Update – December 7th 2023 – This governance proposal passed, and the resulting decrease in SCRT inflation is now live.
In the dynamic world of decentralized networks, adaptability is key. Over the past months, discussions within our community have revolved around a crucial topic: the inflation rate of Secret Network.
This week, an on-chain proposal emerged from these conversations—a call for a vote to temporarily adjust our current inflation rate to reduce inflation from 15% to 9%. This is only the first step in a longer term discussion around adjusting Secret’s tokenomics. So…what does this mean?
Background
As evidenced in the discussions within this forum thread and various community discussions on Discord and Telegram over the last months, the consensus is building towards a significant change. Our current inflation rate stands at 15%, but the proposal suggests a reduction to 9%, a sentiment echoed by SCRT Labs, Secret Network Foundation, and many community members.
This proposition aligns with the prevailing discussions within the Cosmos ecosystem, including the recent proposal to lower inflation of ATOM. Notably, instances like the reduction in inflation leading to substantial value increases for assets like JUNO highlight the potential positive impacts of such adjustments.
Rationale for Lowering Inflation
Let’s dive into the key reasons supporting the proposed reduction:
Inflation and Value Preservation
Lowering inflation is a strategic move to preserve the value of SCRT. Historically, higher inflation rates have been associated with the depreciation of token value. By reducing inflation to 9%, this proposal aims to make SCRT more attractive for long-term holding, fostering a sense of value preservation within the community.
Balancing Rewards for Long-term Sustainability
A lower inflation rate safeguards against the risk of over-saturation in the market with tokens. This adjustment ensures that staking rewards remain attractive without compromising the intrinsic value of SCRT. The goal is to establish a sustainable equilibrium that benefits stakeholders over the long haul.
Network Security and Decentralization
Inflation serves as a mechanism to incentivize staking and, consequently, secure the network. Striking a delicate balance is crucial to prevent centralization issues. Excessive inflation may empower large validators disproportionately, posing risks to decentralization. Lowering inflation to 9% promotes a more equitable distribution of tokens, fortifying network security.
The Proposal
The on-chain proposal is live now, and will be open for voting until December 6th. If the proposal passes, there will be a reduction of the inflation maximum (InflationMax) parameter to 9%, accompanied by adjustments to the BlocksPerYear parameter.
We encourage everyone to vote on this proposal and to continue engaging in discussions on our community channels. In the ever-evolving landscape of decentralized networks, the ability to adapt and refine our protocols is paramount. This proposal to lower inflation reflects a commitment to the long-term success of Secret Network. Your input is vital in shaping the future of the network!
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