Inflation Design

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% - 20% 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.

Staking Rate	Inflation to Stakers	Monthly Reward Rate	Yearly Reward Rate
0%	2.25%	>125%	>1,500%
5%	3.25%	5.42%	65%
10%	4%	3.33%	40%
20%	5.5%	2.29%	27.5%
25%	6.25%	2.08%	25%
30%	7%	1.94%	23.3%
40%	8.5%	1.78%	21.3%
50%	10%	1.67%	20%
60%	4.38%	0.61%	7.3%
70%	2.97%	0.35%	4.2%
80%	2.62%	0.28%	3.3%
90%	2.53%	0.23%	2.8%
100%	2.51%	0.21%	2.51%

Inflation & Staking Rate Formula

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) green graph = i (x) yearly interest rate blue graph = I (x) 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%.

For Further Reference (Polkadot inflation design 2021):

1. Polkadot’s Tokenomics and Interoperability - Coinbase Research
2. Polkadot Inflation and Staking Reward Analysis - Swiss Staking
3. Economics of Polkadot - Polkadot Blockchain Academy
4. Web3 Foundation’s Overview of Polkadot’s Token Economics - Web3 Foundation