Karmic Tokenomics

In some Eastern traditions, Karma represents the principle that one's past actions shape their future state. Similarly, on Status Network, every positive action and contribution accumulates Karma, granting greater influence over the network's funding and incentives. Karma ($KARMA) is a non-transferable governance token that rewards staking, bridging, providing liquidity, and building. The more a user or an app contributes to the L2 in liquidity or activity, the more voting power they earn over funding allocations, liquidity incentives, and network roadmap and parameters.

How Karma is Earned

Karma is minted through six primary mechanisms and cannot be aquired, ensuring that no entity—including the Status team—has any advantage in getting access to it. Everyone earns Karma under the same rules, based solely on their contributions to the network, ensuring it remains a pure representation of meaningful engagement within the network:

1. Staking SNT – Anyone staking SNT receives Karma rewards proportionally. The longer one stakes or locks their SNT, the higher the Karma earning rate.

2. Bridging Yield-Bearing Assets – Bridging ETH and DAI (initially, with more assets to be added later) to Status Network earns Karma.

3. Providing Liquidity – On the native DEX, anyone can provide liquidity to curated pools to earn fees, native yield rewards, and Karma

4. Building and Using Applications – Users and developers earn Karma through transaction volume and app traction. The more successful an app is, the higher Karma is allocated to its developers and users.

5. Paying Premium Gas Fees – Users and apps exceeding their gasless throughput limit pay a premium gas fee that serves as a penalty but also earns them some Karma in return. Increasing their Karma might actually allow them to unlock higher gas-free transaction limits.

6. Direct Donations – Anyone contributing directly to the public funding pool receives Karma.

The initialization parameters of Karma minting allocations will be announced soon. In the future, Karma holders will be able to modify those parameters through a vote if needed. The ultimate objective is to maximize alignment among stakeholders for a more sustainable growth of the network.

Utility of Karma

• Gasless Transactions: As soon as an account has a positive Karma balance, it gains access to a certain throughput of free transactions. A tiered system allows users and apps with higher Karma to enjoy more free transactions per day. A dynamic rate-limiting mechanism prevents spam and ensures fair usage of the network.

• Governance Token: Karma holders vote on the allocation of the apps funding pool. Higher Karma scores have more weight in funding distribution - they can decide to prioritize their favourite applications or protocols.

• Native DEX Liquidity Incentives: Karma holders vote on the incentive gauges for all curated liquidity pools on the native DEX.

• Network Policy Decisions: Karma holders vote on the L2 economic and operational parameters, inlcuding native yield and fees distribution, Karma minting rate and allocation, etc.

• Loyalty and Reputation System: Since Karma is soulbound, high Karma scores signal power users and key contributors within the ecosystem. The users progressively accumulate influence and may gain access to extra incentives and perks (e.g. rewards from apps building on the network and seeking to attract high-quality users).

• Liquid Grants for Votes: In the future, apps, protocols, and liquidity providers will be able to offer liquid grants to Karma holders as voting incentives.

Flywheel Effect

1. Users bridge yield-bearing assets, earning Karma and increasing funding for apps and liquidity providers.

2. Higher app funding attracts new apps to deploy on the network.

3. Funded apps onboard more users, increasing transaction volume on the native DEX.

4. Higher native yield and fees attract more TVL as users bridge additional yield-bearing assets.

As TVL and adoption grow, so do funding opportunities, reinforcing network sustainability.