Proposal: Revision of POL Tokenomics – Elimination of 2% Inflation and Introduction of Treasury Buyback/Burn Policy

Polygon Improvement Proposals Proposal Ideas
21

I appreciate the thoughtful debate here. Both on token supply and on how Polygon can better align economics with real usage.

My take (support, with guardrails):

  • I’m in favor of moving from 2% emissions to 0% via a gated taper (−0.5pp per quarter) — only if validator participation, network performance, and decentralization stay within clear targets. No cliffs.
  • I’d replace discretionary buybacks with programmatic, on-chain fee burns wherever feasible (PoS / AggLayer chains), plus transparent quarterly reports and a live dashboard for supply, burns, treasury flows, and validator economics.
  • During the taper, fund a temporary Validator Stability Pool so APY doesn’t collapse while fee/MEV revenues scale. Security and liveness come first.

On the “ecosystem alignment” idea (e.g., Polymarket):
I like the instinct. If Polygon’s breakout applications win, the network wins and vice versa. Instead of ad-hoc buybacks, a structured, open Ecosystem Alignment Program could create durable incentives without favoritism. For example:

  • Validator roles / staking commitments for top-usage apps that meet objective thresholds (users, fees, open-source contributions, uptime), with transparent criteria.
  • Programmatic revenue alignment (e.g., a share of sequencer/MEV or fee rebates paid in POL under public formulas), so incentives scale with actual usage rather than treasury discretion.
  • Time-boxed, reviewable agreements, not permanent privileges and always with anti-capture safeguards and sunset clauses.

This keeps the focus on usage → value capture → POL economics while avoiding the optics of price support or closed-door deals. It also answers the valid concern that we’re still in a growth phase: you can taper emissions responsibly and let successful apps “plug into” the economic layer in a way that’s measurable and revocable.

Why this path feels healthier than pure buybacks right now:

  • Programmatic burns and alignment mechanisms are rule-based and scale with real activity. Easier to audit and harder to game than discretionary treasury ops.
  • A gated taper protects validator economics while we prove out AggLayer revenue. If the gates aren’t met, the taper pauses. Simple.
  • Public reporting and a real-time dashboard raise trust and reduce narrative drift.

TL;DR
Move to 0% with a gated taper, keep security whole with a temporary validator fund, shift from buybacks to programmatic burns, and launch an Ecosystem Alignment Program that lets breakout apps (e.g., Polymarket) opt into validator/staking or revenue alignment under open, transparent rules. That combination is credibly scarce, security-first, usage-aligned, and governance-friendly.

Sources (official):

4 Likes
22

I’m definitely in support of eliminating inflation. What good does it do?

4 Likes
23

Nice! Great thinking and solid arguments.

5 Likes
24

Something needs to be done or users are going to migrate

3 Likes
25

I suggest we need to eliminate inflation, buyback and burn and even make POL as the native currency for Polymarket! We need to do better!!
Sandeep whats wrong here!!!???

4 Likes
26

Important to connote that I have no executive decision-making capabilities and my opinions are merely that of a community member. I think reduction and redirection of treasury emissions is feasible but it’s not completely clear to me if that should be the case. I do think there is a strong case for incentivization of breakout apps like Polymarket but not in a mechanism where they’re immediately dumped (such as a team grant, user airdrop, etc.). A good start is simply to identify if the current 1% emission has been useful to Polygon as a brand (I think it’s clear that it has not been impactful to the price) and then work backwards from there to calculate the “right” amount of emissions for the ecosystem.

3 Likes
27

:purple_circle: EOSI Finance’s Contribution to the POL Tokenomics Proposal

By: Ken — Lead Developer, EOSI Finance

:chart_decreasing: The Impact on Builders

I’d like to share my thoughts as the Lead Developer of EOSI Finance from our experience so far.
The sharp fall in POL’s value has severely affected us — over 70% of the funds we raised in POL since late last year have lost value.
This crash has delayed our roadmap and forced us to rethink several of our expansion plans. And I know how this pains.

I understand the need to protect validator stability, so my suggestions aim to balance both sides — sustainability for validators and relief for builders like us who believe in Polygon’s long-term vision.

:ten: Key Suggestions

:one: Gradual Reduction of Inflation

Instead of cutting inflation immediately, it should be reduced gradually (e.g., 0.5% per quarter like someone suggested) while monitoring key network health metrics such as:

  • Validator participation

  • Network decentralization

  • Overall liveness

If these metrics drop below safe limits, the reduction should pause automatically to protect network stability.

:two: Fee Burning Across All Chains

Expand the EIP-1559-style fee burn beyond Polygon PoS to AggLayer and other rollups.
This directly links token supply reduction to network activity and avoids arbitrary buyback decisions.

