Inflation and Participation in Stake Based Token Protocols

  • Some, such as Augur and Golem, issue a fixed amount of token initially, and there will never be any more tokens created.
  • Others, such as Bitcoin and ZCash, release token gradually over time via mining or other means, yet there is a fixed supply such that the final amount of token issued will never exceed a certain total.
  • And then there are protocols like Ethereum, where there is continuous issuance, with a temporarily fixed, yet fork-moveable inflation rate, such that the total amount of token is uncertain.
  1. Participants contribute value to the network.
  2. Greater participation rate yields greater security.
  3. Incentives must exist for participation.
  4. Targeting a participation rate, rather than a token issuance rate, aligns better with ensuring a high quality network.
  5. Participation targets may be easier to move via decentralized governance than token issuance rates.
Inflation, and hence token issuance, adjusts through three rounds until the participation rate matches the target.

Participants contribute value

More participation yields more security

You need incentives for participation

Target a participation rate to ensure a high quality network, rather than an inflation rate

Participation targets may be easier to move via decentralized governance than inflation rate

The End Result

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Building live streaming on the blockchain at Livepeer. Previously Founder, VP Eng at Wildcard and Hyperpublic (acquired by Groupon).

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Doug Petkanics

Doug Petkanics

Building live streaming on the blockchain at Livepeer. Previously Founder, VP Eng at Wildcard and Hyperpublic (acquired by Groupon).

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