> For the complete documentation index, see [llms.txt](https://whitepaper.litho.ai/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://whitepaper.litho.ai/docs/network/tokenomics.md).

# Tokenomics

## LITHO Native Token

**LITHO** is the native utility token of the Lithosphere network. It serves multiple critical functions across the ecosystem:

* **Cross-chain and intra-chain transactions**: LITHO is used to pay for gas fees and facilitate value transfer both within the Lithosphere network and across bridged chains.
* **Security deposits**: Verification nodes must stake LITHO as a security deposit to participate in consensus, aligning validator incentives with network health.
* **Currency of choice**: LITHO acts as the primary medium of exchange within the Lithosphere DeFi ecosystem.

## Token Design

The LITHO token economics are structured around five foundational elements:

### 1. Total Supply

The total supply of LITHO is capped at **1 billion tokens**. This fixed ceiling ensures scarcity and provides a predictable monetary policy for the network.

### 2. Distribution System

LITHO operates under a **limited supply, non-inflationary** model. No additional tokens beyond the initial 1 billion can ever be minted, preserving value for long-term holders and participants.

### 3. Allocation

Token allocation follows a structured distribution:

* **10%** reserved for the core team
* **Approximately one-third** allocated to accounting nodes (validators)
* **Remainder** directed toward ecosystem growth, development funding, and community incentives

### 4. Foundation

**More than 50%** of tokens are allocated to the KaJ Labs Foundation to fund cross-chain, cross-organization, and cross-data development initiatives. This ensures sustained investment in the network's core mission of blockchain interoperability.

### 5. Fuels and Miners

Nodes are compensated through a combination of **token release schedules** and **service fees** collected from network transactions. This dual-revenue model provides both predictable baseline rewards and performance-based income.

## Funding Distribution

The initial token distribution follows this breakdown:

| Recipient           | Allocation |
| ------------------- | ---------- |
| Fundraiser donors   | 70%        |
| Lead donors         | 5%         |
| KaJ Labs Foundation | 10%        |
| Network awareness   | 10%        |
| Core team           | 10%        |

## Staking Rewards

From the **Kamet** milestone onward, **one-third of total $LITHO** is rewarded to bonded validators and delegators on an annual basis. This reward structure incentivizes long-term staking and network participation while maintaining a predictable emission schedule.

## LAX Algorithmic Stablecoin

![LUSD](/files/pQJYqVxG06ippReVbDNL)

**LAX** is the algorithmic stablecoin native to the Lithosphere ecosystem. Unlike traditional stablecoins, LAX maintains its peg through algorithmic supply adjustments rather than collateral reserves.

### Key Properties

* **Target value**: Always worth **$1 USD**
* **Not pegged** to USD reserves or crypto collateral
* **Dynamic supply**: Determined by real-time supply and demand dynamics
* **Rebasing mechanism**: The protocol adjusts the total supply of LAX every **24 hours** to maintain the $1 target price

### How Rebasing Works

* When LAX trades **above $1**, the protocol increases supply proportionally across all holders, creating selling pressure to bring the price back down.
* When LAX trades **below $1**, the protocol decreases supply proportionally, creating scarcity and buying pressure to push the price back up.

### LAX Use Cases

LAX serves several functions within the Lithosphere ecosystem:

* **Yield generation**: LAX can be deployed in DeFi protocols to earn yield while maintaining stable value.
* **Leverage**: Traders can use LAX as a stable base for leveraged positions.
* **Liquidity provision**: LAX pairs provide stable liquidity in decentralized exchanges.
* **Collateral**: LAX is accepted as collateral across the Lithosphere ecosystem for lending, borrowing, and other DeFi activities.

## Roadmap Funding

The following diagram illustrates the funding allocation across the project roadmap milestones:

![Roadmap](/files/peE91ss7XfzBG5Y38o64)