Tokenomics

Silicon Network's token economy is designed to align incentives across all ecosystem participants while providing a stable foundation for the network's long-term growth. This section provides a high-level overview of the token model, with comprehensive details that will be available in a Silicon Network tokenomics whitepaper.

Tokenized GPU Ownership

GPU NFTs represents ownership of physical computing hardware, combining the benefits of real-world assets with blockchain-based transferability:

• Each physical GPU in a datacenter will have an NFT on Chia that represents ownership of the GPU to claim rewards, and a corresponding Base NFT that will be used for initial capital formation as well as be used to define where rewards payouts are sent
• Owners can claim rewards based on their GPU's utilization or can opt into resource pools for smoothed, predictable earnings across multiple GPUs
• Performance metrics and ownership records are transparently tracked on-chain
• NFTs can be traded on Silicon Network's marketplace

$SIL Token Overview

$SIL functions as the native utility token of the Silicon Network, serving three essential purposes and will be available on both Base and Chia blockchains:

• Payment Mechanism: Facilitates transactions within the ecosystem
• Reward Distribution: Compensates GPU owners and operators for contributing resources
• Governance: Enables protocol decision-making by token holders

A total fixed supply of $SIL will be generated across both Base, a layer 2 optimistic rollup on Ethereum, and the Chia blockchain to serve as native tokens on both chains. The native tokens will be interchangeable between the two chains through Silicon’s cross-chain transfer protocol (CCTP), a fork of Circle’s CCTP for swapping USDC across blockchains.

Economic Model Summary on Base

On Base, Silicon Network employs a Burn-Mint Equilibrium (BME) model that creates price stability for users while rewarding infrastructure providers building an economic flywheel that balances supply and demand:

• Customer payments in $SIL are burned to create USD-pegged data credits ($DC)
• Spending $DC for compute resources provides stable pricing
• $DCs spent to a GPU or pool GPUs represent the utilization of those GPUs that will earn $SIL within a given time epoch
• $SIL is minted as rewards proportional to resource utilization when $DC are burned over a epoch and ultimately distributed to both GPU owners and providers while a small fee is paid to the Silicon Protocol foundation wallet to maintain the network
• Proof of ownership of NFT to a specific GPU entitles the owner to claim $SIL rewards

Economic Model Summary on Chia

Silicon Network’s will have a portion of the total supply minted as a native token on Chia to incentive participation by the Chia farming community to participate in a worldwide distributed AI inference cloud platform. :

• $SIL on Chia will be used by inference customers to access and use the Silicon Community Cloud Provider network.
• Community cloud providers will be paid in $SIL on Chia as rewards for processing AI inference workloads based on the market price token cost to run the inference workload
• Marketplace price for inference customers will be initially be set by Berkeley Compute based on market rates that will eventually move to an oracle that will determine the exchange rate for $SIL to compute tokens needed to pay for each inference workload 
• $SIL on Chia can be swapped to $SIL on Base and vice versa through Silicon’s cross chain transfer protocol

Cross chain transfer protocol

Silicon Network will deploy a cross chain transfer protocol to ensure a 1 for 1 swap of $SIL across all supported blockchains to keep the total supply of $SIL fixed while allowing the flexibility for users to collect, and spend $SIL on their preferred blockchains and use case:

• Smart contracts on Chia and on Base enable burning and minting of SIL on a 1:1 basis.
• Holders can move $SIL seamlessly between Base and Chia or any other future supported blockchains at a 1:1 swap eliminating needs to have a wrapped or synthetic tokens
• Enhanced security due to a burn-mint mechanism that ensures the native token is only minted on the destination chain
• Easily supports the addition of $SIL on new blockchains to access other highly liquid or strategic communities
• Removes reliance on liquidity pools and third party liquidity providers enabling limitless transfers without requiring locked liquidity while minimizing fees with no slippage

Token Allocation

The $SIL token distribution on Base and Chia is strategically designed to foster long-term ecosystem growth and align incentives across all stakeholders:

• Early Node Incentives: Allocation reserved for early GPU operators who support network growth
• Community & Ecosystem: Funds dedicated to community development, grants, and ecosystem expansion
• Foundation Treasury: Resources maintained by the foundation for long-term governance and sustainability
• Team & Contributors: Allocation for the development team and early contributors with appropriate vesting schedules
• Strategic Partners: Tokens dedicated to building strategic relationships with key industry participants

Specific allocation percentages and vesting schedules are detailed in a forthcoming Silicon Network tokenomics whitepaper.