Source: Research - Web3 Foundation
- -- **x-axis**: Proportion of staked tokens -- **y-axis**: Annualized percentage (inflation and staking rewards, see below) -- **Blue line**: Annual inflation rate diverted to NPoS, i.e., the total amount of tokens minted to - pay validators and nominators. For instance, 0.1 corresponds to 10% of token inflation diverted to - stakers. Since annual token inflation is 10%, all inflation is used to pay validators and - nominators, and 0% of token inflation is diverted to the treasury. -- **Green line**: Annual rewards rate for stakers. For instance, 0.2 corresponds to 20% of annual - returns on the staked tokens. You can determine the current annual staking rewards rate by looking - at the top bar of the staking overview on - [the Polkadot Staking Dashboard](https://staking.polkadot.cloud/#/overview). - -Assuming that the ideal staking rate is 60%, all of the inflation would go to the validators and -nominators if 60% of all tokens are staked. Any deviation from the 60% - positive or negative - -sends the proportional remainder to the treasury. Deviations from the ideal staking rate are -referred to as _staking inefficiencies_. Thus, the treasury does not receive an inflow of funds from -inflation when the system staking rate equals the ideal staking rate. See -[this page](./learn-polkadot-opengov-treasury.md) for more information about treasury inflow -sources. - -For those who are interested in knowing more about the design of the inflation model for the -network, please see [here](https://research.web3.foundation/Polkadot/overview/token-economics). +network through funding the on-chain treasury. The token inflation rate can be updated through +[on-chain governance](./learn-polkadot-opengov.md) based on thorough tokenomics research. -## Ideal Staking Rate +Below is a 25-year prediction of DOT gross annual inflation (red line) and DOT total issuance (blue +line), assuming the current fixed inflation rate. -The ideal staking rate can vary between 45% to 75% based on the number of parachains that occupied a -core (this excludes the system parachains), based on the implementation -[here](https://github.com/paritytech/polkadot-sdk/blob/cd901764a52edc04a6d22bea3a526def593ab2a7/polkadot/runtime/common/src/impls.rs#L80). + -Briefly, the ideal staking rate can be calculated as follows: +Net DOT inflation depends on [treasury burns](./learn-polkadot-opengov-treasury.md) and +[coretime sales](./learn-agile-coretime.md#agile-coretime-implementation) and thus cannot be +predicted. Net inflation can be defined as follows: -`0.75 - auction_proportion` +``` -where `auction_proportion` is obtained by computing `min(auctioned_slots, 60) / 300`. The -`auctioned_slots` are all the auctioned slots (or cores) without the cores for system parachains. +Net Inflation = Gross fixed inflation - burned supply (treasury + coretime sales) -Assuming there are 50 filled cores, of which five are dedicated to -[system parachains](./learn-system-chains.md), there are 45 auctioned cores. The -`auction_proportion` is thus `45 / 300 = 0.15`. The ideal staking rate is `0.75 - 0.15 = 0.6`. +``` -If the amount of tokens staked goes below 60%, then staking rewards for nominators increase, -incentivizing them to stake more tokens on the network. On the contrary, staking rewards drop if -staked tokens exceed the ideal staking rate. This results from the change in the percentage of -staking rewards that go to the Treasury. +Where `Gross fixed inflation` is the annual inflation of 120M DOT and the `burned supply` is the +annual burn supply due to treasury burns and coretime sale burns. diff --git a/docs/learn/learn-kusama-inflation.md b/docs/learn/learn-kusama-inflation.md new file mode 100644 index 000000000000..f769b8f25413 --- /dev/null +++ b/docs/learn/learn-kusama-inflation.md @@ -0,0 +1,97 @@ +--- +id: learn-kusama-inflation +title: Kusama Inflation Model +sidebar_label: KSM Inflation +description: Explanation of KSM's Inflation Model. +keywords: [token, KSM, inflation] +slug: ../learn-kusama-inflation +--- + +import MessageBox from "../../components/MessageBox"; import "../../components/MessageBox.css"; + +Source: Research - Web3 Foundation
+ +- **x-axis**: Proportion of staked tokens +- **y-axis**: Annualized percentage (inflation and staking rewards, see below) +- **Blue line**: Annual inflation rate diverted to NPoS, i.e., the total amount of tokens minted to + pay validators and nominators. For instance, 0.1 corresponds to 10% of token inflation diverted to + stakers. Since annual token inflation is 10%, all inflation is used to pay validators and + nominators, and 0% of token inflation is diverted to the treasury. +- **Green line**: Annual rewards rate for stakers. For instance, 0.2 corresponds to 20% of annual + returns on the staked tokens. You can determine the current annual staking rewards rate by looking + at the top bar of the staking overview on + [the Polkadot Staking Dashboard](https://staking.polkadot.cloud/#/overview). + +Assuming that the ideal staking rate is 60%, all of the inflation would go to the validators and +nominators if 60% of all tokens are staked. Any deviation from the 60% - positive or negative - +sends the proportional remainder to the treasury. Deviations from the ideal staking rate are +referred to as _staking inefficiencies_. Thus, the treasury does not receive an inflow of funds from +inflation when the system staking rate equals the ideal staking rate. See +[this page](./learn-polkadot-opengov-treasury.md) for more information about treasury inflow +sources. + +For those who are interested in knowing more about the design of the inflation model for the +network, please see [here](https://research.web3.foundation/Polkadot/overview/token-economics). + +## Ideal Staking Rate + +The ideal staking rate can vary between 45% to 75% based on the number of parachains that occupied a +core (this excludes the system parachains), based on the implementation +[here](https://github.com/paritytech/polkadot-sdk/blob/cd901764a52edc04a6d22bea3a526def593ab2a7/polkadot/runtime/common/src/impls.rs#L80). + +Briefly, the