I am in favor of the linear inflation model proposed by @alice_und_bob. Below is some data to show that at the start, it is similar to what was proposed by @jonas, with the addition of having a predictive idea of where inflation will go in the next year (down!).
The model is simple: 120 M DOT printed each year, fixed. We can decide how much goes to the stakes and how much to the treasury.
Below is a table of the difference between exponential inflation (current model) and linear inflation (proposed model):
Data used for the plot above:
You can see how, after the first year, inflation drops from 10 to 8.16%, then 7.54% the second year, and so on. If we adopt the linear inflation model, inflation will go to 6% in the next 5 years. I hope that by then, we will get some decent usage of Polkadot tech, that transaction fees will generate a substantial income for the treasury, and that coretime sale burn might push even further down net inflation.
The inflation drop for adopting the linear vs. exponential model can be visualized below:
This should be interpreted as the maximum possible inflation. In fact, it does not take into account coretime revenue sale burn that will create a deflationary pressure more or less important depending on how much Polkadot is used. Then you have transaction fees, where 80% of them are diverted to the treasury. Nothing prevents OpenGov to further reducing the 120 M DOT annual inflation if revenue from fees is substantial enough to be an important revenue stream for the treasury.
Inflation is a vital part of our ecosystem and anything really in the real world. The problem of the real world is that developed countries still have high inflation, and this is bad because you dilute your currency value without necessarily adding much value (as the country is developed). Well, Polkadot is at an early stage of development, and we have had 10% inflation in the past 4 years since launch. It is time to have a clear path forward, easily understandable by anyone, and force people to work collectively to capture value in the next years. I believe the linear inflation model gives us enough time to do so while making the ecosystem appealing to retail and non-retail investors willing to onboard in our ecosystem with peace of mind.
Staker APY will drop to 12.5% in the first year and then gradually to 5% after 20 years.
