Diem | The Market for Venice Compute v1.4 July 21 2025 Overview The Venice community may have noticed the update on the token dashboard to our new terminology, changing “VCU” to “Diem”. This change was setting us up for something bigger. Venice will soon be enabling the transfer and trade of AI inference capacity by evolving VVV’s former VCU paradigm into something called Diem ● Diem is going to be tokenized ● Diem tokens are minted from VVV ● Once tokenized, your daily compute capacity will become stable and predictable Diem is a novel token design in the crypto ecosystem, embodying a tradeable compute unit equal to $1 per day of Venice API credit . This change simplifies the value proposition for API users, provides more value and flexibility to VVV holders, and is a prerequisite step for our future VVV strategy. Strengthening VVV’s Value Proposition ● Problem 1: VCU (the formerly named Venice Compute Units) were not transferrable or tradeable. ● Solution: Diem will soon be tokenized, permitting it to be accumulated and traded. ● Problem 2: Since VCU represented a share of total capacity, as more users arrived, each VCU has been yielding a declining amount of compute. This made it hard for API users to plan for their capacity needs into the future. ● Solution: Once tokenized, Diem balances will not change regardless of capacity or user growth. API users will thus know exactly how much credit they have today, tomorrow, and in the distant future. Key Changes to the Paradigm Being Removed ● The former VCU concept which was non-transferrable and volatile, is being replaced with Diem which will soon be tokenized. ● The Utilization Rate has to date allocated between 20% to 80% of VVV emissions to Venice. This mechanism is being eliminated. Being Added ● Tokenized Diem : A tradeable compute token equal to $1 per day of Venice API credit. Diem is exclusively minted from VVV. ● Diem Mechanics : ● 1 Diem always equals $1 per day of API credit ● User balances are consistent (they do not rise and fall with Venice API usage) ● Freely transferable and tradeable as a ERC20 token on Base Other change: Lower Inflation ● We have hinted at a long-term goal of reducing the VVV inflation rate over time, potentially making it deflationary. ● Toward this goal, with the Diem launch we are reducing VVV inflation from 14m per year to 10m per year. How Diem Works 1. Mint Diem : VVV stakers will be able to mint Diem, which locks their sVVV 2. Burn Diem : To unlock their sVVV, users can burn the same quantity of Diems they minted, at any date and in any portion 3. Stake Diem : Each staked Diem receives $1 per day of API credit perpetually Benefits and Mechanics Benefits ● Compute becomes tradeable : VVV holders, at their choice, can now separate their access to inference capacity from their asset (by minting Diem). They can trade that Diem without losing their VVV, providing a market-driven approach to API access. ● Compute becomes predictable : Diems are an ERC20 token existing in the user’s wallet. A user’s Diem balance only rises or falls when they send or receive the Diem. No longer will a user’s API capacity fall as network use grows (currently the case with VCU). ● Simplified Staking Yield : ● Users with VVV staked receive 100% of VVV emissions as yield ● Users with VVV locked (from minting Diem) receive 80% as much Mechanics The upgrade to Diem adds a new mechanism called the Mint Rate: ● Mint Rate : Set algorithmically on a predictable curve. Determines how many sVVV are required to mint 1 Diem. It adjusts based on the current Diem supply and target Diem supply. The higher the rate, the more sVVV is required to mint each Diem. ● Definition : The quantity of sVVV that must be locked to mint 1 Diem. ● Formula : Mint Rate = Base Mint Rate × e^(Adjustment Power × (Current Diem Supply ÷ Target Diem Supply)^3) ● Mint Rate is lowest when Current Diem Supply = 0 (starting position) ● Mint Rate grows exponentially as Current Diem supply approaches and surpasses Target Diem Supply. This creates a natural limit on Diem supply as it’s constrained by the supply of VVV. ● Mint Rate calculator demo: https://diem-calculator.staging.venice.ai/ ● Starting Parameters will be communicated before launch (they are in the rough ballpark of the above calculator defaults) ● Target Diem Supply : The desired quantity of Diem tokens in existence. Venice controls this variable, as each Diem is a liability of the company. However, while Venice controls this target variable, it cannot change the actual supply of Diem in the market. How Staking Will Work VVV ● Stake : receive staking yield (now 100% of VVV emissions) ● Unstake : 7-day cooldown with no yield Diem ● Stake: receive $1/day of API credit ● Unstake: instantly available How Diem Minting Works 1. Lock sVVV : Mint Diems at the current Mint Rate 2. Receive Adjusted Yield : 80% of normal staking yield 3. Unlock sVVV : Burn Diems to unlock sVVV. Example ● User Action : Mints 25 Diems by locking 1000 sVVV ● To Unlock : Burns 25 Diems to get back the 1000 sVVV ● While in Locked state, User continues to receive 80% of normal staking yield. Value Proposition Overview ● For API Users : Greater predictability–get $1/day of API credit in perpetuity for every Diem held ● For VVV Holders : Trade or sell minted Diem if not using the API yourself ● For Speculators : Trade and arbitrage the price differentials between VVV and Diem. Diem will be generally rangebound, valued as a perpetuity (Diem value = $1/day x assumed discount rate), while VVV is not rangebound. ● Demand for Diem derives from API users desiring low-cost access to AI inference, and from holders of locked VVV desiring to unlock. Supply is constrained by the supply of VVV and the Mint Rate. ● Demand for VVV derives from the ability to create Diem, earn yield, enjoy Pro access in the Venice app, and future mechanisms that Venice has not yet announced. Supply is constrained to 10m VVV per year minus any burn mechanisms which Venice may implement. Conclusion & Key Takeaways The introduction of Diem and its associated mechanics marks a significant evolution in the Venice ecosystem. ● Simplified Value Proposition : Diem offers a simpler way for API users to access API credits. 1 Diem = $1 per day. No volatility in compute allocation. ● Greater dynamic marketability of VVV’s utility : compute can be extracted and transferred or sold by a holder of VVV to a user of API credit (this addresses the number one request of early VVV holders for a “VCU marketplace”). Previously, the utility of VVV was staking yield + ability to use API yourself for free. Post Diem, the utility of VVV is staking yield + ability to use API yourself + ability to sell capacity via Diem to others. ● Lower inflation : reduced from 14m to 10m VVV per year, combined with future burn mechanisms with the goal of making VVV deflationary. It is likely that VVV emissions will be reduced further in the future. ● Simpler staking mechanisms: 100% of emissions now goes to VVV Stakers (increased from variable 20-80% previously dictated by Utilization Rate) The upgrade to tokenized Diem is scheduled to occur in August. As part of this launch there will be at least a 30 day transition period from the current Staking/API system to the new tokenized DIEM system. All important steps in this process will be announced in the #announcements channel in the Venice’s Discord.