23 lines
1.1 KiB
Markdown
23 lines
1.1 KiB
Markdown
# Concepts
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## The Minting Mechanism
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The minting mechanism was designed to:
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- allow for a flexible inflation rate determined by market demand targeting a particular bonded-stake ratio
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- effect a balance between market liquidity and staked supply
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In order to best determine the appropriate market rate for inflation rewards, a
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moving change rate is used. The moving change rate mechanism ensures that if
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the % bonded is either over or under the goal %-bonded, the inflation rate will
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adjust to further incentivize or disincentivize being bonded, respectively. Setting the goal
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%-bonded at less than 100% encourages the network to maintain some non-staked tokens
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which should help provide some liquidity.
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It can be broken down in the following way:
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- If the inflation rate is below the goal %-bonded the inflation rate will
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increase until a maximum value is reached
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- If the goal % bonded (67% in Cosmos-Hub) is maintained, then the inflation
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rate will stay constant
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- If the inflation rate is above the goal %-bonded the inflation rate will
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decrease until a minimum value is reached
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