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The CLV chain adopts the same inflation design as Polkadot's, as it's a proven and long-term economical design that we think fulfills the future development of the CLV ecosystem.
Inflation to validators is dynamic, between 2.25% - 10% annually, depending on $CLV staking rate on CLV Mainnet.
Although the total number of $CLV in circulation is the combination of the number of tokens on 4 chains ($CLV on Ethereum, BNB Chain, CLV Parachain and CLV Mainnet), the inflation model is only subject to the amount of $CLV circulating on the CLV Mainnet.
Formula for inflation and interest rate
The value of the staking rate should lie between 30% and 60% - ideally at 50%. If it falls, the security is compromised, so we should give strong incentives to $CLV holders to stake more of their assets. If it rises, we lose liquidity, so we should decrease the incentives sharply.
x = staking rate(x is always a value between 0 and 1)
= i (x) yearly
blue graph =
inflation rate to stakers
x-axis represents the total staking rate, y-axis interest rate (green) or inflation to validator rate (blue)
- 1.Number 1 displayed in the graph is the minimum of the inflation to stakers (i.e. when neither validators nor nominators are staking $CLV). It’s the inflation “starting” point; 0.025 → 2.5% in this case goes away for validator rewards.
- 2.The second number shows a linear increase of inflation if the staking rate is between 0 and 50%. There is a linear correlation between the staking rate and inflation till 0.5 is reached. The inflation rate is 5% if the staking rate is at 25%. If the staking rate doubles to 50%, so does the inflation rate to 10%. But remember: It is only linear till 50% staking rate is reached.
- 3.The red line at number 3 is the ideal staking rate of 50%. In this case, the annual staking reward is at 20%. But if the staking rates exceeds 50%, there is an exponential decay in inflation, which results in a strong decay of staking rewards. The reason for that is that the network needs liquidity and decreases the incentives sharply if the staking rate exceeds 50%.