The Economics of Shelby

Full Tokenomics of the Shelby protocol, including initial distribution, will be published later.

Overview

The Shelby network uses both a native token and stablecoins:

• Shelby token or Stablecoins for user payments
• Shelby token as an internal unit for staking, rewards, and governance

---

Payment and Conversion Flow

1. User Payments

   • Users pay for storage and read operations in stablecoins or Shelby token.
   • User read fees are routed directly to the relevant RPC Operators. RPCs use paymentchannels for reading data from SPs.
   • User storage fees are routed through the protocol on chain.

2. Conversion to native tokens

   • The protocol programmatically converts those storage fees that were paid in stablecoins into Shelby tokens on the open market.
   • Accumulated Shelby tokens form the source of rewards to Storage Providers (SPs).

3. Reward Release

   • SPs are rewarded in the native token.
   • Rewards are released gradually and are conditioned on successful audit outcomes.
   • The release schedule ensures storage integrity and aligns rewards with verified service.

4. Burns

   • A predefined fraction of each conversion is permanently burned.

---

Staking and Roles

Storage Providers (SPs)

• Must stake the native token to operate and earn rewards.
• Storage tasks and reward eligibility are proportional to the individual stake.

RPC Operators

• Stake to access additional benefits (e.g., pricing tiers and read routing).

Delegators

• Can delegate native tokens to SPs or RPC Operators to share in their rewards.

---

Protocol Fund

The Protocol Fund is governed by the community.

Sources:

• A predefined fraction of collected usage fees.
• Portion of genesis allocation.

Uses (among others):

• Delegation to high-performing operators.
• Retroactive public goods funding (RetroPGF).
• Ongoing protocol development and maintenance.

---

Supply and Emissions

• Total token supply is capped. (No perpetual inflation.)
• Bootstrap rewards for early participants taper over time and are stake-weighted.
• Initial allocation with locked releases.
• RetroPGF distributions are determined through governance rather than algorithmic issuance.

---

Shelby tokenomics structure links storage activity, reward issuance, and supply restrictions within a single closed economic loop.