---
title: "Tokenomics"
description: "Economic model, token utility, and validator incentives for the NTRN token"
icon: "coins"
---

The Neutron token (NTRN) powers the network's economic model with a fixed supply of 1,000,000,000 tokens and zero inflation, ensuring long-term value preservation without dilution through continuous issuance.

## Token Distribution

NTRN tokens were initially distributed across various stakeholders:

| Allocation | Percentage | Amount (NTRN) |
|------------|------------|---------------|
| Treasury | 27.00% | 270,000,000 |
| Reserve | 24.00% | 240,000,000 |
| Team | 23.00% | 230,000,000 |
| Investors | 11.00% | 110,000,000 |
| Airdrops | 7.00% | 70,000,000 |
| Liquidity Bootstrap | 5.00% | 50,000,000 |
| Binance Launchpool | 2.00% | 20,000,000 |
| Advisors | 1.00% | 10,000,000 |

![NTRN Token Supply](/images/ntrn_tokensupply.png)

## Token Generation Event

The initial distribution of NTRN tokens was facilitated through a multi-component Token Generation Event (TGE) designed to distribute tokens fairly while building initial liquidity:

<CardGroup cols={3}>
  <Card title="Airdrop" icon="parachute-box">
    <p className="mt-2">7% of NTRN supply was airdropped to ATOM stakers and other qualifying Cosmos ecosystem participants to bootstrap the initial community.</p>
  </Card>
  
  <Card title="Lockdrop" icon="lock">
    <p className="mt-2">Users locked LP tokens from axlrUSDC/NTRN and ATOM/NTRN pools for various durations to receive NTRN tokens proportional to their contribution.</p>
  </Card>
  
  <Card title="Liquidity Bootstrap Auction" icon="chart-line">
    <p className="mt-2">5% of NTRN was allocated to bootstrap initial liquidity pools, with participants receiving both LP tokens and additional NTRN incentives.</p>
  </Card>
</CardGroup>

The TGE utilized several smart contracts working together:
- **Credits Contract**: Managed token vesting and distribution
- **Airdrop Contract**: Distributed tokens to eligible addresses using Merkle proofs
- **Auction Contract**: Facilitated NTRN-NATIVE pool initialization
- **Lockdrop Contract**: Enabled users to lock LP tokens to receive NTRN
- **Vesting LP Contract**: Managed the vesting of LP positions over a 90-day period

### Token Unlock Schedule

NTRN follows a gradual unlock schedule to ensure long-term network stability and align incentives of different stakeholders.

![NTRN Unlock Schedule](/images/ntrn_unlock.png)

### Binance Launchpool

A portion of NTRN tokens (2.00% of the total supply) was distributed through Binance Launchpool:

- **Total Launchpool Rewards**: 20,000,000 NTRN
- **Duration**: 20 days (started October 11, 2023)
- **Staking Options**: BNB, TUSD, and FDUSD pools
- **Initial Circulating Supply**: 217,112,292 NTRN (21.71% of total)

## Fee Model and Distribution

Neutron features an innovative multi-denomination fee system:

- **Multi-Denom Fees**: Transactions can pay gas in any liquid token on the network
- **NTRN/ATOM Discount**: 30% discount when using NTRN or ATOM for gas fees
- **Gas Limit**: 330M gas per block (11× increase post-Mercury)
- **Fee Distribution**: 100% of fees stay within Neutron's economy

### Pre-Mercury Fee Distribution

Before the Mercury upgrade, Neutron operated under the Interchain Security model (ICS) with the following fee distribution:
- 25% of transaction fees were sent to the Cosmos Hub as payment for security services
- The remaining 75% were either burnt (if paid in NTRN) or sent to the Reserve (if paid in ATOM or other tokens)

> **Note:** Following the Mercury upgrade, this fee-sharing arrangement with the Cosmos Hub was discontinued as Neutron became a sovereign chain with its own security model.

