As we get ready for the mainnet launch in the coming weeks, we would like to take a moment to address questions about the Hermez tokenomics and the current circulating supply. We have created a dedicated page on our website explaining in detail the HEZ tokenomics.
The HEZ utility token is used to bid for slots to become a coordinator and portions are donated, burned, and used to incentivize active network usage and engagement. This is the only economic design built into the core protocol from the start.
There are two specific ways that HEZ will flow through the network: the auction and user rewards. In the auction, prospective coordinators use HEZ to bid for the right to validate blocks on the L2 network as part of the Proof-of-Donation process.
As HEZ tokens come into the system through bids, they will be distributed in the following way:
- 30% of the tokens will be burnt.
- 40% of the tokens will be donated to Ethereum Layer 1 (for further information on why we selected this particular method, check out this article).
- 30% will be distributed among the network participants to reward users for onboarding specific tokens onto the network and transacting with them.
The maximum number of HEZ tokens that will ever exist is 100,000,000. Due to the deflationary design of the auction model, this number will decrease once mainnet is operational and coordinators are bidding.
Following the distribution and vesting schedule explained on the whitepaper, as of February 2021, there are just over 36 million HEZ that are not under the Hermez project multi-sig wallet. The majority of these tokens are subject to vesting.
HEZ Original Distribution
Here’s a chart explaining the original token distribution, as well as the different vesting tiers affecting some of the token allocations.
We have compiled all this information on our website, which you can check by clicking here.