Walrus is a decentralized storage protocol developed by Mysten Labs. It is designed to efficiently handle large binary files called “blobs” by leveraging the Sui blockchain for coordination, attestation, and payments. The protocol employs a Delegated Proof-of-Stake (dPoS) mechanism and utilizes its native token, WAL, to power its economic and incentive structures.
This article provides a detailed insight into Walrus’ tokenomics.
Tokenomics in the Nutshell
There are several key components in Walrus’ tokenomics.
Delegated Proof-of-Stake (dPoS) and Node Operations
Walrus operates on a dPoS model, where WAL token holders can delegate their tokens to storage nodes. Nodes with higher delegated stakes are more likely to be selected for storing and serving data. This system incentivizes nodes to maintain high performance and reliability. At the end of each epoch, rewards are distributed to nodes and their delegators based on their contributions to data storage and availability.
Storage Pricing Mechanism
Unlike traditional consensus-based pricing, Walrus allows each storage node to propose its storage and write operations pricing. The protocol then determines the final price by selecting the proposal at the 66.67th percentile (i.e., the price proposed by the node at the two-thirds mark when proposals are ordered by stake weight). This approach balances cost-effectiveness with network sustainability.
Token Utility
The WAL token serves multiple functions within the Walrus ecosystem:
- Payment for services: Users use WAL tokens to pay for data storage and retrieval services.
- Staking and delegation: Token holders can stake their WAL tokens or delegate them to storage nodes to earn rewards.
- Governance: WAL tokens grant holders voting rights on protocol parameters, including storage pricing models, penalty mechanisms, and reward distributions.
Deflationary Mechanisms
Walrus features two burning mechanisms that reduce the circulating supply of WAL tokens over time with the goal of creating a deflationary effect that could enhance token value.
Token Distribution
The total supply of WAL tokens is capped at 5 billion, with the initial circulating supply set at 1.25 billion (25% of the total). The distribution is as follows:
Storage Pricing Model
The storage pricing model in Walrus is unique and designed to be market-driven yet fair.
Decentralized Price Discovery (Percentile-Based Selection)
Each storage node in the Walrus network submits its proposed price for handling data operations, including storing blobs and committing data (writing operations).
Then, instead of relying on an average or a fixed value, Walrus uses a 66.67th percentile selection model.
- The prices proposed by all nodes are ordered by their stake weight (i.e., nodes with more WAL staked or delegated to them have more influence).
- The protocol chooses the price submitted by the node at the two-thirds mark (66.67th percentile) of the total weighted stake.
This price becomes the effective rate for that epoch.
Walrus’ model discourages price collusion as the outcome depends on relative positions rather than averages, and so it’s harder for major stakeholders to manipulate pricing. Additionally, it balances cost and sustainability by ignoring lower bids and outliers while encouraging competition. Finally, it ensures stake-weighted fairness, as larger and more trusted nodes can influence pricing more.
Users pay for storage with WAL tokens at the price determined for the epoch. These tokens are then distributed as rewards among storage nodes and their delegators.
Rewards Design
The rewards design in Walrus is set to incentivize high-performance storage nodes, encourage token staking, and ensure long-term community participation.
Key Components of the Rewards Design
The system operates in epochs. At the end of each epoch, rewards in WAL tokens are distributed to storage nodes and their delegators.
Rewards in the Walrus network come from storage payments and protocol subsidies. For each epoch, the protocol calculates total rewards based on the storage capacity used and the price per unit of stored data, with an additional subsidy rate applied to incentivize participation.
In the Walrus network, rewards are driven by how much of the network’s storage capacity is actively used. At the beginning of May 2025, 21% of the total 4,123 TB was in use. The used capacity is constantly growing, bringing more rewards to delegates.
Rewards are calculated based on the amount of used storage, the price per MB of stored data, and a protocol subsidy, currently 80%. These rewards are then split between validators and delegators.
Total Rewards (in WAL) = (Used Storage in TB × 1,000,000 × Price per MB in Frost × (1 + Subsidy Rate)) ÷ Frost per WAL
When the Walrus network reaches 100% storage utilization, the rewards will scale proportionally to the full network capacity of 4,123 TB. With the current price per MB of stored data at 55,000 Frost, and the 80% protocol subsidy, the total rewards per epoch can be calculated using the following formula:
Total Rewards (in WAL) = (4,123 × 1,000,000 × 55,000 × 1.8) ÷ 1,000,000 = 408,177 WAL per epoch.
More generally, rewards are based on:
- Performance (storage availability, responsiveness)
- Uptime and reliability
- Amount of data stored and served
- Stake weight (direct + delegated stake)
Nodes receive rewards for storing and serving blobs, maintaining consistent online availability, and participating in protocol-level operations like attestation.
Token holders who don’t run a node can delegate their WAL tokens to a node operator. They receive a fraction of the rewards proportional to the amount they delegate.
Node operators can set commission rates, similar to validators in other PoS systems. Poorly performing nodes (low uptime, bad responsiveness) may receive reduced or no rewards, motivating operators to maintain quality service and infrastructure.
A portion of the storage payment fees or penalties may be burned, reducing supply. This creates a deflationary dynamic that benefits all token holders over time.
Walrus reserves the right to adjust reward distribution over time and use subsidy pools (10% of total supply) to bootstrap node participation and stabilize early network stages.
APR and High Commissions
In Walrus, APR (Annual Percentage Rate) and commission rates are key factors in the reward system under its Delegated Proof-of-Stake (dPoS) mechanism.
APR (Annual Percentage Rate)
APR in Walrus represents the annualized return on WAL tokens that are staked or delegated, based on the rewards earned during each epoch, which lasts 14 days. The protocol distributes WAL rewards at the end of each epoch. The rewards received over time are extrapolated to estimate yearly returns.
The main factors influencing APR are the amount of network capacity used and the cost of stored data units. If more capacity is used and storage prices move upward, the total network rewards increase. Other factors influencing APR are node performance, total stake, issuance rate, and delegation strategy.
Commission Rates
A commission rate is the percentage of rewards that a node operator keeps before distributing the rest to their delegators.
- Let’s say a node earns 1,000 WAL in rewards during an epoch.
- With the current commission rate at 60%, the operator keeps 600 WAL.
- The remaining 400 WAL is distributed pro rata to all delegators based on how much they staked.
The commission rate is seemingly high, yet it stems from the need to continually maintain resilient and massive infrastructure because the nodes must store significant amounts of data and keep it fully available at all times.
A high commission rate means more rewards to the node operator, while delegators get lower net APR. Conversely, low commission rates attract more delegators but can lower the operator’s APR while increasing their stake weight and potential total rewards.
Node operators can set their commission rates, and they become a competitive factor in attracting delegation.
Rewards vs Shards
Rewards are distributed between nodes proportionally to the number of shards, of which there are one thousand. They are shared proportionally to the stake, yet this happens discretely.
For instance, if the stake is 1 billion WAL, one shard is 1 million. If the stake increases, but the gained amount is insufficient to add one more shard (for example, 400,000 WAL), the rewards will not increase. This is one of the reasons why APR is slightly different between nodes.
So, in our example, the rewards will be the same whether 1 million or 1.4 million WAL are staked and will only increase if 2 million WAL are staked.
Conclusion
Walrus features an economically fair tokenomics model that is set to support its mission of establishing an efficient ecosystem that benefits all its participants while fulfilling its core mission. As such, Walrus plays an important role in the growing Web3 ecosystem and can become an indispensable part of it.
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