At the live AMA of the first anniversary of Ontology’s MainNet launch on July 24, 2019, the Ontology core team announced that 37,500,000 ONT, 100% of the ONT amount unlocked for the core team in 2019 and 3.75% of the total ONT supply, will be staked into consensus nodes.

The total ONT supply is 1,000,000,000 and the current circulating supply is 655,000,000 ONT. Now that the staking of 37,500,000 ONT has completed, the circulating supply has been reduced to 617,500,000 ONT. What implications will this have for the supply and demand of ONT and ONG? In this article, I will explain it in plain-English economics by breaking down Ontology’s ONT/ONG dual-token model.

According to the demand curve in economics, we can infer that:

As is shown below, when the circulating supply is 655,000,000 ONT, the ONT price is P1.

Let’s first take a look at ONT’s demand curve:

The staking of 37,500,000 ONT means that the ONT circulating supply in the market is reduced by 37,500,000. When demand remains unchanged while the circulating supply is reduced to 617,500,000 ONT (see S2), the ONT price goes up to P2, and P2>P1;

When the ONT price is up, demand for ONT will grow and ONT transactions will increase, thus driving up the demand for ONG, the GAS in the Ontology network. We must add here that part of the rewards for the Ontology Triones nodes comes from the ONG GAS fee. As ONT transactions increase, so do the GAS fees distributed to Ontology Triones nodes. We can predict that as the rewards for staking increase, more investors will want to stake their ONT into the Ontology Triones nodes. When more ONT is staked, the ONT circulating supply in the market will be reduced further (see S3). As a result, the ONT price moves to P3 and P3>P2>P1, which means the ONT price is up again.

Now the implications of the 37,500,000 ONT staking by the core team for the ONT price are very clear. What about ONG? As mentioned before, as the ONT price increases, ONG GAS will be used more frequently, thus driving up the demand and in turn the ONG price. When the ONG price is up, we can infer that:

As is shown below, the initial ONG price is P1.

(D2 represents the growing demand, S2 represents the rising supply, and S3 represents the decreasing supply.)

Scenario 1: The demand for ONG is up while the supply remains unchanged. In this case, we will see the demand curve moving to D2. How can we assume the supply will remain unchanged? According to the Ontology dual-token model, the ONG amount generated in a given period is constant. So the ONG price moves to P2;

Scenario 2: The demand for ONG is up and the supply has increased slightly. Under this scenario, we will have D2 and S2. As it takes time for ONG to be unbound, chances are the speed at which the ONG supply increases is slower than that of the demand, so the ONG price moves to P3 and P3>P1;

Scenario 3: The demand for ONG is up whereas the supply is down. The reason for this is that as the ONT price rises, users who stake in the Ontology Triones nodes find that the rewards from staking are lower than trading ONT. As more users trade their ONT in the secondary market, fewer ONT is staked in the nodes. As a result, the ONG amount generated by staking or the unbound ONG amount decreases, so we will have P4 and S3, showing that the supply is down while the demand is up, therefore P4>P1.

As can be seen above, P4>P3>P2>P1. The ONG price moves upwards in all 3 scenarios.

When ONG appreciates, the first thing that comes to our mind is how can we get ONG? Besides staking in the Ontology Triones nodes, you can also get ONG on the Ontology dApp platform. dApps on Ontology offer a certain amount of ONG as incentives to new users. You can obtain a certain amount of ONG in these dApps and make transactions using ONG as GAS.

The more people use dApps, the higher the demand for ONG. As ONG is being used more frequently and keeps appreciating, investors will naturally turn their attention to what generates ONG — ONT. When investors are choosing which digital asset to invest in, they will also consider whether that digital asset has added value besides project development and the price trend. If you buy ONT, you can make a profit by trading it and also earn rewards from the ONG generated by the ONT you hold, which is the added value ONT offers and what makes Ontology’s dual-token model stand out. We have every reason to believe that the growing demand for ONT will undoubtedly drive up the prices of both ONT and ONG.

By breaking down the Ontology dual-token model, I have explained what positive implications the staking of 37,500,000 ONT will bring, we can certainly be sure that more good things will come out of this.