With the plan to create an on-chain Terra fund by instituting a 6% tax for 12 months posted on the forums recently (link: A 12-month on-chain fund for Terra projects), this seems like a good opportunity to zoom into one briefly mentioned aspect of that proposal, namely a potential inflation change. It was suggested by several community members that we adjust the maximum inflation to keep the same effective apr that we currently enjoy (~7.4%). I think this is an important enough discussion to warrant it’s own thread and discussion.
Inflation / (total staked SCRT / total SCRT) * (1 - fees) - inflation = effective apr
If we would like to keep the current ‘effective apr’ and create the on-chain Terra fund:
X / (137/218) * 0.88 - X = 7.4
Solving for X leads to an inflation of 18.5% to keep the same effective apr with the Terra fund.
January 1st 2022: ~11%
Last month (SF tax at 10%): ~6%
If on-chain Terra fund gets approved: 6%
If on-chain Terra fund gets approved and maximum inflation is raised to 20%: 8%
ATOM: 11% (Maximum inflation is 20%)
OSMO: 80% (Reduced by 1/3 per year)
JUNO: 40% (Halved yearly until 10%, then reduced by 1% per year)
Sentinel: 37% (Reduced by 6% every 6 months until 13%)
- Estimate support for temporarily increasing inflation to 18.5% or 20% to offset the on-chain Terra fund and start community discussions before an on-chain proposal
- Kick-start long-term inflation discussions (40% of validators that participated in the 2022-Q2 Validator Survey would like to see the inflation percentages, and inflation change rate being discussed)
- Increasing inflation would also increase the amount of SCRT received by SF, the community pool, and the prospective Terra fund. At 20% inflation, they would each receive 33% more SCRT than now.
- Increasing inflation may lead to more SCRT being sold. It could also attract more stakers due to a more attractive apr.