ideal staking rate can be calculated as follows: + +`0.75 - auction_proportion` + +where `auction_proportion` is obtained by computing `min(auctioned_slots, 60) / 300`. The +`auctioned_slots` are all the auctioned slots (or cores) without the cores for system parachains. + +Assuming there are 50 filled cores, of which five are dedicated to +[system parachains](./learn-system-chains.md), there are 45 auctioned cores. The +`auction_proportion` is thus `45 / 300 = 0.15`. The ideal staking rate is `0.75 - 0.15 = 0.6`. + +If the amount of tokens staked goes below 60%, then staking rewards for nominators increase, +incentivizing them to stake more tokens on the network. On the contrary, staking rewards drop if +staked tokens exceed the ideal staking rate. This results from the change in the percentage of +staking rewards that go to the Treasury. diff --git a/docs/learn/learn-polkadot-opengov-treasury.md b/docs/learn/learn-polkadot-opengov-treasury.md index fee90033cb51..0cc521b597a4 100644 --- a/docs/learn/learn-polkadot-opengov-treasury.md +++ b/docs/learn/learn-polkadot-opengov-treasury.md @@ -27,12 +27,7 @@ mechanisms: - **Transaction fees:** 80% of the transaction fees of every submitted extrinsic is diverted to the Treasury, while 20% is given to the block producers. -- **Staking inefficiencies:** the network knows an exogenously determined parameter called ideal - staking rate. The APY for stakers (nominators & validators) decreases whenever the actual staking - rate is not equal to the ideal staking rate. To keep inflation constant at 10%, the system does - not creates less tokens, rather some share of the overall reward for stakers is diverted to the - Treasury (more information - [here](https://research.web3.foundation/Polkadot/overview/token-economics)). +- **Inflation:** 15% of DOT annual inflation is directed to the Treasury. - **Slashes:** whenever validators and nominators are [slashed](./learn-offenses.md), a share of the slashed tokens are diverted to Treasury. They are typically rare and unpredictable events. - **Transfers:** everyone can send funds to the Treasury directly. This is a rare event and @@ -41,8 +36,8 @@ mechanisms: The outflow is determined by the following mechanisms: - **Burned tokens:** at the end of each spend period, - [a fraction](../general/chain-state-values.md#treasury-burn-factor) of the available funds are - burned. + **[a fraction](../general/chain-state-values.md#treasury-burn-factor) of the available funds are + burned**. - **Treasury proposals & Bounties:** they make up the largest share of outflow tokens to the community and need to be approved by governance. Then, payouts occur at the end of a [spend period](../general/glossary.md#spend-period). diff --git a/docs/learn/learn-staking.md b/docs/learn/learn-staking.md index 350727106688..1d92dd49b962 100644 --- a/docs/learn/learn-staking.md +++ b/docs/learn/learn-staking.md @@ -452,21 +452,8 @@ automatically check if you qualify. For more information, visit the - Can choose [multiple validators](../general/chain-state-values.md#maximum-votes-per-nominator) which can help to decentralize the network through the sophisticated [NPoS system](learn-consensus.md/#nominated-proof-of-stake) -- 10% inflation/year of the tokens is primarily intended for staking rewards. - -When the system staking rate matches with the ideal staking rate, the entire inflation of the -network is given away as the staking rewards. - -The ideal staking rate is a dynamic value - as the number of active parachains influences the -available liquidity that is available to secure the network. - -Any divergence from the ideal staking rate will result in the distribution of a proportion of the -newly minted tokens through inflation to go to the treasury. Keep in mind that when the system's -staking rate is lower than the ideal staking rate, the annual nominal return rate will be higher, -encouraging more users to use their tokens for staking. On the contrary, when the system staking -rate is higher than the ideal staking rate, the annual nominal return will be less, encouraging some -users to withdraw. For in-depth understanding, check the -[inflation](learn-staking-advanced.md#inflation) section on the Wiki. +- 85% of inflation/year of the tokens is primarily intended for staking rewards. Check the + [inflation](learn-staking-advanced.md#inflation) section on the Wiki for more information. ### Cons of Staking diff --git a/docs/maintain/maintain-guides-validator-payout.md b/docs/maintain/maintain-guides-validator-payout.md index 25017ff2adb2..1a549efeea60 100644 --- a/docs/maintain/maintain-guides-validator-payout.md +++ b/docs/maintain/maintain-guides-validator-payout.md @@ -184,12 +184,10 @@ This includes the stake of the validator itself plus any stake bonded by nominat :::info Validators set their preference as a percentage of the block reward, _not_ an absolute number of -DOT. Polkadot's block reward is -[based on the _total_ amount at stake](../learn/learn-inflation.md#ideal-staking-rate). The -commission is set as the amount taken by the validator; that is, 0% commission means that the -validator does not receive any proportion of the rewards besides that owed to it from self-stake, -and 100% commission means that the validator operator gets all rewards and gives none to its -nominators. +DOT. Polkadot's block reward is based on the _total_ amount at stake. The commission is set as the +amount taken by the validator; that is, 0% commission means that the validator does not receive any +proportion of the rewards besides that owed to it from self-stake, and 100% commission means that +the validator operator gets all rewards and gives none to its nominators. ::: diff --git a/polkadot-wiki/sidebars.js b/polkadot-wiki/sidebars.js index ee0bcacf051f..92b0a5a6b8c6 100644 --- a/polkadot-wiki/sidebars.js +++ b/polkadot-wiki/sidebars.js @@ -1001,6 +1001,7 @@ module.exports = { "general/kusama/kusama-adversarial-cheatsheet", "maintain/kusama/maintain-guides-society-kusama", "maintain/kusama/maintain-guides-how-to-validate-kusama", + "learn/learn-kusama-inflation", ], }, ],