inflation

Abstract

The x/inflation module mints new Evmos tokens and allocates them in daily epochs according to the Evmos Token Model distribution to

• Community Pool 50%.
• Staking Rewards 50%,
• Usage Incentives: 0%,

It replaces the Cosmos SDK x/mint module, that other Cosmos chains are using.

The allocation of new coins incentivizes specific behaviour in the Evmos network. Inflation allocates funds to 1) the community pool(managed by sdk x/distribution module) to fund spending proposals, and 2) the Fee Collector account (in the sdk x/auth module) to increase staking rewards. The now deprecated x/incentives module account (3) does not accrue tokens anymore.

Contents

1. Concepts
2. State
3. Hooks
4. Events
5. Parameters
6. Clients

Concepts

Inflation

In a Proof of Stake (PoS) blockchain, inflation is used as a tool to incentivize participation in the network. Inflation creates and distributes new tokens to participants who can use their tokens to either interact with the protocol or stake their assets to earn rewards and vote for governance proposals.

Especially in an early stage of a network, where staking rewards are high and there are fewer possibilities to interact with the network, inflation can be used as the major tool to incentivize staking and thereby securing the network.

With more stakers, the network becomes increasingly stable and decentralized. It becomes stable, because assets are locked up instead of causing price changes through trading. And it becomes decentralized, because the power to vote for governance proposals is distributed amongst more people.

Evmos Token Model

The Evmos Token Model outlines how the Evmos network is secured through a balanced incentivized interest from users, developers and validators. In this model, inflation plays a major role in sustaining this balance. With an initial supply of 200 million and over 300 million tokens being issued through inflation during the first year, the model suggests an exponential decline in inflation to issue 1 billion Evmos tokens within the first 4 years.

We implement two different inflation mechanisms to support the token model:

1. linear inflation for team vesting and
2. exponential inflation for staking rewards and community pool.

Linear Inflation - Team Vesting

The Team Vesting distribution in the Token Model is implemented in a way that minimized the amount of taxable events. An initial supply of 200M allocated to vesting accounts at genesis. This amount is equal to the total inflation allocated for team vesting after 4 years (20% * 1B = 200M). Over time, unvested tokens on these accounts are converted into vested tokens at a linear rate. Team members cannot delegate, transfer or execute Ethereum transaction with unvested tokens until they are unlocked represented as vested tokens.

Exponential Inflation - The Half Life

The inflation distribution for staking and community pool is implemented through an exponential formula, a.k.a. the Half Life.

Inflation is minted in daily epochs. During a period of 365 epochs (one year), a daily provision (epochProvison) of Evmos tokens is minted and allocated to staking rewards and the community pool. The epoch provision depends on module parameters and is recalculated at the end of every epoch.

The calculation of the epoch provision is done according to the following formula:

periodProvision = exponentialDecay       *  bondingIncentive
f(x)            = (a * (1 - r) ^ x + c)  *  (1 + maxVariance * (1 - bondedRatio / bondingTarget))


epochProvision = periodProvision / epochsPerPeriod

where (with default values):
x = variable    = year
a = 300,000,000 = initial value
r = 0.5         = decay factor
c = 9,375,000   = long term supply

bondedRatio   = variable  = fraction of the staking tokens which are currently bonded
maxVariance   = 0.0       = the max amount to increase inflation
bondingTarget = 0.66      = our optimal bonded ratio

Example with bondedRatio = bondingTarget:

period  periodProvision  cumulated      epochProvision
f(0)    309 375 000      309 375 000     847 602
f(1)    159 375 000      468 750 000     436 643
f(2)     84 375 000      553 125 000     231 164
f(3)     46 875 000      600 000 000     128 424

Note, that after discussion with the validator community, it was decided to decrease the inflation to 1/3 during the upgrade to v16.0.0.

State

State Objects

The x/inflation module keeps the following objects in state:

State Object	Description	Key	Value	Store
Period	Period Counter	[]byte{1}	[]byte{period}	KV
EpochIdentifier	Epoch identifier bytes	[]byte{3}	[]byte{epochIdentifier}	KV
EpochsPerPeriod	Epochs per period bytes	[]byte{4}	[]byte{epochsPerPeriod}	KV
SkippedEpochs	Number of skipped epochs bytes	[]byte{5}	[]byte{skippedEpochs}	KV

Period

Counter to keep track of amount of past periods, based on the epochs per period.

EpochIdentifier

Identifier to trigger epoch hooks.

EpochsPerPeriod

Amount of epochs in one period

Genesis State

The x/inflation module's GenesisState defines the state necessary for initializing the chain from a previously exported height. It contains the module parameters, the current period, epoch identifier, epochs per period and the number of skipped epochs. :

type GenesisState struct {
    // params defines all the parameters of the module.
    Params Params `protobuf:"bytes,1,opt,name=params,proto3" json:"params"`
    // amount of past periods, based on the epochs per period param
    Period uint64 `protobuf:"varint,2,opt,name=period,proto3" json:"period,omitempty"`
    // inflation epoch identifier
    EpochIdentifier string `protobuf:"bytes,3,opt,name=epoch_identifier,json=epochIdentifier,proto3" json:"epoch_identifier,omitempty"`
    // number of epochs after which inflation is recalculated
    EpochsPerPeriod int64 `protobuf:"varint,4,opt,name=epochs_per_period,json=epochsPerPeriod,proto3" json:"epochs_per_period,omitempty"`
    // number of epochs that have passed while inflation is disabled
    SkippedEpochs uint64 `protobuf:"varint,5,opt,name=skipped_epochs,json=skippedEpochs,proto3" json:"skipped_epochs,omitempty"`
}

Hooks

The x/inflation module implements the AfterEpochEnd hook from the x/epoch module in order to allocate inflation.

