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Is the "base block reward" here referring to coinbase rewards in the graph at the bottom here? Does it mean that coinbase reward targets 5% and staking rewards targets 7% thus a combined 12% inflation rate? |
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arc: 0042
title: Adjust block reward algorithm to make sure inflation is stable
authors: Haruka Ma
discussion: self
topic: Protocol
status: Draft
created: 2024-09-09
Abstract
The AleoBFT consensus doesn't guarantee a stable block interval, but the current block reward algorithm assumes the block interval is fixed at 10 seconds, and is emitting rewards regardless of actual block intervals. This makes the 5% annual reward target almost unattainable: shorter block intervals causes higher reward frequency and higher annual reward, and vice versa.
As an example, if the block interval is 3 seconds throughout a full year, the effective inflation rate from base block reward would be 16.67% instead of 5%.
This ARC proposes changes to the block reward algorithm so it could adjust the per-block reward according to the actual block interval, therefore achieving the 5% annual target without being affected by fluctuations of the validator network.
Specification
Proposed new block reward algorithm and implementation:
The proposed algorithm takes the actual block interval into account, emitting less reward if block interval is short, and vice versa.
Note the block interval is capped to 60 seconds in the calculation; this is set mainly to remedy situations like chain halts or the gap between genesis timestamp and first block (only applicable to future chain resets for testnets) so there won't be a sudden large sum of credits being rewarded in one block. The 60 seconds here is just an arbitrary number; actual interval cap should be discussed further.
Also note the block interval is guaranteed to be greater than zero on the consensus level.
Test Cases
Tested with the above code on local devnet:
Dependencies
snarkVM. Potentially other products that relies on the implementation.
Backwards Compatibility
Implementing this ARC requires the snarkVM and snarkOS to have a proper soft fork mechanism.
Security & Compliance
The proposed algorithm affects the tokenomics, albeit it's trying to bring the chain back to the intended state.
Conflict of interests among validators
This section lists some situations the author could think of.
References
N/A
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