Stellar Could Eventually Remove Its 1% Yearly Inflation

Stellar (XLM) is proposing to disable inflation from the stellar protocol. The main goal behind it is to eliminate the benefits that accounts were receiving without giving anything productive to the network. The information was released by the Stellar Development Foundation in a blog post on September 30. 

Stellar Could Disable Inflation

Stellar is one of the leading cryptocurrency networks in the market. The blockchain project has already been working with several companies including IBM. However, there are some issues that the Stellar community must solve before continuing its expansion path.

The blog post explains that when Stellar was conceived, they envisioned an incentive mechanism whereby account holders would direct inflation-generated lumens toward projects built on Stellar. 

This was a very noble mechanism that would support the development and growth of the entire ecosystem. However, this never happened. Inflation on the network is not serving this purpose. 

The Stellar Development Foundation explains that users join pools in order to claim the inflation for themselves rather than helping the network expand. 

On the matter, the blog post explains:

“A few Stellar ecosystem projects receive enough votes to qualify for inflation, but the good people who vote for those projects are essentially opting out of inflation pools. They’re choosing to make a donation. We’re all for that, but it just doesn’t make sense to bake the option to donate into the protocol itself.”

At the same time, the Stellar Development Foundation claims that inflation will eventually lead to scalability issues in the future. To grow the network, it is necessary to maximize efficiency, throughput and scalability. Inflation pools do not have an operational impact as of today, but as the network continues growing, this will start to affect the whole ecosystem. 

OrbitLens from setellar.expert submitted a Core Advancement Proposal to Stellar’s open-source Github repository outlining a plan to disable inflation. They will just modify the inflation operation so that it doesn’t do anything. Although there may be some vestigial traces of the mechanism, the inflation will not be there. 

The Stellar Development Foundation cannot impose this change unilaterally. This is why the proposal has been made and validators in the network will have to vote on which version of the protocol the network runs. 

Regarding the projects that were benefited with inflation, the SDF will continue to support them through education and technical assistance for them to build on top of the Stellar network. The SDF is also offering lumen grants.