Tokenomic Adjustment Proposal March 14th 2025 
To pave the way for KILT&rsquo;s ambitious multi-chain future, we propose to rectify certain technical and tokenomic defects in the current Polkadot-Ethereum-BASE bridging chain. This would involve the KILT token on BASE undergoing a contract migration. The KILT parachain would continue to run as normal on Polkadot.
&nbsp;
Motivation
The primary reasons for the migration are as follows:
<ul>
<li>The current KILT <a href="https://etherscan.io/token/0x5d3d01fd6d2ad1169b17918eb4f153c6616288eb" target="_blank" rel="noopener">Ethereum contract</a> has a fixed supply of 164,000,000 which cannot accommodate native KILT&rsquo;s maximum supply of 290,560,000. This contract acts as a bottleneck in existing bridging arrangements meaning that the maximum supply could never reach BASE, or indeed any other chain. This restricts KILT&rsquo;s ability to operate in a multi-chain capacity.</li>
<li>The current KILT <a href="https://basescan.org/token/0x9E5189a77f698305Ef76510AFF1C528cff48779c" target="_blank" rel="noopener">BASE contract</a>, by necessity, has a mintable supply, since it is reached only by bridging from Ethereum. Its supply is limited instead by the maximum supply of the Ethereum contract, through which KILT must first pass before reaching BASE. This arrangement is undesirable to maintain long-term and poses security and reputational risks.</li>
</ul>
&nbsp;
Tokenomic Adjustment
At time of writing, KILT&rsquo;s total supply is ~164,760,000 meaning that there are ~125,800,000 tokens remaining to be minted. Following the inflation schedule described in the original <a href="https://kilt-protocol.org/files/Token-Economy.pdf" target="_blank" rel="noopener">token economy paper</a> these were due to be emitted over approximately 60 years primarily to Collators and, in small part, the Treasury.
Simplification of the Collator arrangements, down to a core of 3 to 5 participants, would make these tokens available and we propose to distribute them proportionately to existing KILT holders. Thereafter, KILT would be 100% minted and with no inflation. This distribution cannot take place on Polkadot due to the aforementioned supply bottleneck on Ethereum; only 164,000,000 of the 290,560,000 (i.e. 56%) would ever be able to bridge to Ethereum or beyond. Instead, the distribution would&nbsp;take place by way of the BASE contract migration itself.
The contract migration would not change the maximum supply of 290,560,000. From the true total supply, this means that tokens would need to be migrated at a ratio of 1:1.7635(&hellip;). In practice, taking the Ethereum contract&rsquo;s smaller total supply bottleneck the ratio becomes 1:1.7717(&hellip;).
&nbsp;
<img src="https://i.ibb.co/YFk1zKVq/table1.png" alt width="470" height="243" />
&nbsp;
The migration ratio would be rounded to 1:1.75 which leaves 3,560,000 surplus tokens, representing 1.2% of the supply. Since the Treasury was due to be a recipient in the original emissions scheme, these tokens would be diverted there for the continued benefit of the project:
&nbsp;
<img src="https://i.ibb.co/HLbXQqzH/Screenshot-1.png" alt width="667" height="126" />
Governance, Utility and the Parachain
The KILT parachain would continue to run as normal and without interruption. It would transition to using DOT for gas. The new BASE token would enjoy exactly the same governance rights over KILT Protocol by way of bridging back to Polkadot to participate in democracy actions.
Existing DIDs would have their associated KILT unlocked, but to preserve the tokenomic integrity of the system up to this point we would divert an exactly equivalent amount of KILT on the new BASE contract to the Treasury.
EVM functionality is in development and further utility for the KILT token will be announced in due course.
&nbsp;
Exchanges
KILT&rsquo;s CEX listings are highly valued and our goal is to retain them by gaining the exchanges&rsquo; support for the contract migration and assisting them however necessary. Discussions have been opened with each of them and at this early stage there have been strong expressions of&nbsp;interest in supporting the contract migration by listing the new token and migrating user deposits on their behalf, when the time comes.
