In yesterday’s update, I made some incorrect statements regarding the yearly issuance rate of new ICX tokens.
The exact inflation rate will be agreed upon via consensus. Delegates on the ICON network are incentivized to agree on an inflation rate that will keep the ICX economy stable and healthy without devaluing their own staked tokens too much. If 20% inflation really happens, it would mean the ICON network is doing really, really, really well. In reality, 20% will likely never happen. Furthermore, ICX supply is hard-capped at 800,460,000 ICX, and inflation is calculated with the circulating supply – currently 473,406,688 ICX. Thus, a 100% supply increase is literally impossible because it would put the circulating supply at 946,813,376 ICX, which is 18% greater than the total supply.
I did not do enough research before writing that post, and for that, I apologize. Here is a better explanation of how yearly ICX issuance works.
ICON’s network uses a Delegated Proof of Stake (DPOS) consensus algorithm that distributes block rewards to users who stake their ICX tokens. Since the ICON network could stay online until the end of time, the amount of ICX tokens for block rewards cannot be predetermined. Instead, the ICX tokens for block rewards are generated at a yearly issuance rate that is determined by the I-Score of the entire ICON network.
In the ICON ecosystem, I-Score is a function of network activity and can be calculated for both individual participants as well as the overall network. The yearly ICX issuance rate is a function of the network’s I-Score rate of increase. When the rate of the I-Score is zero, the issuance rate will be 7%. Lastly, the issuance rate has an upper bound of 20%. If 2/3 or more of the network’s C-Reps do not agree on the calculated issuance rate, it can be adjusted ±5%. In short, yearly ICX issuance is automatically calculated by the protocol using the overall I-Score of the ICON network, and this calculated percentage can be altered within the allowed boundary (±5%) through C-Rep consensus.
Thus, 800,460,000 ICX is just the current total supply and not a hard cap. Similar to Ethereum, EOS, and ARK, the ICON protocol needs to issue new ICX tokens for block rewards, which means ICX has no hard supply cap.
This point still holds true.
ICON’s inflation is baked in at the protocol level and acts as an incentivization structure for community members to hold financial stakes in the network. When money is on the line, users are motivated to act in the best interest of the network.
Keep in mind the I-Score-based issuance model will most likely not go live when ICX staking is first implemented. The network will need some time to calculate I-Scores before they can be used for issuance calculations. During this time, the issuance rate will be fixed similar to ICON V2 mainnet’s temporary fixed rate of 0.01 ICX for transaction fees.
Once again, I apologize for the misunderstanding.
Update (November 8, 2018): Check out this Twitter thread from @2infiniti that explains ICX issuance in detail.