Stellar Validators To Vote On Core Change; Eliminate Inflation Mechanism To Boost Ecosystem Growth


Stellar has recently announced its decision to eliminate the inflation mechanism from its core protocol through an update on its version 12. The decision was announced through a medium blog post on 30th September.

According to the blog, the first-ever proposal for removing the inflation mechanism from the core-protocol cane in October 2018, and the dev team since then have taken in input from the community, looked at Pros and Cons, and have decided that the inflation mechanism put in place was no more serving its purpose. In fact, the mechanism can actually hinder scalability on the network.

The inflation mechanism was designed as an incentive program to support the new projects and development on the network. The plan was to redirect inflation generated linens rewards towards building new projects, however, very soon individuals started to join pools and directed those inflation funds to their addresses, thus defeating the purpose.

The blog read,

“Increasingly, inflation is being proportionally split among individual account holders, which means they don’t actually serve any economic purpose. Balances go up in lockstep with the total supply of XLM, so individual increases are offset by an exactly proportional increase everywhere else. Imagine waking up with twice as much money in your bank account only to discover that everyone else did, too, and so everything costs twice as much. Nothing would have changed, really. Inflation, for Stellar, is just redenominating the ecosystem each week.”

The change in core protocol to eliminate the inflation mechanism will be rolled out with version 12 and will be up for voting by the validators.

What if the vote goes against the removal of the inflation mechanism?

Version 12 with the proposed changes will be rolled out starting from October, the validators will be provided with ample time to upgrade to the new model, and then voting will be open to every validator rand they would ultimately decide if the proposed changes are valid or not.

In case validators vote against the proposed changes, then a new version will e released without the protocol changes made for elimination of inflation mechanism and it will be opened for voting again.

The blog post also noted that they would continue to support new projects on the platform through various grants and donations, and those projects which were slated to benefit from the inflation program would not be left out.

The blog post mentioned,

“The SDF’s mandate is to grow and support the network, and as part of that, we provide education and technical assistance to projects building on Stellar. We also offer lumen grants.”

“In addition to research grants and the Stellar Community Fund, we offer quarterly grants to projects that build and maintain infrastructure vital for the ecosystem to flourish. Those are the exact projects inflation was designed to benefit.”

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