Learn about Boca's inflation in one article
Sophisticated algorithms and deductions have enabled Boca's inflation model to balance the interests of the entire network, while also ensuring the healthy development of the Boca network.
“Boca Knowledge Map”This is an entry-level article about Boca from zero to one. We tried to start with the most basic part of Boca and provide you with comprehensive information about Boca. Of course, this is a huge project and full of challenges. However, we hope that through such efforts, everyone can correctly understand Boca, and also make it easy for people who don't know Boca to quickly grasp Boca related knowledge.Today is the 12th issue of this column. Through a short article, I will take you to understand what is going on with inflation in the Boca Network.
Boca DOT is the native token of the Boca Network. It can be nominated, voted on by community governance, and distributed by parachains. The initial circulation of DOT cards was 10 million. In August 2020, the DOT denomination was split. Therefore, the initial total circulation of the new DOT token is 1 billion, and then it will be issued more every year, and the total amount is unlimited. So the question is, how do you increase Boca sales, and how do you control the inflation rate?
How is Boca inflating
Boca inflates a portion of DOT and targets these DOT to specific groups of people to support the participants that maintain the Boca Network and the construction of the ecosystem.
As we mentioned before, Boca uses NPoS to nominate proof of interest to reach consensus. There are two roles: nominator and validator. They become nominees through staking (staking) tokens and then nominate trustworthy validators. Validators receive rewards by running nodes and confirming blocks.This reward comes from the issuance of additional tokens, which has led to inflation。
Furthermore, Boca's treasury is a fund pool for ecological construction formed by combining part of inflated DOT, DOT that has been slashed (cut) by the system due to misconduct, and part of transaction fees to stimulate ecological development.Staking rewards and the Boca Treasury are the main sources of capital after the Botoons inflation。
The complete inflation of Boca is mainly composed of the following components: (i1) inflation that rewards validators and nominees through the issuance of additional tokens; (i2) inflation caused by issuing additional tokens to the treasury; (i3) deflation due to misconduct, that is, slashing (reduction), and (i4) deflation caused by transaction fees.The formula is: inflation rate = i1+i2-i3-i4, and i1 also accounts for the largest share of inflation caused by verifiers and nominees that require additional tokens to be issuedIt is a major factor in overall inflation.
To understand this consensus more clearly, we need to understand the treasury mechanism more clearly. The i2 part of the treasury mainly goes to the i1 and i2 parts, but in addition to inflation funds, the treasury also includes i3 and i4, and the treasury will destroy some unused funds (this is also the only burning mechanism for the entire Boca), but i3 and i4 are not originally part of the inflation part, so i1+i2 is equivalent to double counting i3 and i4. So we have to subtract i3 and i4 from here.
Therefore, Boca's inflation rate is less than 10% because part of the DOT was burned through the treasury mechanism.
Design for the best pledge rate
The inflation portion of DOT will be rewarded to staking participants, and the other part will go to the treasury, so how are the two distributed? This brings up Boca's design for one of the best collateral rates.
Boca hopes that DOT's amount of staking can be reasonably guided, guarantee the security of the network consensus, and achieve good token liquidity.Through a sophisticated algorithm, under the condition of 10% inflation, it is determined that the optimal pledge rate is 50%In other words, half of the tokens are pledged in the consensus system. From this, it can be broadly divided into three situations:
1. When the pledge rate is less than 50%, the security of the network consensus will be compromised, and it is necessary to encourage more tokens to be pledged. At this time, the annual yield is greater than 20%
2. When the pledge rate is equal to 50%, the ideal state is reached. At this point, the annual yield of the verification node is 20%
3. When the pledge rate is greater than 50%, the liquidity of the token will weaken. At this time, the annual yield is less than 20%, encouraging the redemption of the token
The x axis is the pledge rate, the Y axis indicates the annualized inflation rate, the blue line indicates the inflation rate generated by the validator node token, and the green line is the annualized return on the pledge.
So, how much will Boca's Staking annualized Yield actually be?
From a theoretical point of view, for staking people, the highest pledge annualized yield that can be obtained is when the pledge rate is exactly 50%. However, in the actual process, since some of the inflationary funds will flow to the treasury and the treasury has a destruction mechanism, the overall inflation rate will be 10%. Furthermore, due to many participants playing games with each other, the pledge rate cannot be stabilized at around 50% during the actual process. As a result, Staking's yield did not reach its highest point either.Combining the above two factors, the actual annualized return on DOT's pledge is around 10%-15%。
Also, the best 50% pledge rate we've just seen is the ratio previously designed according to when Boca had a parachain, but in the actual process,Since the current Boca doesn't have a parachain yet. Therefore, through a referendum, Boca temporarily adjusted the optimal pledge rate to 75%. In the future, when Boca's slot auction goes smoothly, and after Boca has a parachain, the optimal pledge rate will also be adjusted to 50% of the original design. I hope everyone knows.
Ultimately, in Boca's token design,The optimal allocation ratio for staking, slot auctions, and circulation is 50%: 33%: 17%。
The inflation model is beneficial to the healthy development of Boca's ecology
Boca's inflation model is more than just the above; it also includes many complex parameter adjustments and formulas. In short, Boca Network's inflation is the result of a series of sophisticated algorithms and deductions. its nonlinear model,On the one hand, it is a great incentive for token holders, allowing them to actively participate in the Boca network to maintain network security; on the other hand, once the pledge rate reaches a certain level, the token can also be adjusted to ensure the liquidity of the token throughout the network. Being able to balance the rights and interests of the various players participating in the Boca Network is not an easy task. Boca has made this possible and ensured the healthy development of the network.
*The information provided by the Polkadot Ecological Research Institute does not represent any investment suggestions. The published articles only represent personal opinions and are for reference and study only. Since domestic policies and regulations related to digital assets have not yet been introduced, users in mainland China are requested to pay careful attention to the development of Crypto.
In view of the endless number of Boca ecological projects, there are many poor quality projects and fraudulent projects, which are worth being wary of. On the other hand, it is difficult for groups that are only involved in the Boca Project to understand the full picture of Boca's entire ecological development, and many opportunities have been missed. So, weIt was decided to establish a Boca ecosystem, where all Boca ecological projects can be discussed in an open manner. Everyone can objectively share their views on each project, understand the development of each Boca project, and share information to seize opportunities together。
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