Chiliz

The Deflationary Native Token VCM captures value for the CHZ token by requiring its use for gas fee payments and essential network operations, tying its demand directly to transactional activity on the Chiliz network. As a user utilizes CHZ to process transactions, the token’s importance increases with network usage, with this value manifested as economic utility. Additionally, CHZ tokens spent on transaction fees are burned, implementing a deflationary mechanism akin to Ethereum’s EIP-1559, where the base fee is burned, further enhancing value capture by reducing the token’s circulating supply and creating deflationary pressure.

The Consensus Token VCM enables the CHZ token to capture value by requiring a validator to stake CHZ to engage in the Chiliz network’s consensus process, ensuring network security. The validator must lock up CHZ to participate in node running and block validating operations, which constitute conditional actions necessary for network operation. This staked CHZ is exposed to the risk of slashing for any malicious behavior, aligning the validator’s incentives with those of the network operator and users. Moreover, even if the user immediately wished to withdraw his stake, he would be able to do so only with a delay of 72 000 blocks, thereby exposing the tokens to at least the risk of runaway depreciation. In return, the validator receives CHZ-denominated staking rewards; incentivizing active participation in the consensus process. As more CHZ is staked, the increased stake value raises the cost of an attack on the network, fostering greater confidence for developers and users building on the platform.

The Stake Delegation VCM captures value for the CHZ token by allowing a delegator to stake their CHZ and delegate it to a validator of their choice, contributing to the validator’s total stake for the purpose of selecting the active set of thirteen (since February 2025) highest-stake validators in the Chiliz network. The delegator’s staked CHZ is exposed to the same risk of slashing as the validator’s stake, and their conditional action involves choosing a validator to delegate their stake to, aligning their interests with the network’s security. In exchange, the delegator receives a proportional share of the staking rewards allocated to the validator, less the validator-specific commission, in addition to the rewards due to the validator’s self-stake. Higher staking levels, including delegated stakes, reduce the circulating supply of CHZ, mitigating inflationary pressures from emissions and supporting the token’s value.

The Governance VCM captures the value of the CHZ token by enabling a validator, though not necessarily a main validator, to participate in the steering of the protocol, thus being conditioned on risk exposure and conditional action.

In addition, it can be argued that the ability to delegate governance power also allows the staker to indirectly influence the Chiliz ecosystem’s decision-making process. Unlike direct governance, where a user creates proposals and votes, this mechanism shifts the conditional action of proposal creation and voting to the validator. The staker wields a derivative form of governance power, akin to a representative democracy, by reallocating their staked CHZ to the validator, thereby dynamically adjusting the distribution of governance influence within the validator set; furthermore, the staker can influence the validator’s behavior by prioritizing one whose governance goals align with their own. This, however, is not enshrined in the token design and is therefore present as a note here, and the Governance sub-VCM pertains purely to the direct participation of validator owners.