Published Jul 20, 2023
By Qredo Team

Qredo Releases New QRDO Tokenology


We're taking a monumental step forward in optimizing the functionality and growth potential of Qredo Network, with QRDO at the heart of it all. Here's what's new:

  • Implementing a new staking model that requires users to lock their tokens to receive rewards.

  • Creating an Ecosystem Fund that will serve as a primary repository for service fees tipped and will have a market-driven reward release function. 

  • Creating a Staking Support Fund with an exponential decay vesting to support the early adopters of the new FPoS consensus. 

  • Introducing Protocol Fees, making QRDO an essential element for operating and using the protocol. 

  • Introducing Service Fee tip deposited in the Ecosystem Fund to support the network security. 

  • Introducing Protocol Fee burn function - all protocol fees will be burned.

  • Allocating the remaining tokens from the outstanding token supply, with 160 million tokens burned. 

  • Accelerating vesting to decrease uncertainty in the market and reduce the total circulating supply to total supply gap. Total circulating supply will increase to 639 million QRDO, but staking, locking, and burning will decrease inflation compared to the current model. 

  • Turning the roadmap over to our community with a discussion on Qredo Community Governance Forum and QRDO-enabled voting.

This new tokenology enhances QRDO's utility across staking, network usage, governance, payments and rewards – capturing value created by the Qredo ecosystem.

Announcing QRDO tokenology

After many months of hard work it is with great pride that we announce the release of our new QRDO Tokenology paper.

Read Qredo Tokenology

From the beginning, it has always been our aim to create the world's most secure, reliable crypto self-custody solution and to solve the biggest problems in blockchain – first and foremost security, but also the management and interoperability of digital assets – by pairing it with distributed multi-party computation (MPC). The greater the decentralization, the greater the network security and the launch of the new QRDO Tokenology marks a significant step forward in our evolution towards becoming a fully decentralized blockchain ecosystem. 

These goals have defined our mission and product, guiding us on our path over the past five years and bringing us to this pivotal moment in our journey. At Qredo, we intend to realize the full potential of blockchain by fully engineering away trust from all aspects of the Qredo Protocol.

At the heart of this breakthrough lies a Cosmos-based evolution of the Qredo blockchain paired with a zero knowledge (ZK) ledger that can prove the validity of its state to any third party that can verify a zero knowledge proof – in essence, a “universal ZK-rollup''. This is the future of Qredo, and this year we will enable any existing dApp to be built as fully interoperable across blockchains by leveraging this universal ZK-rollup paired with Qredo's L2 – but crucially – without any trust in third parties. Builders will be able to use Qredo to deploy cross-chain collateral, unlock cross-chain liquidity via AMMs, and launch verifiably trustless bridges. 

In order to facilitate this evolution, and successfully transition towards greater decentralization, we know the tokenomics underlying Qredo Network need to be meaningfully reconfigured in order to create a vibrant, thriving ecosystem that delivers value sustainably to all stakeholders. 

We encourage you all to read the QRDO Tokenology paper to understand at a granular level how the network will be structured going forward. For those that don't want to delve into that level of detail, we have a condensed summary below.

Qredo protocol and application

Qredo Protocol is a Layer 2 blockchain that acts as an asset registry, recording governance policies and the ownership of assets secured by a distributed MPC (dMPC) network. The Qredo Application is the user-facing application where traders and institutions can interact with DeFi. It is a practical application of the foundational Qredo Protocol.

Qredo economy stakeholders

There are five main stakeholder groups within Qredo's economy:

  • Stakers lock QRDO tokens with Validators to support their consensus operations, to increase security and confidence in the protocol, and to earn rewards. 

  • Validators responsible for running the decentralized custody network and executing transaction requests.

  • Users spend capital in the economy by buying the services offered by Qredo. 

  • Developers maintain core network systems and implement new features, earning QRDO as a reward. 

  • Token holders hold QRDO in order to vote on key issues in the development of the Qredo Protocol. 

