Tokenomics and Governance

Token Functionalities. The goal of Cysic AI is to establish a decentralized and reliable proving/verification service that fosters community growth and self-sustainability. The $CAI token will be utilized to incentivize provers, validators, and agents in the protocol, which establishes an effective governance and reward distribution mechanism.

Cysic AI uses a dual-token mechanism, namely $CAI and $veToken (governance token). Each token plays a specific role in the network and together builds the Cysic AI ecosystem:

• $CAI: $CAI is the native token of Cysic AI and is used to pay transaction gas fees, block rewards, and escrow rewards. $CAI maintains the liveness and vitality of the network through the gas fee mechanism and is one of the incentives for users to participate in network activities.

• $veCAI: $veCAI is the governance token and is non-transferable. $veToken can be obtained by escrowing $CAI. The voting power of a user is proportional to the amount and escrow time of $veCAI.

The provers/verifiers contribute their computation power to the pool, which in turn provides services to various ZK projects. Meanwhile, in addition to the blockchain rewards from Cysic AI, users can buy $CAI and then escrow the token to obtain the voting power to govern the computation pool. The distribution of the computation power can be dynamically adjusted based on several key factors, with the token reward return provided by the ZK projects being one of the factors.

Token Supply and Emission. Cysic AI implements an inflationary mechanism to issue tokens and motivate participation in the network. This could be achieved through the release of new $CAI according to an appropriate inflation rate that is distributed to provers and community members. The inflation rate is dynamically adjusted based on the macroeconomic environment, activities among various ZKP projects, and participation in the Cysic AI.

Cysic AI will also introduce a token burning mechanism in the future, which essentially means the protocol will buy back the tokens to maintain a stable supply and demand of tokens and activities. This will dynamically adjust the inflation or deflation economic cycle and help maintain scarcity and sustain the value of the remaining tokens.

Staking and Governance. The protocol requires provers/verifiers to stake some $CAI initially to defend against malicious behaviors. All eligible computing providers can connect to Cysic AI, by staking a certain amount of $CAI as collateral to maintain the reliability and sustainability of the network service. The staked $CAI will have a base lockup period of 6 months and can be extended to participate in reward distribution.

Governance is achieved through $veCAI denotation. $veCAI represents the voting and staking custody of $CAI. The escrowed $CAI enters into a locked state on a monthly basis. The longer the lockup period, the more $veToken can be obtained. Different lockup periods lead to different amounts of $veToken, with a roughly linear increasing proportion. As the remaining lockup time decreases, $veToken gradually diminishes as well. Participants can also choose to set up automatic re-locking. In this scenario, the remaining lockup time of $CAI remains fixed, and participants receive a fixed percentage of $veCAI. Once automatic re-locking is canceled, the remaining lockup time of $CAI will begin to decay again, and $veCAI will decrease over the same time. Pledging $CAI for voting is reversible but comes with costs, in order to prevent malicious voting attacks. Participants can increase their escrowed amount or extend the escrow duration at any time to earn more $veCAI. Being escrowed for voting will also receive partial staking yields, where the percentage varies based on the importance of voting from time to time. In other words, $veCAI is not tradable, but it has implicit value that could be reflected by the percentage of staking yield.

Overall, Cysic AI would be an innovative way to promote the development of ZKP technology and increase the adoption of zero-knowledge proof verification, most importantly ownership, governance, and diversification of the community. The network could provide a platform for provers to collaborate, share knowledge and expertise, and contribute to the advancement of various industries across global ecosystems.