TANIP1 Findings & Recommendations Report Following “Proposal: Temporary Pause of TANIP-1 Issuance Pending Council Review”

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Prepared by TAN Council — October 2025

1. Executive Summary

TANIP-1 was the Telcoin Association’s first application-layer TEL issuance program, designed to operationalize user ownership within the Telcoin Platform by rewarding productive activity on the Telcoin Application Network (“TAN”). It established the unified staking model and introduced a transparent, rules-based framework for distributing TEL issuance to users who staked and generated verified on-chain fees, as well as to those who referred new participants.

Launched on 19 February 2025 and paused on 3 September 2025, TANIP-1 directed a weekly issuance of 3.2 million TEL from the TAN Council Safe to eligible participants. The program represented a key milestone in shifting value accrual from intermediaries to active users, translating the Association’s constitutional principle of a user-owned financial platform into a measurable on-chain mechanism.

TANIP-1 pursued four main objectives:

  1. Reward productive network participation by linking issuance to real transaction activity and referrals.

  2. Encourage organic user adoption through peer-to-peer referrals.

  3. Promote sustainable staking behaviour by tying rewards to committed stake levels.

  4. Ensure transparency and reproducibility through verifiable, on-chain data.

The issuance process combined smart contracts and deterministic off-chain computation to calculate rewards from eligible transaction fees. Participants’ claims were published weekly, ensuring auditability and fairness.

Outcomes show that TANIP-1 successfully stimulated trading activity but was likely largely driven by speculative (“mercenary”) capital seeking short-term returns. Weekly fee volumes stabilized around the 3.1M TEL issuance rate, suggesting participants were spending roughly what they earned. While transaction volumes increased during the program, wallet participation remained relatively constant, indicating limited long-term user retention. Referral data further suggested circular or self-referential activity among some wallets, reinforcing the presence of short-term capital rather than organic network growth.

In response, the TAN Council recommends transitioning from issuance-based incentives to a Trading Fee Rebate Program, maintaining the same framework and eligibility criteria but ensuring that no user can earn more TEL than they spend in fees. This would preserve network participation incentives while curbing mercenary behaviour and reinforcing genuine platform use.

In summary, TANIP-1 achieved its objective of activating application-layer issuance and validating the unified staking model. However, data indicates that future programs should focus on sustainable engagement mechanisms - such as fee rebates - until the Telcoin Application Network reaches greater maturity and organic transaction volume can support a return to full issuance-based incentives.

2. Background & Context

TANIP-1 was created to activate TEL issuance at the application layer of the Telcoin Platform, initiating the unified staking model and activating essential platform adoption incentives. It introduced the first systematic method for distributing rewards to participants in the Telcoin Application Network (“TAN”), based on their use of TAN applications and their success in referring new users to those services.

While the Telcoin App had already offered a stake and refer feature since December 2022 - allowing users to stake TEL, refer new users, and earn up to 42 percent of their referees’ trading fees - that system existed solely within the Telcoin App itself. TANIP-1 implemented similar mechanics at the application layer, under the governance of the Telcoin Association. This new framework enables any developer building on the Telcoin Application Network to connect their application to the same incentive model and allow their users to harvest TEL issuance, rather than just redistributing revenue within their application.

This step effectively empowered the Stakers miner group within the Telcoin Platform, finally unlocking the flow of TEL issuance to users participating at the application layer. It represented a major milestone in realizing the Telcoin Association’s constitutional vision of a user-owned financial platform, where value accrues not to intermediaries but to those who directly contribute to network growth. TANIP-1 operationalized that principle by turning everyday participation in Telcoin-enabled applications into measurable ownership through TEL issuance.

The proposal was motivated by a need to drive organic growth, enhance user engagement, and align economic incentives between the platform and its community. By linking TEL issuance to verifiable on-chain activity, the Association aimed to reward stakers who used the platform and referrers who helped expand it. The mechanics were designed to ensure the program remained sustainable while encouraging long-term commitment to the network.