You can get a sense already just from these definitions how stakeholders relate to and interact with one another, and how QRDO is integral in both value creation and stakeholder participation in the network.

Tokenology staking models, fees and funds

Our long-term vision is to implement a Delegated proof-of-stake (DPoS) consensus model. However, to facilitate a smooth transition to DPoS, the network will initially implement Federated proof-of-stake (FPoS). The primary distinction between the two lies in the staking. In FPoS, stakers contribute to a single staking pool distributed among validators who have been preselected by Qredo based on technical skill and experience running validator nodes. All FPoS validators possess equal consensus power and stakers delegate their tokens to a single staking pool rather than to individual validators. This approach to consensus allows for enhanced testing to critically ensure that security and latency are not compromised as we transition to DPoS.

The new reward model incorporates two token inflow mechanisms – an Ecosystem Fund and a Staking Support Fund. Both funds will receive initial QRDO token allocations to support the growth of the network. However, they have two different release functions and purposes. The Ecosystem Fund will also be financed by a service fee tip, and its release function will be contingent on Qredo's performance and growth, ensuring alignment with the network's long-term sustainability. The Staking Support Fund has as a set exponential decay vesting to support the early adopters. Both inflows form a reward pool that is distributed between validators and stakers. In the FPoS model, the validator commission is set by the protocol as 70%. The staking APR is market-driven and is expected to vary from 5-30%. 

We also introduce Protocol Fees, imposed when submitting requests to Qredo Network, that will serve as a safeguard against potential spamming attacks. All Protocol Fees will be burned, serving as a disinflationary mechanism for the QRDO token.

QRDO token allocation, total circulating supply and inflation

Finally, a key goal of our revised tokenology is to determine the allocation and vesting schedules for the as-yet-unreleased one billion QRDO tokens. We propose that the new QRDO token allocation be distributed among the Staking Support Fund and Ecosystem Fund, as well as a Treasury Fund to fund partner programs, grants and liquidity-stimulating loans, and a Public Goods Fund, which will primarily be used for small airdrops and protocol fees. We also propose that 160 million QRDO tokens be burned.

We anticipate an increase in the circulating supply from 339M to 639M QRDO tokens. Afterwards, the circulating supply will stabilize and continue to grow steadily for the next two years. The expected annual inflation during this period is projected to decrease by over 40% compared to the current tokenomics model. Supply growth rates will significantly decelerate in all scenarios at the beginning of 2026, when legacy vesting schedules will come to an end. 

While this represents a significant supply shock, we believe that in the medium term, it will have a positive impact on the QRDO ecosystem. With the new deflationary measures in place and the service tip's balancing impact on the ecosystem fund, we expect the Qredo economy to become deflationary in the next three years.

Qredo network growth

Since its launch, Qredochain has recorded more than one million transactions and following our recent upgrade to the new Qredo Application we have seen a 243% month-on-month increase in user-generated transactions. Additionally, builders, such as the hybrid exchange Ankex, are launching services that utilize Qredo Network, generating material increases in protocol transactions.

With the launch of the QRDO Tokenology, we will now start to capture this activity in Protocol Fees and expect growing usage of Qredo Network combined with new implementations of QRDO staking, locking and burning to increase demand and value for the QRDO token.

Community governance

In our view, one of the most important utilities of the QRDO token is the ability to put decision-making power about the future of the protocol directly in the hands of our community. We have recently launched the Qredo Community Governance Forum, a platform for all QRDO token holders who, regardless of their role or level of participation in the Qredo ecosystem, have the opportunity to discuss, debate and collaborate on Qredo protocol improvement proposals, which are subject to a community vote. Voting power is proportional to your amount of staked QRDO and proposals that pass are folded into the formal Qredo Protocol roadmap.  

We have also posted the full tokenology whitepaper in the Protocol section of the Qredo Community Governance Forum. We welcome you to join us and provide feedback on this monumental evolution of the Qredo Protocol.