Epoch Hook: Inflation

The epoch hook handles the inflation logic which is run at the end of each epoch. It is responsible for minting and allocating the epoch mint provision as well as updating it:

1. Check if inflation is disabled. If it is, skip inflation, increment number of skipped epochs and return without proceeding to the next steps.
2. A block is committed, that signalizes that an epoch has ended (block header.Time has surpassed epoch_start + epochIdentifier).
3. Mint coin in amount of calculated epochMintProvision and allocate according to inflation distribution to staking rewards and community pool.
4. If a period ends with the current epoch, increment the period by 1 and set new value to the store.

Events

The x/inflation module emits the following events:

Inflation

Type	Attribute Key	Attribute Value
inflation	"epoch_provisions"	{fmt.Sprintf("%d", epochNumber)}
inflation	"epoch_number"	{strconv.FormatUint(uint64(in.Epochs), 10)}
inflation	"amount"	{mintedCoin.Amount.String()}

Parameters

The x/inflation module contains the parameters described below. All parameters can be modified via governance.

Key	Type	Default Value
ParamStoreKeyMintDenom	string	evm.DefaultEVMDenom // “aevmos”
ParamStoreKeyExponentialCalculation	ExponentialCalculation	A: sdk.NewDec(int64(300_000_000))
		R: sdk.NewDecWithPrec(50, 2)
		C: sdk.NewDec(int64(9_375_000))
		BondingTarget: sdk.NewDecWithPrec(66, 2)
		MaxVariance: sdk.ZeroDec()
ParamStoreKeyInflationDistribution	InflationDistribution	StakingRewards: sdk.NewDecWithPrec(500000000, 9)
		UsageIncentives: sdk.NewDecWithPrec(000000000, 9)
		CommunityPool: sdk.NewDecWithPrec(500000000, 9)
ParamStoreKeyEnableInflation	bool	true

Mint Denom

The ParamStoreKeyMintDenom parameter sets the denomination in which new coins are minted.

Exponential Calculation

The ParamStoreKeyExponentialCalculation parameter holds all values required for the calculation of the epochMintProvision. The values A, R and C describe the decrease of inflation over time. The BondingTarget and MaxVariance allow for an increase in inflation, which is automatically regulated by the bonded ratio, the portion of staked tokens in the network. The exact formula can be found under Concepts.

Inflation Distribution

The ParamStoreKeyInflationDistribution parameter defines the distribution in which inflation is allocated through minting on each epoch (stakingRewards, CommunityPool).

Enable Inflation

The ParamStoreKeyEnableInflation parameter enables the daily inflation. If it is disabled, no tokens are minted and the number of skipped epochs increases for each passed epoch.

Clients

A user can query the x/inflation module using the CLI, JSON-RPC, gRPC or REST.

CLI

Find below a list of evmosd commands added with the x/inflation module. You can obtain the full list by using the evmosd -h command.

Queries

The query commands allow users to query inflation state.

period

Allows users to query the current inflation period.

evmosd query inflation period [flags]

epoch-mint-provision

Allows users to query the current inflation epoch provisions value.

evmosd query inflation epoch-mint-provision [flags]

skipped-epochs

Allows users to query the current number of skipped epochs.

evmosd query inflation skipped-epochs [flags]

total-supply

Allows users to query the total supply of tokens in circulation.

evmosd query inflation total-supply [flags]

inflation-rate

Allows users to query the inflation rate of the current period.

evmosd query inflation inflation-rate [flags]

params

Allows users to query the current inflation parameters.

evmosd query inflation params [flags]

Proposals

Update Params

Allows users to submit a MsgUpdateParams with the desired changes on the x/inflation module parameters. To do this, you will have to provide a JSON file with the correspondiong message in the submit-proposal command.

For more information on how to draft a proposal, refer to the Drafting a proposal section.

evmosd tx gov submit-proposal proposal.json [flags]

gRPC

Queries

Verb	Method	Description
gRPC	evmos.inflation.v1.Query/Period	Gets current inflation period
gRPC	evmos.inflation.v1.Query/EpochMintProvision	Gets current inflation epoch provisions value
gRPC	evmos.inflation.v1.Query/Params	Gets current inflation parameters
gRPC	evmos.inflation.v1.Query/SkippedEpochs	Gets current number of skipped epochs
gRPC	evmos.inflation.v1.Query/TotalSupply	Gets current total supply
gRPC	evmos.inflation.v1.Query/InflationRate	Gets current inflation rate
GET	/evmos/inflation/v1/period	Gets current inflation period
GET	/evmos/inflation/v1/epoch_mint_provision	Gets current inflation epoch provisions value
GET	/evmos/inflation/v1/skipped_epochs	Gets current number of skipped epochs
GET	/evmos/inflation/v1/total_supply	Gets current total supply
GET	/evmos/inflation/v1/inflation_rate	Gets current inflation rate
GET	/evmos/inflation/v1/params	Gets current inflation parameters