The burn mechanism that will redefine POKT's supply: Pocket Network bets on deflation

Pocket Network has just made a historic turn in its economic architecture. The governance vote concluded in December 2024 approved the PIP-41 initiative, a radical change that transforms the protocol from an expansionary model to a deflationary one. Implementation is scheduled for mid-January 2025 via update v1.31, and impacts will begin to be felt immediately in the circulation of POKT.

What does this mean in practice? That the network will introduce a permanent burn rule system where 2.5% of all tokens used in transactions will be removed from circulation without reissuance. Considering that POKT currently has a circulating supply of 2,011,680,128 tokens, this deflationary mechanism will act as a constant pressure valve on inflationary pressure.

The mechanics that change everything: how the new burn rules work

The previous system operated under a neutrality logic. Every time an application paid a fee in POKT to access blockchain data via a relay, those tokens were burned. Simultaneously, the network minted an equivalent amount to compensate node operators processing the request.

The reform introduces a deliberate asymmetry. The burn rules now work as follows:

• 100% of relay fees are permanently burned from the system
• Only 97.5% of that burned amount are re-minted as rewards
• The 2.5% difference disappears forever

This design creates an automatic counter-pressure effect. The higher the activity on the decentralized RPC network, the more transactions occur, the more POKT is burned without reissuance, and the total supply gradually decreases. Conversely, during periods of lower demand, the deflationary pressure naturally slows down.

The technical architecture ensures that this mechanism is algorithmic and without intermediaries. No centralized entity decides what to burn; the burn rules are directly coded into the logic of protocol v1.31, executing automatically on each transaction.

Why a DAO chooses scarcity: the economic reasoning behind PIP-41

Tokenomics analysts have repeatedly pointed out that protocols based solely on emissions face a fundamental dilemma: if utility demand does not grow faster than the new supply, the token price tends to depreciate under excessive supply pressure.

The PIP-41 proposal reverses this equation. By linking supply reduction directly to protocol usage, Pocket Network creates a virtuous cycle where higher activity generates greater scarcity. For POKT holders, this introduces a store of value feature that did not exist before.

The approval process was not rushed. The community spent months debating, modeling technical scenarios, and analyzing comparisons with other infrastructure protocols. Node operators, developers, and token holders actively participated in multiple review cycles before reaching consensus. This collaborative governance reflects how mature protocols iterate their economic models post-launch.

Differentiated impact depending on the role in the network

Not everyone in the ecosystem will experience this transition in the same way.

For node operators: The immediate reduction in minted POKT is 2.5% compared to the previous model. In absolute terms, this represents a marginal cut in relay rewards. However, the potential benefit lies in those devalued POKT possibly increasing their unit value if the deflationary pressure creates perceptible scarcity in the market.

For token holders: The change is fundamentally positive in theory. The more activity on the network, the less POKT is in circulation. Assuming stable or increasing demand, this contraction effect should exert upward pressure on the price. The current distribution of 2,011,680,128 tokens in circulation will begin to compress algorithmically.

For dApp developers: The fee structure remains unchanged. They continue paying the same POKT per relay request. The change occurs silently in the backend; they do not perceive a difference in their user experience.

For the protocol overall: The transformation positions Pocket Network uniquely in the sector. While competitors rely on stablecoin payments or maintain expansionary models, Pocket Network now uses deflation as a value mechanism. This could inspire similar discussions in other DAOs.

The before and after comparison table

Questions arising in the market

When exactly does it come into effect?
Mid-January 2025. The v1.31 update requires all nodes to synchronize simultaneously with the new burn rules.

Does this affect the cost for end users?
No. Developers and applications continue paying the same POKT per relay. The change is invisible to them.

What happens if relay demand decreases?
Deflation slows down. The burn rules operate proportionally to activity. Fewer transactions = less burn = lower deflationary pressure. The mechanism is fully dynamic.

Can the protocol reverse this if it goes wrong?
Technically yes, through another DAO vote. But community consensus was broad, indicating high commitment to this direction.

What to expect in 2025

The implementation in mid-January will mark the beginning of a fascinating economic experiment. For the first time, a decentralized infrastructure network of significant scale will apply deflationary burn rules as a core tokenomics mechanism.

The coming months will reveal whether this architecture achieves its goal: creating algorithmic scarcity that rewards early participation while maintaining strong incentives for node operators. The circulating supply of POKT will begin its gradual contraction, each relay contributing imperceptibly to an overall reduction.

Pocket Network has bet that deflation linked to real utility creates a more solid economic foundation than infinite expansion. On-chain data and price dynamics in the coming quarters will determine whether this bet was correct or if the market requires additional iterations.