This issuance program drew its funding from TEL held in the TAN Council Safe, from which a defined weekly distribution of 3.2 million TEL was allocated to eligible stakers on a pro rata basis. The first issuance period began on 19 February 2025, following TAN Council approval through a Snapshot vote held between 3–8 February 2025. Distributions were conducted transparently and recorded publicly each week until the program’s pause on 3 September 2025, as determined by a Council vote held between 29 August – 3 September 2025.

The program applied to any on chain users who had staked TEL and optionally referred others to the network. While Telcoin is currently the only developer operating on TAN, TANIP-1 established the foundation for a horizontally scalable incentive system, reflecting the platform’s ambition to empower a decentralized community of developers and users alike.

3. Objectives & Design

TANIP-1 established the framework for distributing TEL issuance to application-layer participants of the Telcoin Platform. Its design translates the Telcoin Association’s principle of user ownership into a structured, data-driven issuance process that rewards real activity on the Telcoin Application Network (“TAN”).

Objectives

The program was designed to achieve four main objectives:

  1. Reward productive network participation.
    TANIP-1 directed new TEL issuance to users who actively engaged with Telcoin Association powered decentralised financial services, either by generating transaction fees or by referring new participants who did.

  2. Encourage organic user adoption.
    By rewarding referrals, TANIP-1 incentivised peer-to-peer network expansion. New users who signed up with a referral code and staked TEL became eligible to participate, with the aim of creating a cycle of adoption and engagement.

  3. Promote sustainable staking behaviour.
    Reward eligibility was a function of each participant’s stake during the period, encouraging users to maintain consistent stake levels over time rather than chase short-term yields. This encouraged large scale ‘proof of alignment’ - by staking, users demonstrate that they own TEL, suggesting they are incentivised to act in ways that benefit the TEL token.

  4. Establish transparency and reproducibility.
    All reward calculations were derived from on-chain data and could be independently verified. This ensured that issuance decisions were transparent, auditable, and resistant to manipulation.

Together, these objectives aligned with the Association’s broader mission to ensure that value accrues to users who create it.

Design Overview

At its core, TANIP-1 defines a rules-based TEL issuance mechanism for two categories of participants:

  • Stakers: users who have posted a non-zero TEL stake via the Telcoin StakingModule contract; and

  • Referrers: users who have referred one or more other stakers (their referees) to the network.

A staker is eligible for issuance based on their own fees paid on TAN applications. A referrer receives issuance based on both their own fees and the cumulative fees of their referees. This structure ensures that users who contribute to transaction volume, either directly or indirectly, are proportionally rewarded.

The system determines each participant’s share of issuance through a pro-rata calculation of the total user fees generated during a defined time period (week). All eligible user fees are identified on-chain as TEL transfers from approved DeFi aggregator contracts (1inch and 0x) to the AmirX contract, which routes all Telcoin Application Network trades. Only transactions executed by authorized backend executor addresses are counted, ensuring that issuance is derived exclusively from legitimate platform activity.

Each participant’s potential reward is subject to a reward cap, calculated as:

Reward cap = lowest stake held during the period – cumulative rewards previously earned.

This was changed in April to be a time based average stake rather than the lowest stake during the period, based on this vote.

This constraint ties the user’s earning potential to their committed stake, reinforcing sustainable behaviour. Historical reward data is recorded by the TANIssuanceHistory contract, which persists cumulative rewards to enable accurate cap derivation in future periods.

Computation Framework

Issuance calculations are performed using the TAN Staker Incentives Calculator, an off-chain script designed to aggregate on-chain data across supported networks (initially Polygon). The calculator follows a deterministic workflow:

  1. Define the reward period.
    The system determines a start and end block for each period — either automatically (from the lastSettlementBlock stored in TANIssuanceHistory) or manually if specified by Council.

  2. Fetch on-chain user fee data.
    The calculator identifies all TEL transfers from aggregators to AmirX initiated by Executor EOAs, verifying that each corresponds to a legitimate user transaction.

  3. Map referral relationships.
    It parses transaction calldata to establish Referrer–Referee pairs, ensuring correct attribution of fees.

  4. Retrieve stake and reward data.
    The calculator queries the StakingModule for each user’s stake history and cumulative rewards, determining their stake (initially the minimum stake but later the time based mean) during the period.

