Concepts

The Minting Mechanism

The minting mechanism was designed to:

• allow for a flexible inflation rate determined by market demand targeting a particular bonded-stake ratio
• effect a balance between market liquidity and staked supply

In order to best determine the appropriate market rate for inflation rewards, a moving change rate is used. The moving change rate mechanism ensures that if the % bonded is either over or under the goal %-bonded, the inflation rate will adjust to further incentivize or disincentivize being bonded, respectively. Setting the goal %-bonded at less than 100% encourages the network to maintain some non-staked tokens which should help provide some liquidity.

It can be broken down in the following way:

• If the inflation rate is below the goal %-bonded the inflation rate will increase until a maximum value is reached
• If the goal % bonded (67% in Cosmos-Hub) is maintained, then the inflation rate will stay constant
• If the inflation rate is above the goal %-bonded the inflation rate will decrease until a minimum value is reached