The S token serves as Sonic’s native currency, playing a pivotal role in the network’s ecosystem. It supports various functions, including transaction fee payments, staking, validator operations, and governance participation.

Staking

Users can stake their S tokens directly on Sonic via MySonic. Withdrawing staked tokens requires a 14-day waiting period, ensuring a secure and steady staking process.

When staking, it is essential to select a trustworthy validator. Misconduct or technical errors by a validator can result in penalties, which may affect your delegated S tokens. Careful consideration is crucial to safeguard your stake.

Tokenomics

At launch, Sonic introduced a total supply of 3.175 billion S tokens, aligning with the corresponding total supply of 3.175 billion FTM. Based on decisions made through governance proposals, additional features and adjustments will gradually shape the S token’s tokenomics.

Airdrop Program

Six months post-launch, Sonic plans to mint an additional 6% of the 3.175 billion S tokens to support an innovative airdrop initiative. This program aims to reward active users and builders from both the Fantom Opera and Sonic ecosystems.

The airdrop incorporates a unique burn mechanism, encouraging user engagement while progressively reducing the total supply of S tokens, fostering long-term value stability.

Ongoing Funding for Sonic’s Growth

To support the continued development and expansion of the Sonic network, additional S tokens will be minted starting six months after its launch. These tokens aim to:

• Promote S adoption globally and enhance the network’s visibility.
• Expand the Sonic team and scale operations to drive greater adoption.
• Execute marketing strategies and DeFi onboarding campaigns.
• Establish programs like Sonic Spark and Sonic University to foster innovation and advance Sonic technology adoption.

Funding Allocation

To finance these initiatives, 1.5% of the total supply of S tokens (47,625,000 tokens) will be minted annually for six years, beginning six months after the mainnet launch.

Burn Mechanism to Control Inflation

To prevent inflation and ensure efficient use of funds, the network will burn any unused tokens at the end of each year. This mechanism guarantees that 100% of newly minted tokens are dedicated solely to network growth and are not stored for future use in the treasury.

For Instance:

If Sonic Labs uses only 5,000,000 tokens in the first year, the remaining 42,625,000 tokens will be burned, maintaining a sustainable token supply.

This approach emphasizes accountability and long-term value for the S token, ensuring resources are used strategically for Sonic’s growth.

Block Rewards Transition

The distribution of block rewards is being shifted from Fantom Opera to Sonic. As validators and stakers migrate to Sonic, block rewards on Opera will gradually be reduced to zero. The resulting savings will be redirected to incentivize Sonic validators. Meanwhile, the Sonic Foundation will continue operating validators on Opera temporarily to ensure network stability.

Sustaining Rewards Without Inflation

To maintain a 3.5% APR for Sonic validators during the first four years without introducing inflation, the remaining FTM block rewards from Opera will be reallocated to Sonic. These rewards are already part of the initial 3.175 billion S token supply.

At launch, Sonic’s circulating supply will be approximately 2.88 billion tokens, with the remaining annual difference of 70 million tokens allocated as validator rewards. This approach eliminates the need to mint new tokens for block rewards during the first four years, ensuring a stable and inflation-free reward system for validators.

Token Burn Mechanisms

Sonic employs three distinct burn mechanisms to gradually reduce the emission of new S tokens and maintain a deflationary system:

1. Fee Monetization Burn

If a transaction occurs on an app that does not participate in the Fee Monetization (FeeM) program, 50% of the transaction fee will be burned.

2. Airdrop Burn

For users opting out of the full 270-day maturation period for 75% of their airdrop allocation, a portion of their S tokens will be burned.

3. Ongoing Funding Burn

From the 47,625,000 S tokens minted annually for the first six years to fund Sonic’s growth, any unused tokens at the end of each year will be burned.

Validator Rewards

By securing the Sonic network through validator operations and staking a specified amount of S tokens, participants can earn rewards. These include:

Block Rewards: Distributed as part of the validator incentive structure.

Transaction Fees: Paid by users for transactions on the Sonic network.

This system ensures network security while providing financial incentives for active contributors.

Block Rewards

On Sonic, validators receive a target annual reward rate of 3.5% when 50% of the total network supply is staked. To achieve this, the network mints tokens each epoch, except for Sonic’s first four years, during which validator rewards are sourced from Opera block rewards.

The reward rate dynamically adjusts based on the staking participation:

• If 100% of tokens are staked: The reward rate decreases to 1.75% annually.
• If only 25% of tokens are staked: The reward rate increases to 7% annually.

Ecosystem Vault

Originally established on Fantom Opera, the Ecosystem Vault was designed to support community-driven growth by redistributing a percentage of network fees to selected apps within the ecosystem.

On Sonic, this initiative will evolve by introducing quarterly disbursements from the Ecosystem Vault to the Sonic Community Council (SCC). The SCC is an independently managed group of ecosystem contributors responsible for fostering growth through:

• User-focused initiatives
• Developer onboarding programs
• App support and enhancements

The disbursement amounts will be determined by the Sonic Foundation and will reflect the SCC’s performance during the prior quarter.