## Treasury System

Neutron operates a sophisticated treasury system that manages the protocol's funds and token distribution:

### DAO Treasury

The Neutron DAO Treasury is the primary fund manager post-Mercury, holding a significant portion of NTRN tokens to serve multiple purposes:

- Fund validator operations (base compensation)
- Pay staking rewards to delegators
- Bootstrap liquidity across the DeFi ecosystem
- Support ecosystem growth through incentives and grants
- Fund ongoing development of the network

### Reserve Contract

The Reserve contract, instantiated at genesis, was designed to hold vested NTRN tokens. Key features include:

- **Vesting Mechanism**: Reserve tokens are vested based on on-chain activity—the more NTRN tokens burned through transaction fees, the more tokens get unlocked from the reserve
- **Distribution Control**: The contract is controlled by the Neutron DAO
- **Vesting Formula**: Uses a mathematical formula based on burned tokens to calculate release rates, ensuring a gradual distribution of tokens

### Distribution Contract

The Distribution contract handles the second stage of token distribution:

- Distributes tokens between a configurable set of "shareholders" (addresses with assigned weights)
- Allows shareholders to withdraw collected tokens based on their proportional shares
- Can only be configured by the Neutron DAO

## Key Treasury Allocations

Following Mercury, the DAO deployed Treasury funds to establish a robust DeFi landscape:

- **Staking**: ~225M NTRN staked with Drop Protocol for network security
- **Liquidity**: ~25M NTRN allocated to dNTRN-NTRN liquidity
- **Lending Capacity**: 5M NTRN allocated to lending protocols
- **Staking Rewards**: 6M NTRN pre-loaded for delegator rewards
- **Validator Compensation**: 700k NTRN allocated for validator payments

## Staking Economics

Following the Mercury upgrade, Neutron transitioned to a sovereign security model with unique staking parameters:

### For Delegators

- **Target Staking APR**: 3% annually
- **Source of Rewards**: Neutron DAO Treasury (not block rewards)
- **Slashing**: Initially disabled (to be reassessed as the network matures)
- **Unbonding Period**: 20-day unbonding
- **Delegation Method**: Native staking or liquid staking via partners

### For Validators

Validator compensation and performance requirements are detailed in the [Proof of Liquid Staking](/concepts/proof-of-liquid-staking) section and [Validators](/validators) documentation.

## Token Utility

NTRN serves multiple functions within the ecosystem:

- **Security**: Stake NTRN to secure the network
- **Governance**: Use NTRN in governance vaults to participate in decentralized decision-making
- **Transaction Fees**: Pay reduced gas fees when using NTRN
- **DeFi**: Use NTRN and its derivatives (like dNTRN) across Neutron's integrated DeFi protocols
- **Collateral**: Use NTRN as collateral in lending markets
- **Deflationary Mechanism**: When paid as transaction fees in NTRN, a portion may be burned to create deflationary pressure

## Governance Rights

Governance power in Neutron comes from NTRN in voting vaults:

- **Voting Mechanism**: Deposit NTRN to dedicated voting vaults to gain governance power
- **Staked Voting**: Native stakers receive 1 point of governance power per NTRN delegated
- **Proposal System**: Standard Cosmos SDK governance with deposit, voting, and execution phases
- **Voter Rewards**: Potential incentives for governance participation

## Liquid Staking

Neutron actively encourages the development of liquid staking derivatives:

- **dNTRN**: The primary liquid staking token for NTRN, enabling users to maintain liquidity while staking
- **Composability**: Use dNTRN throughout the DeFi ecosystem while earning staking rewards
- **Deep Liquidity**: Protocol-owned liquidity ensures smooth trading between NTRN and dNTRN

## Comparison to Traditional PoS Models

Neutron's economic model differs from traditional proof-of-stake in several key ways:

| Feature | Traditional PoS | Neutron's Model |
|---------|----------------|-----------------|
| Supply | Inflationary | Fixed Supply |
| Block Rewards | From inflation | From Treasury |
| Validator Role | Governance representatives | Infrastructure providers |
| Slashing | Required for security | Replaced by jailing and performance incentives |
| Commissions | Set by validators | Not applicable (direct Treasury payments) |
| Fee Distribution | To validators/delegators | To Treasury and ecosystem |

This opinionated approach creates a more stable, predictable economic environment while maintaining the security guarantees of proof-of-stake.