A higher ICP price can reduce the number of tokens minted for node provider rewards, but it also means fewer ICP tokens are needed to pay for the network’s computing costs.
An analysis published by ICPulse argues that looking only at reduced issuance can give an incomplete picture of how changes in the ICP price affect net supply.
Node provider rewards are denominated in XDR rather than ICP. The network therefore mints the number of ICP tokens required to meet the fixed XDR value of those rewards. When the price of ICP rises, fewer tokens are needed to deliver the same value.
The same principle applies to cycles, which are used to pay for computation on the Internet Computer. The analysis states that one trillion cycles is defined as one XDR, meaning a higher ICP price requires fewer tokens to purchase the same amount of computation.
Both flows are therefore linked to XDR, although they operate through different parts of the network. According to the analysis, this means the reduction in burn that accompanies a higher ICP price should be considered alongside the reduction in issuance.
Data covering 30 complete UTC days to 8 September shows 963,324 ICP minted during the period. Of that amount, 551,737 ICP went to node provider reward accounts across three days: the monthly distribution on 14 August, followed by smaller distributions on 18 August and 7 September.
During the same period, 47,472 ICP was burned through the purchase of cycles and another 52 ICP was burned through transaction fees. The resulting net emission was 915,800 ICP.
The analysis estimates that the two XDR-priced flows differ by more than eleven times. On that basis, for every 100 ICP of issuance reduced by a higher token price, around nine ICP of burn would also be removed.
The remaining 43 per cent of the ICP minted during the period came from stakers realising maturity. Unlike node rewards and cycles, this component is denominated in ICP and therefore does not change directly with the token’s price.
There is also a limitation in comparing daily ledger activity. ICP burned for cycles is tied to purchase events, with canister owners deciding when to top up their cycles balances. The analysis notes that the amount of cycles consumed per ICP burned varied by more than twelve times over a recent week.
As a result, the relationship between ICP’s price and net supply cannot be established simply by comparing daily burn figures. The analysis instead derives the relationship from the XDR peg used by the protocol.
The figures and methodology are presented by ICPulse as an analysis of ICP issuance and burn mechanics rather than a forecast of price or supply. The site also states that its founding terms are locked for life for the first 100 people on its list.
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