  5. Compute pro-rata weights and apply caps.
    Each user’s fee share is expressed as a proportion of total eligible fees. The resulting issuance is then constrained by their reward cap, ensuring that no user earns beyond their staked commitment.

  6. Finalize and distribute issuance.
    The resulting reward map is uploaded on-chain via the TANIssuanceHistory contract’s increaseClaimableByBatched() function, increasing each participant’s claimable TEL balance within the staking contract, while the associated transaction data is passed to the TAN Safe where the transaction is signed and the issuance is distributed.

This process produces a transparent, reproducible record of TEL distributions, which are published weekly to the program’s rewards directory. Each file lists supported networks, block ranges, and the reward amounts allocated to every eligible address.

Program Parameters

All program disbursements were performed through Council-approved Safe transactions to the TANIssuanceHistory contract (0xe533911f00f1c3b58bb8d821131c9b6e2452fc27) using parameters generated by the program’s SafeTxArrayBuilder utility. Issuances were executed chronologically by period to maintain consistency in historical data.

4. Data Analysis & Outcomes

This section presents and interprets the results of TANIP-1 during its operational period from 19 February (period 1) to 3 September 2025 (period 28). It also includes hypothetical data for periods 29-32, that is, the behaviour of the user group and the issuance this would have resulted in had the program continued running. A special thank you to Andrew Pinch of the TELx council for collating the following data.
Figure 1: TANIP-1 weekly fees by type

Figure 1 shows the fees for each period, split into referee and staker fees. The weekly fees are found to stay relatively low in the first 5 weeks before increasing, eventually showing consistency and relative stability at around 3.1M TEL per week in periods 22 to 28. The stability around 3.1M TEL could suggest some mercenary behaviour (defined simply as speculative capital seeking short term returns) - where referees and stakers were only willing to spend as much TEL as they would receive back in rewards (weekly rewards were set to 3.2M TEL per week). While there were weeks in which fees spent were greater than issuance received (Weekly fees reached a maximum value of 5.133M in week 21), these were usually followed by sharp reductions in fee expenditure the next week, possibly suggesting users were reducing trading once they realised they spent more in fees than they earned. Indeed, the mechanics of the system revolve around competitive harvesting and pro rata fees, meaning a user’s issuance is dependent on their own use of the system as well as the rest of the user base’s. Once TANIP-1 was paused in periods 29 to 32, the fees are seen to drop off significantly, to approximately 500k TEL per week. This data suggests the TEL issuance significantly incentivised users to trade, but perhaps also that the scheme did not create long term users of the system. For future work, it would be useful to compare the data from before TANIP-1, i.e. periods 0, -1 and -2 to see if TANIP-1 had any effect on the net user base.


Figure2: TANIP-1 Fee Dominance

Figure 2 shows the proportion of fees originating from referees and from stakers. Through data analysis sessions during TAN council meetings, we were aware of some wallets which referred another wallet, which in turn referred the first wallet. They often exhibited very similar trading behaviours. These circular referrers often created a lot of volume over a number of weeks. This is signified in figure 2, as we observe the data tend towards 50/50 staker and referee fees. In the case where self referential wallets create most of the volume via very similar trading patterns, it makes sense that fees would tend towards a 50/50 split. The trend above therefore suggests more mercenary behaviour. This is supported by the break in trend upon TANIP-1 pause, where the split departs from the 50/50 case. Ideally, in a healthy system, we would like to see each user referring many active users, resulting in referee fee dominance. This was actually the case in the early periods, before self referring wallets were seen. A worst case scenario would be a complete lack of incentive to refer anybody, which would be demonstrated by zero referee fees.


