> For the complete documentation index, see [llms.txt](https://docs.xyo.network/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.xyo.network/xyo-layer-one/tokenomics.md). # Tokenomics The XYO and XL1 dual-token system powers the economic and security foundations of the XYO Layer One Blockchain. In this system, XYO functions as a staking and governance asset, securing network integrity through Validator Node and Block Producer Node commitments. When staked, XYO allows participants to earn XL1, the inflationary utility token used to pay gas fees, incentivize block production, and support data validation processes. A portion of XL1 fees—such as base fees—is burned, ensuring long-term supply control. Slashing mechanisms protect the network from dishonest behavior, with slashed XYO Tokens also permanently removed from circulation by burning. Meanwhile, decentralized data collectors and processors can be compensated in either token, supporting the network’s decentralized physical infrastructure (DePIN) capabilities. The architecture is designed for flexibility and sustainability, enabling slashing insurance, step-based rewards, and ongoing participation from validators and contributors. The following diagram illustrates the flow of tokens and incentives across the ecosystem. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation by asking a question. Perform an HTTP GET request on the following URL with the `ask` and `goal` query parameters: ``` GET https://docs.xyo.network/xyo-layer-one/tokenomics.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is what the user is ultimately trying to achieve, the reason they need the answer. Sharing it helps GitBook give you a better, more relevant answer. A goal is most helpful when it describes the outcome the user wants rather than restating the question. For example, with `ask=how do I create an API token`, a goal like `automate deployments from our CI pipeline` lets GitBook tailor the answer to that use case. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.