Inflation is a curse in the financial sector. Even in the cryptocurrency world, it is an issuance model best avoided altogether. The Stellar Foundation acknowledges it may be best to get rid of these excess assets altogether. Although first proposed a year ago, the team is now ready to remove the inflation mechanism from its ecosystem altogether.
Stellar has Inflation
Contrary to what most people may think, Stellar is a digital asset which effectively has an inflation mechanism. As it is not a traditional cryptocurrency like Bitcoin or Ethereum, having such a mechanism does make a fair bit of sense. It is a project dedicated to streamlining and disrupting traditional finance, an industry where inflation is almost a must to survive in the long term. However, there have been people who genuinely oppose this mechanism in Stellar, and they have been quite vocal about it.
In fact, one could argue the inflation rate of Stellar should have been removed last year. Several meetups were organized since October 2018 to openly discuss this matter and find a potential solution. Even the developer google group saw quite a few discussions regarding this particular mechanism and how it would affect Stellar now and in the future. It is crucial for teams to weigh the pros and cons before making a decision. That verdict now comes in the form of removing the current inflation mechanism.
What Will Change Exactly?
The reason to remove this mechanism from Stellar comes at an interesting time. According to the developers, the current system doesn’t benefit the ecosystem or any projects being built on top of Stellar right now. Even the projects which already exist do not see any use from this concept whatsoever. Initially, the developers wanted to use this as a mechanism system, but it has become rather apparent inflation is not the right way to go about things.
The current plan of approach is to simply modify the inflation operation so that it can’t do anything. This requires very little changes when the new Core upgrade is submitted to the public. Causing minimal fraction for all users and developers is always a favorable course of action. However, this approach needs to be voted in by the network. All network participants will be determined if they want to accept this release. It will be up to validator node operators to give users the option to cast their vote in this regard.
Looking Toward the Future
To this date, there are some Stellar projects which “rely” on this inflation curve. They do not need to worry, as the Stellar Foundation will continue to offer research and quarterly grants to projects building vital infrastructure. There is also the Stellar Community Fund which will play an increasing role of importance moving forward. As far as the inflation funds being kept by the Stellar Development Foundation is concerned, the holdings will be made public in the coming months. How the funds will be distributed, remains undecided at this time.