Guide to SHER Tokenomics

Tokens are a way for anyone to contribute to a network and gain exposure to the long-term value creation of that network. In this way, a tokenholder can be thought of as someone who is looking to use their specific skillset and knowledge to participate in the construction and governance of a given ecosystem.

The SHER token is the backbone of the Sherlock protocol and it will exist to ensure the long-term sustainability and success of the protocol. The goal is for the Sherlock protocol to continue to exist and function in a useful way in the future. This requires continuous participation in the network over time and is why the SHER token supply is planned to be inflationary in the future. Decades from now, new contributors should be able to access token rewards and those who no longer contribute or participate will incentivize these newcomers.

The SHER token has been designed from the ground up, but many inspirations were taken from the creative minds who designed other governance systems. Specifically, the creators of the SHER token were inspired by the progressive decentralization approach taken by The Graph creators as well as the voting mechanisms designed by the Curve team.

Beyond this, SHER tokenholders will always be an essential part of a properly functioning Sherlock ecosystem. The roles of SHER tokenholders include:

  • Managing the security team and having a built-in vested interest in the effectiveness of both the security team and the protocol combined
  • Governing the protocol and setting parameters as well as voting on additional smart contract deployments
  • Most important, stepping up to provide the censorship resistance necessary to ensure the Sherlock protocol can exist for many decades to come

Token Allocation

The SHER token will have an initial supply cap at 100,000,000 tokens. The supply is not permanently capped at this level but we’d expect SHER governance to have a very good reason for increasing the supply above that level in the next 10 years.

The initial supply of 100,000,000 tokens is expected to be distributed based on the percentage allocations outlined below. Note: Some of these allocations are not hardcoded, therefore they are subject to change.

  • 40.4% (40,365,000 SHER) is reserved for current and future core team members. Most of these members are full-time or have dedicated a substantial portion of their lives to contributing to the Sherlock ecosystem. Every contributor in this category has a 1-year lockup and 36-month linear vesting schedule. Current and future team members in this category are expected to be in it for the long haul and are rewarded commensurately.
  • 4.5% (4,455,000 SHER) is allocated to investors who participated in the pre-seed round and contribute strategic, hiring, sourcing, legal and other support to the protocol and the core team on an ongoing basis. These tokens are subject to a 1-year lockup and a 36-month linear vesting schedule.
  • 0.2% (180,000 SHER) is allocated to the foundational advisory support system for the Sherlock core team. These advisors contribute advice and guidance on an ongoing basis to provide a guiding hand to the core team members. These tokens are subject to a 1-year lockup and a 24-month linear vesting schedule.
  • 7.5% (7,500,000 SHER) is allocated to the stakers who participated in the initial guarded launch staking event. These stakers risked their capital when nobody else would and have demonstrated an unwavering belief in the operation of the protocol. This staking event included a 6-month USDC lockup and the SHER tokens associated with this event are subject to a 1-year lockup and a 12-month vesting schedule, with 50% unlocked after the first year and 50% unlocked after the second year.
  • ~7.3% (~7,300,000 SHER) is allocated to participants in Sherlock’s seed round. The details of this raise are still being finalized. The team expects the allocation to be somewhere around 7.3% of the total SHER token supply. The proceeds from the seed round will be used mainly for hiring and audit/security purposes.
  • 1.5% (1,500,000 SHER) is allocated to participating protocols who utilize Sherlock’s services. Sherlock believes it is important to foster aligned incentives between other protocols in the ecosystem. The expectation is that the vast majority of tokens in this category will be dispersed as part of a token swap with protocols in the Sherlock ecosystem. These tokens will have a 1-year lockup with all tokens being claimable after the 1-year lockup.
  • 6.0% (6,000,000 SHER) is allocated to security expert contributors. A huge portion of Sherlock’s model relies on the continued participation of the very best security experts in the crypto space. So far, we’ve been honored to work with many of them and we hope to continue to earn that privilege as well as develop up-and-coming security talent for the ecosystem. These tokens are subject to a 6-month lockup with all tokens being claimable after the 6-month lockup.
  • 20.0% (20,000,000 SHER) is allocated to stakers in the Sherlock protocol, starting in April 2022. Sherlock cannot function properly without the trust and participation of the staking community. Sherlock will continue to reward those who trust the protocol with their capital for many years to come. These tokens will have a lockup period that is analogous to the staking lockup they choose. We expect the choices to range from 6-month lockups to 12-month lockups in the short-to-medium term.
  • 12.7% (12,700,000 SHER) is allocated to the treasury to support the unforeseen and ongoing operational needs of the Sherlock protocol for decades to come. These funds may be used for various purposes such as bootstrapping a SHER/ETH Uniswap pair or vote-escrowed liquidity mining.

Token Allocation Visualization

SHER tokens will unlock as follows:

The Sherlock team believes the current tokenomics of the SHER token sets up the protocol for continued success well into the future. The community of future tokenholders is already quite a large and talented group, and the team looks forward to adding many impactful contributors to the community in the coming years.

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