At the same time, the Polygon team should welcome proposals from builders to legally and safely burn more POL, helping stabilize its value.

A counter-cyclical burn policy could also be introduced:

  • In boom periods → burn or lock more POL to prevent overheating.

  • In slow periods → use treasury reserves to buy back POL or give short-term staking rewards.

This self-balancing system would help the ecosystem remain steady through market ups and downs.

:three: Transparent On-Chain Buybacks

Require that 20% (or more) of all treasury inflows — such as fees, MEV revenues, and partnerships — go to on-chain buybacks and burns.
These should be executed by transparent smart contracts with public reporting.
Regular buybacks restore trust and demonstrate Polygon’s commitment to token value.

:four: Temporary Validator Stability Fund

Create a short-term treasury-funded stability pool to support validator rewards while inflation is being reduced.
As network fees grow, phase out this pool gradually to maintain independence.

:five: Ecosystem Alignment & Cross-Chain Incentives

Launch an open ecosystem alignment program offering major dApps (like Polymarket and others) validator roles or revenue-sharing when they meet certain metrics (e.g., uptime, user activity, fees).

This aligns app success with POL demand and encourages more developers to build on Polygon.
Sharing sequencer revenues with dApps that drive high user traffic can also boost ecosystem growth.

:orange_circle: As a builder, I have to admit — our team at EOSI Finance has sometimes considered moving to another chain due to minimal ecosystem support. Polygon has incredible tech, but many builders feel unheard. Rebuilding that connection is vital.

:six: Quarterly Governance & Treasury Reports

Polygon should publish quarterly tokenomics reports that include:

  • Total and circulating supply

  • Burned tokens

  • Treasury holdings

  • Upcoming emissions

A real-time dashboard would bring transparency and reduce unnecessary speculation.

:seven: Smarter Grants & ROI-Based Funding

Instead of fixed inflation funding the treasury, focus on ROI-driven grants — projects that directly grow activity and users.
Invest more in DeFi 2.0, DeFAI protocols, and meme-driven communities, as these are proven to attract users and volume this 2025.

Most casual crypto investors out there don’t care about tech updates like AggLayer, Katana, etc — they care about projects they can relate to.
Supporting these projects will naturally grow the network’s usage and visibility.

:eight: Stronger Branding & Marketing

Many community members already said this — and I agree completely.
POL’s marketing and visibility are too weak for a project of this scale.

Polygon’s biggest success came from its L2 narrative, but since then, marketing has stagnated.
Competitors like Solana and HyperLiquid are still building user excitement through memes, cultural relevance, and consistent narratives.

Polygon should:

  • Mix DeFi + Darkpool + Layer-2 narratives into one strong story.

  • Launch campaigns showing real use cases and builder support.

  • Reintroduce “Polygon (POL)” with clear messaging that appeals to both developers and users.

:nine: Time-Weighted Staking

Offer higher rewards for longer lock-ups and mild penalties for early withdrawals.
This encourages long-term holding and stability without increasing inflation.

:ten: Developer Fee-Share Incentives

Reward developers who build high-traffic dApps.
A small share of POL transaction fees from those contracts should go to their creators.
This approach:

  • Encourages innovation

  • Provides sustainable developer income

  • Ties builder success directly to network growth

In short, the more value a dApp brings to Polygon, the more POL it earns.
This turns POL’s tokenomics into an “application mining” model that rewards productivity, not speculation.

:compass: Final Words

Polygon has the infrastructure and vision to remain a core part of Web3 — but it needs a human-centered, builder-aligned approach to tokenomics.
As a developer representing EOSI Finance, I’m rooting for Polygon to take this chance to make POL stronger, fairer, and more sustainable for everyone.

9 Likes
28

Making $POL the native token of Polymarket is a great idea.

Is there any downside? Seems like both Polymarket & Polygon benefit as $POL fees are so little.

3 Likes
29

I also want to add that when Katana rolled out and I tried it out, I was very disappointed that POL was not the native gas token. As a user and POL holder, I sat there thinking to myself, “wtf am I supposed to use this token for then?”. I have not touched Katana since. That alone really turned me off.

5 Likes
30

Appreciate the thoughtful write-up, @VentureFounder.

Below is my take, a package that (i) answers each point, (ii) sets objective guardrails tied to on-chain data, and (iii) is immediately shippable in phases.

1) Inflation: taper with automatic “safety brakes”

  • Policy: If/while POL issuance is active (commonly referenced at ~2%/yr), taper −0.5% per quarter until 0–1% band unless safety brakes trip. Brakes = pause the next cut if any of the below are true in the prior 30D:

    • Active validators producing blocks < 80 (last 7D recently hovered ~64–69).

