can be moved and staked, each with its own impact on the total supply:

  • Scenario 1 (1:1 Migration): Most users just swap their tokens without staking. This causes a temporary dip in supply as the Fuse Network locks some of its tokens. Supply then returns to normal in 2026.
  • Scenario 2 (50% Staked): Half of the migrated tokens are staked for different time periods, creating a gradual increase in supply as these tokens unlock with bonuses.
  • Scenario 3 (85% Mixed staking): Most of the tokens are staked, causing a big drop in supply at first. Supply then slowly goes up again as staked tokens are released.

These scenarios show how different choices for staking and migration can affect the balance between token supply growth and reward incentives over time.