Figure 3: TANIP-1 Missed TEL Rewards

Figure 3 shows the number of missed TEL rewards (bars) per period, with the cumulative sum shown by the orange line. ‘Missed rewards’ are rewards that users would have had distributed to them had they had enough TEL staked. I.e. users who created enough volume to earn x rewards, but then were capped based on their stake and previous cumulative rewards to rewards y, where y<x, would have a ‘missed rewards’ of x-y. Generally, we see high missed rewards initially, which were likely due to users not understanding the reward mechanisms or not being aware of the program (users who were not aware would likely not stake their issuance, and so would get capped). Broadly speaking, missed rewards reduced with time, which was likely also aided by the move from lowest amount of staked liquidity in the period to the time weighted average. We see a large uptick in hypothetical missed TEL rewards in periods 29 - 32 (after TANIP-1 pause), likely signifying users unstaking. The missed TEL rewards can likely act as a proxy for visibility of the program (when in operation) as users are generally expected to stake their earned issuance, but will only do so if they are aware of the program.


Figure 4: TANIP-1 Number of Weekly Active Wallets

Figure 4 shows how many wallets were active in each period. Overall, the data shows a slight tapering off followed by a relatively consistent number of weekly active wallets. One particularly interesting point, contrary to the behaviours seen in other charts, is the lack of change from periods 29 -32, when TANIP-1 was paused. While there was an initial high number of wallets participating in the early weeks, the data seems to suggest that in the longer term TANIP1 has no significant impact on weekly wallet users.


Figure 5: TANIP-1 New Wallets per Period

Figure 5 shows the number of new wallets per period - that is the number of wallets that were active in that period which had not previously been seen. Period 1 has been omitted, as each wallet in period 1 was counted as a new wallet, and this greatly skewed the data. Overall there was an initial boost to the number of active wallets, but this reduced to a relatively stable, low amount. It is important to note that this is new wallets, so despite being small values per week, this would exhibit linear growth in the number of active wallets, provided users kept interacting (paying fees) each week. Comparing with Figure 4, however, where we see a relatively flat weekly wallet count at the later periods, this suggests there was a constant ‘churn’ of wallets - i.e. new wallets were created at approximately the same rate that wallets stopped being active. This suggests a general lack of ‘stickiness’ of this application layer issuance.

Overall, the data suggests TANIP-1 mainly had an impact on the amount of fees spent, but this was likely from mercenary capital. No significant difference was seen on the number of wallets being used, although there were slightly elevated rates of new wallet creation while issuance was being distributed. Due to the competitive nature of the harvesting, it is likely that this system would work well at scale, where mercenary capital (or fees paid for the purpose of earning issuance) would be disincentivised as it would be forced to compete with transactions that would happen anyway, for example to facilitate remittances.

5. Future Recommendations

Based on the above findings, which found TANIP1 created some increased use of TAN products but was likely dominated by mercenary capital, the council recommends implementing a Trading Fee Rebate Program as a simple, transparent mechanism to maintain active participation across the Telcoin Application Network while removing incentives for mercenary capital.

Overview
The suggested rebate program follows the same structure and eligibility criteria as TANIP-1.
Participants must have an active TEL stake and generate verified on-chain fees through a TAN developer application.
Rewards continue to be calculated using the same process - based on each wallet’s own generated trading fees and the fees of its referees - ensuring continuity and compatibility with the existing issuance framework.

Rebate Structure
Under this new regime, each eligible wallet would receive a rebate calculated from its own and referees’ fees during the period.
After calculations, a final per-wallet cap is applied:
• R = calculated rebate amount (from own and referees’ fees), distributed pro rata across all stakers
• F = total TEL fees paid by that wallet during the same period
• Final rebate = MIN(R, F)

This results in the following mechanism:

  • If a wallet’s calculated rebate exceeds what it spent in fees, it simply receives back the amount it paid.
  • If the calculated rebate is less than what it spent, it receives that full rebate amount.

This ensures that no participant can earn more TEL than they contributed in fees, maintaining fairness and reinforcing genuine network participation.

Implementation
Rebates will be funded from existing TAN Council budget, held in the TAN Council Safe and distributed weekly through the TANIssuanceHistory contract using the same transparent process established under TANIP-1.

Recommendation
The Council recommends authorizing a Trading Fee Rebate Program using the parameters above.
This approach maintains consistency with the existing framework, rewards real network contribution, and continues to evolve the Telcoin Application Network toward a balanced and sustainable incentive model. The council also believes that the current TANIP1 implementation will work at scale, and is happy to consider shifting back to this model once the TAN and broader Telcoin platform are more mature.