Uniswap LP would be moved to the new pair upon opening of the contract migration window.
Contract migrations are not an uncommon occurrence and exchanges have good experience in handling them. We expect that they would be able to work with us to offer a hassle-free transition with the minimum of downtime.
&nbsp;
Summary
<ul>
<li>Defects in the Polkadot&rarr;Ethereum&rarr;BASE bridging setup limit KILT&rsquo;s ability to expand to EVM chains.</li>
<li>This can be corrected by means of a contract migration on BASE.</li>
<li>~43% of the supply remains to be minted and we propose to distribute this to current holders.</li>
<li>Maximum supply would remain the same (290,560,000).</li>
<li>Total supply would increase from ~164,760,000 to 290,560,000.</li>
<li>Holders would migrate at 1:1.75. For example, 1000 KILT on the old contract would become 1750 KILT on the new contract.</li>
<li>1.2% of this newly-minted supply would be granted to the Treasury, to make up for lost inflation due.</li>
<li>After the migration, the supply would be 100% minted and there would be zero inflation.</li>
<li>The parachain would transition to using DOT for gas.</li>
<li>The new token would enjoy the same governance rights over the parachain.</li>
</ul>
&nbsp;
Next Steps
We welcome a discussion on this topic. We are seeking regulatory approval, after which we will be in a position to return to the community with a detailed plan and timeline, which will be put to a referendum. At this stage, KILT holders do not need to take any action whatsoever; all trading and token functions remain unchanged. 
-The KILT Foundation

Tokenomic Adjustment Proposal March 14th 2025 
To pave the way for KILT&rsquo;s ambitious multi-chain future, we propose to rectify certain technical and tokenomic defects in the current Polkadot-Ethereum-BASE bridging chain. This would involve the KILT token on BASE undergoing a contract migration. Concurrently, the KILT token on Polkadot would be deprecated.
&nbsp;
Motivation
The primary reasons for the migration are as follows:
<ul>
<li>The current KILT <a href="https://etherscan.io/token/0x5d3d01fd6d2ad1169b17918eb4f153c6616288eb" target="_blank" rel="noopener">Ethereum contract</a> has a fixed supply of 164,000,000 which cannot accommodate native KILT&rsquo;s maximum supply of 290,560,000. This contract acts as a bottleneck in existing bridging arrangements meaning that the maximum supply could never reach BASE, or indeed any other chain. This restricts KILT&rsquo;s ability to operate in a multi-chain capacity.</li>
<li>The current KILT <a href="https://basescan.org/token/0x9E5189a77f698305Ef76510AFF1C528cff48779c" target="_blank" rel="noopener">BASE contract</a>, by necessity, has a mintable supply, since it is reached only by bridging from Ethereum. Its supply is limited instead by the maximum supply of the Ethereum contract, through which KILT must first pass before reaching BASE. This arrangement is undesirable to maintain long-term and poses security and reputational risks.</li>
</ul>
&nbsp;
Tokenomic Adjustment
At time of writing, KILT&rsquo;s total supply is ~164,760,000 meaning that there are ~125,800,000 tokens remaining to be minted. Following the inflation schedule described in the original <a href="https://kilt-protocol.org/files/Token-Economy.pdf" target="_blank" rel="noopener">token economy paper</a> these were due to be emitted over approximately 60 years primarily to Collators and, in small part, the Treasury.
Simplification of the Collator arrangements, down to a core of 3 to 5 participants, would make these tokens available and we propose to distribute them proportionately to existing KILT holders. Thereafter, KILT would be 100% minted and with no inflation. This distribution cannot take place on Polkadot due to the aforementioned supply bottleneck on Ethereum; only 164,000,000 of the 290,560,000 (i.e. 56%) would ever be able to bridge to Ethereum or beyond. Instead, the distribution would&nbsp;take place by way of the BASE contract migration itself.
