McCaleb asked if the network should “push to get rid of inflation”. This has inspired passionate responses and below are summaries of some of the viewpoints and questions.
Keep the current inflation mechanism
- Inflation replenishes lumens lost over time as people lose their secret seeds.
- It provides a way to recycle transaction fees.
- It signals that lumens are not an investment and incentivizes use instead of holding.
- It draws in and retains retail investors who see it as a “dividend payment”.
- Many retail investors don’t see the current inflation mechanism as something that devalues each lumen.
- Changing this would result in backlash from retail investors.
Remove the current inflation mechanism
- Network performance will drag as more accounts are created.
- Inflation pools have negated the purpose of inflation. If everyone receives the same amount, people are not incentivized to use - they hodl instead. The theoretical value of each lumen goes down while the value of each person’s lumen balance stays the same.
- Without pools, the current mechanism makes the rich richer.
The prospect of removing the current inflation mechanism inspires several questions:
Should lumens be inflationary? If yes:
- Should the network give everyone inflation equally, or should it incentivize specific behaviors like validating ledgers or providing asset liquidity?
- Can the chosen mechanism be designed to reduce the chance of gaming the system?
- Should the network still recycle fees? If so, how? Using something similar to the current inflation mechanism?