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% - 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.
| 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
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)
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.
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.
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: https://research.web3.foundation/en/latest/polkadot/overview/2-token-economics.html
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