Tokenomics

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In early 2025, Fuse will launch a new network called Fuse Ember, with a fixed supply of 420 million tokens. This new network will operate in parallel with the current one, and existing FUSE tokens will gradually be moved over to ensure a smooth transition.

The reason behind the creation and deployment of Fuse Ember is to leverage a scalable zkEVM technology by Polygon in order to enable scaling and privacy for business payments on Fuse’s new Layer-2 network. Fuse Ember will have 120 TPS in day one and scale using Validium committee to 9000 TPS offering scale comparable to Visa. The integration of zero-knowledge (ZK) technology will enable new use cases, and promote the seamless integration and collaboration of diverse payment and financial services and applications.

TL;DR of the migration:

• 15% total supply distributed during the migration
  Fuse Foundation will Allocate 63,000,000 FUSE (45%) from its treasury as migration incentives over the next 3 years

  

• 30% discount on node pre-sale
  Prior to the public sale, a private pre-sale will be held for existing Fuse investors and validators.

• Node sale on launchpad in December
  Fuse will host a node sale on a trusted NodeOps launchpad.

• Incentivized Testnet
  Node operators on Flash testnet will be incentivized before the mainnet launches

• Fuse upgrades Tokenomics

  • Native FUSE token migrates from the old L1 Fuse network to L2 Fuse

• New Staking Model with revshare stFUSE liquid staked token and RWA/LST yield

  • The Fuse team will create a native revenue share stFUSE token, which will distribute revenue from various activities across the network.

  • stFUSE token will enable liquid staking, allowing rewards to auto-compound, be (re)staked, and remain compatible with DeFi.

  • At least 17% of total supply locked in first year The Fuse Foundation will lock 71,000,000 FUSE in the first year after the Fuse Ember mainnet launch, to reduce the circulating supply.

    Role Incentives Breakdown

    Node Operators: Incentives for Running a Node

    1. Fuse Foundation incentive - 15,000,000 FUSE which will be distributed monthly across all Node Operators and Node NFT Delegators over 3 years.
    2. A share of the revenue generated by the sequencer.
    3. A share of the revenue generated by the native yield dApp.
    4. 10% of the Node NFT Delegators reward

Node Licence Delegators: Incentives for Delegating a License

Everything is the same as operators minus 10% delegation fee for Node Operators

stFUSE Holders: Incentives for Migrating and Staking FUSE

1. A share of the revenue generated by the sequencer. In total, 10% of the revenue is distributed among all stakers. The longer you stake, the higher your share will be.
2. A share of the revenue generated by the native yeild dApp.In total, 10% of the revenue is distributed among all stakers. The longer you stake, the higher your share will be.
3. A share of the revenue received by Fuse Foundation during the Node Sale. It will be allocated to boost the staking reward on the first year after the mainnet launch.
4. Fuse Foundation - 20,000,000 FUSE which will be distributed over the first 2 years, to guarantee the minimum APY of 9.79%.
5. Extra bonus when migrating FUSE tokens via locking in stFUSE for a period of 3 months to 2 years. During the locking period, tokens are taken out of circulation supply. a. 2.5% of the locked FUSE amount - when locked for 3 months b. 4% of the locked FUSE amount - when locked for 6 months c. 5.5% of the locked FUSE amount - when locked for 1 year d. 7% of the locked FUSE amount - when locked for 1.5 years e. 8.6% of the locked FUSE amount - when locked for 2 years

An important nuance is that this particular additional reward will only be available for those who migrate FUSE tokens in the first 3 months after the mainnet launch.

Benefits Of The New Model

The migration to the Fuse Ember network introduces several advantages that enhance the overall ecosystem:

• Scale & Privacy: zkEVM are the end-game for rollup technology, it will pave the way for business adoption since it will enable fixing privacy as well as UX and scaling issues all were considered a blocker for adoption for businesses.
• Network Security: The new stFUSE token strengthens the network by enabling liquid staking, allowing users to auto-compound rewards and contribute to the network’s resilience. By staking and delegating voting power to DA node operators, stakers directly help secure the Fuse Ember network.
• Sustainable Economy: Fuse Ember moves away from traditional inflationary models with a fixed supply of 420 million tokens, zero inflation and a deflationary model. Rewards are tied to real network activity for long-term sustainability without affecting the token’s value.
• Revenue Sharing: stFUSE holders share in the revenue generated by multiple network activities, including node sales and sequencer fees. This creates an ongoing, sustainable reward model where stakers continuously profit from network growth.
• Frictionless Integration: stFUSE enables seamless participation in DeFi and staking activities without the need for complex bridges or extra steps. This ease of use lowers the entry barriers for both users and developers, promoting engagement.
• Community Governance: stFUSE holders can lock tokens and participate in network governance by selecting DA node operators, contributing to decisions that impact Fuse Network’s future. By making users a part of the process, Fuse strives to promote a decentralized and community-driven governance model.

New Token Model

Fuse is upgrading its token model as the native FUSE token transitions from the L1 Fuse Network to the L2 Fuse Ember network. This evolution includes a new staking system with stFUSE, a liquid staking token offering revenue sharing and DeFi compatibility, alongside measures to enhance token sustainability and incentivize participation during the migration.

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.

Period	Inflation	Tokens Issued	Cumulative Burned Tokens	Net Total Supply	Minted Tokens
08/2023	5%	364,651,875	-8,173,861	356,478,014	18,232,594
08/2024	3%	382,884,469	-8,173,861	374,710,608	11,486,534
08/2025	1.5%	394,371,003	-8,173,861	386,197,142	5,915,565
08/2026	1%	400,286,568	-8,173,861	392,112,707	4,002,866
08/2027	0.75%	404,289,434	-8,173,861	396,115,573	3,032,171
08/2028	0.50%	407,321,604	-8,173,861	399,147,744	2,036,608
08/2029	0.50%	409,358,212	-8,173,861	401,184,352	2,046,791
08/2030	0.50%	411,405,003	-8,173,861	403,231,143	2,057,025
08/2031	0.50%	413,462,028	-8,173,861	405,288,168	2,067,310
08/2032	0.50%	415,529,339	-8,173,861	407,355,478	2,077,647
08/2033	0.50%	417,606,985	-8,173,861	409,433,125	2,088,035
08/2034	0.50%	419,695,020	-8,173,861	411,521,160	2,098,475

* 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 right 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 get. 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 about 33 million tokens.
• Additional Token Lock: Fuse will lock up 71,000,000 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.

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 70 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 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.

Year	Old model supply	Scenario 1 (1:1 swap)	Scenario 2 (50% staked)	Scenario 3 (85% migration 50% staked)
2024	374,710,608	-	-	-
2025	386,197,142	315,675,651	193,337,826	164,337,152
2026	392,112,707	390,580,651	396,903,222	337,367,739
2027	396,115,573	390,580,651	396,903,222	337,367,739
2028	399,147,744	390,580,651	396,903,222	337,367,739
2029	401,184,352	390,580,651	396,903,222	337,367,739
2030	403,231,143	390,580,651	396,903,222	337,367,739
2031	405,288,168	390,580,651	396,903,222	337,367,739
2032	407,355,478	390,580,651	396,903,222	337,367,739
2033	409,433,125	390,580,651	396,903,222	337,367,739
2034	411,521,160	390,580,651	396,903,222	337,367,739

Charts

1. 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.