The contract migration would not change the maximum supply of 290,560,000. From the true total supply, this means that tokens would need to be migrated at a ratio of 1:1.7635(&hellip;). In practice, taking the Ethereum contract&rsquo;s smaller total supply bottleneck the ratio becomes 1:1.7717(&hellip;).
&nbsp;
<img src="https://i.ibb.co/YFk1zKVq/table1.png" alt width="470" height="243" />
&nbsp;
The migration ratio would be rounded to 1:1.75 which leaves 3,560,000 surplus tokens, representing 1.2% of the supply. Since the Treasury was due to be a recipient in the original emissions scheme, these tokens would be diverted there for the continued benefit of the project:
&nbsp;
<img src="https://i.ibb.co/HLbXQqzH/Screenshot-1.png" alt width="667" height="126" />
Governance, Utility and the Parachain
The KILT parachain would continue to run as normal and without interruption. It would transition to using DOT for gas. The new BASE token would enjoy exactly the same governance rights over KILT Protocol by way of bridging back to Polkadot to participate in democracy actions.
Existing DIDs would have their associated KILT unlocked, but to preserve the tokenomic integrity of the system up to this point we would divert an exactly equivalent amount of KILT on the new BASE contract to the Treasury.
EVM functionality is in development and further utility for the KILT token will be announced in due course.
&nbsp;
Exchanges
KILT&rsquo;s CEX listings are highly valued and our goal is to retain them by gaining the exchanges&rsquo; support for the contract migration and assisting them however necessary. Discussions have been opened with each of them and at this early stage there have been strong expressions of&nbsp;interest in supporting the contract migration by listing the new token and migrating user deposits on their behalf, when the time comes.
Uniswap LP would be moved to the new pair upon opening of the contract migration window.
Contract migrations are not an uncommon occurrence and exchanges have good experience in handling them. We expect that they would be able to work with us to offer a hassle-free transition with the minimum of downtime.
&nbsp;
Summary
<ul>
<li>Defects in the Polkadot&rarr;Ethereum&rarr;BASE bridging setup limit KILT&rsquo;s ability to expand to EVM chains.</li>
<li>This can be corrected by means of a contract migration on BASE.</li>
<li>~43% of the supply remains to be minted and we propose to distribute this to current holders.</li>
<li>Maximum supply would remain the same (290,560,000).</li>
<li>Total supply would increase from ~164,760,000 to 290,560,000.</li>
<li>Holders would migrate at 1:1.75. For example, 1000 KILT on the old contract would become 1750 KILT on the new contract.</li>
<li>1.2% of this newly-minted supply would be granted to the Treasury, to make up for lost inflation due.</li>
<li>After the migration, the supply would be 100% minted and there would be zero inflation.</li>
<li>The parachain would transition to using DOT for gas.</li>
<li>The new token would enjoy the same governance rights over the parachain.</li>
</ul>
&nbsp;
Next Steps
We welcome a discussion on this topic. We are seeking regulatory approval, after which we will be in a position to return to the community with a detailed plan and timeline, which will be put to a referendum. At this stage, KILT holders do not need to take any action whatsoever; all trading and token functions remain unchanged. 
-The KILT Foundation

Tokenomic Adjustment Proposal

- **Problem Statement:** Defects in the Polkadot-Ethereum-BASE bridging setup limit KILT's expansion to EVM chains.
- **Significance:** Correcting these defects through a contract migration on BASE will allow for the distribution of remaining tokens to current holders, maintaining the maximum supply of 290,560,000.
- **Proposed Solution:** Conduct a contract migration on BASE, distributing remaining tokens to current holders at a ratio of 1:1.75, with 1.2% of the new supply allocated to the Treasury.
- **Expected Outcomes:** Total supply will increase from ~164,760,000 to 290,560,000, with zero inflation post-migration, and the parachain transitioning to using DOT for gas.

#238 Tokenomic Adjustment Proposal