    • Nakamoto coefficient ≤ 4 (external estimate) or concentration worsens QoQ. Set a 12-month target of NC ≥ 10.

    • Median net staking APR < 3% (benchmarked vs exchange/retail staking quotes of ~2.6–7%).

  • Why this works: It protects validator economics and decentralization while committing to predictable disinflation.

2) Fee burn: extend EIP-1559 style burns across AggLayer/CDK

  • Policy: Mandate base-fee burn on all CDK/AggLayer chains (opt-out only with governance). Today PoS burn historically annualized near ~0.27% of supply at comparable activity—use that as a baseline KPI and publish the burn % per chain.

  • Implementability: CDK already supports custom native gas tokens and fee mechanics; require templates to ship with burn enabled by default.

3) On-chain buyback & transparency

  • Policy: Route 20% of net protocol income (sequencer surplus, shared bridge fees, MEV rebates after costs) to an on-chain auction-based buyback contract with weekly reports:

    • Inputs: 30D fees & net income (cf. public dashboards)

    • Outputs: amounts bought/burned, slippage, counterparties, and P/S tracking.

  • Counter-cyclical toggle: When 30D Network REV falls below its 12-month median by >1σ, throttle buybacks and divert up to 50% of that stream to the stability fund (next section).

4) Temporary Validator Stability Fund (12–18 months)

  • Policy: Use up to 25% of the existing 12% rewards allocation (max ~300M POL over the period) to floor net staking APR ≥ 3% while inflation tapers. Sunset as fees rise.

5) Ecosystem alignment & app revenue-share

  • App mining 2.0: Share 10–25% of incremental sequencer surplus with dApps that (a) rank top decile in 30D unique users, (b) contribute ≥5% of L2 gas usage, and (c) maintain ≥30% 90-day retention. Pay in POL with a vest/clawback.

  • Why now: Activity and fees on Polygon have been rebounding in 2025; tying share to measurable usage compounds that trend.

6) POL utility: gas, collateral, and fee rebates (addresses Katana/Polymarket)

  • Katana today: Launched as a CDK/OP-stack chain using ETH as gas; POL stakers received KAT exposure via airdrops. Path forward: make POL the default gas option for new CDK chains and offer dual-gas on Katana (ETH & POL) once UX parity is proven.

  • Polymarket: Keep USDC settlement for UX/regulatory reasons, but add: (i) POL staking tiers that unlock fee rebates, (ii) POL LP boosts on markets, and (iii) a POL-denominated loyalty ladder. (Polymarket still runs on Polygon infra, and institutional tie-ups just increased—perfect moment to align incentives.)

  • PoS clarity: Since Sept 2024 PoS gas is POL—surface this in wallets/Portals and one-tap “Swap-for-Gas” in all official bridges.

7) Quarterly tokenomics & treasury reporting (plus a live dashboard)

Publish every quarter:

  • Supply & float: circ. supply (currently ~10.5–11B POL), unlocks, and emissions.

  • Burns: 90D and cumulative (link PoS burn explorer + on-chain dead address).

  • Revenues: 30D chain fees & net income (with methodology).

  • Validator health: active validators producing blocks (target ≥80), NC trend, commission dispersion.

8) Grants → ROI-based pipelines

  • Replace blanket emissions with milestone tranches: users, fee contribution, retention, security track record. Prioritize DeFi 2.0, DeFAI, and consumer-pull verticals where 2025 data shows growth.

9) Brand & narrative (make it measurable)

  • North star: “Polygon: the Aggregated Liquidity Layer.” Every launch should show practical UX wins (faster finality, lower fees, unified liquidity) with case studies (e.g., Polymarket, Katana). Track brand lift via MAU, tx/day, fee growth, and share vs other L2s.

10) Time-weighted staking (simple tiers)

  • 12m lock = 2.0×, 6m = 1.5×, 3m = 1.2×, flex = 1.0×.

  • Early exit penalty: 25% of accrued bonus goes to the stability fund. (Keeps long-term alignment without new inflation.)

11) Developer fee-share

  • Rule: Eligible contracts (opt-in, audited) earn 5–10% of base fees they generate, paid in POL monthly, subject to (a) security score, (b) uptime, and (c) no-wash-tx detection. This turns POL into “application mining” that rewards productive usage.

Closing

This set balances validator sustainability, clear POL utility, and builder/user incentives, all tied to publicly verifiable metrics and dashboards.

7 Likes
32

Totally in agreement with this proposal. POL is a wonderful project with proven use cases and a team that works hard, but it needs to realign with reality… inflation, in the current context of the network, does not do any good.

3 Likes