TAKE YOUR SEAT!
Elrond Network allows staking, which is similar to making a deposit and receiving high rewards for leaving your tokens in, as a way to secure the network.
One aspect that differentiates Elrond is that there is a total staking limit. Meaning out of the total token supply there is a limited amount of space for staking. For example, for mainnet launch there are 13.500 billion ERD in circulation and a staking limit of 5.500 billion ERD.
High performance with moderate inflation
This limit allows for the annual performance to be high for everyone who is staking, with a moderate inflation rate which is relative to the total supply.
There is an ongoing effect of supply and demand. Since it has a limit, the staking space is very full; therefore it is difficult to find a place (a seat). When an investor has a staking seat which earns 29% annually, there is a constant fear that they might not be able to get another seat again if they leave.This keeps people in the staking process. Also, news spreads about Elrond’s high performance and the amount of people on hold increases, increasing also the price of the token as a result.
A rewards budget is automatically generated, with the sum of fees+ new minted tokens. These newly minted tokens are the ones that generate the inflation in a controlled way.
The ERD token has in its code a maximum inflation plan, which is shown in the following table:
Max. inflation 1st year (if 0 fees) 10.845%
Max. inflation 2nd year 8.754%
Max. inflation 3rd year 7.102%
Max. inflation 4th year 5.747%
Max. inflation 5th year 4.599%
Max. inflation 6th year 3.597%
Max. inflation 7th year 2.701%
Max. inflation 8th year 1.878%
Max. inflation 9th year 1.106%
Max. inflation 10th year 0.365%
So for example, the maximum inflation rate in the third year would be 7%, which translates into 1.400 billion ERD in the rewards pool. If in that same year, we have raised 500 billion ERD in fees, only 900 billion tokens will be minted, generating an inflation rate of just 4%.
Unlimited supply of tokens
This system, therefore, means the total number of tokens once the network enters its 10th year will be between 20 billion ERD and 25 billion ERD. From this point, there won’t be any more minted tokens, and all rewards will come from the fees.
Roughly every 2 months all staking validators and providers will have an auction where the new total staking limit is established. This is how, for example, we could go from having a 5.500 billion limit to 6.500 billion limit.
If the rewards pool is steady and the staking limit evolves in time, we will likely have an annual performance percentage that will drop progressively.
For example, in mainnet we have 2.000 billion ERD in rewards in the first year and we start with a 5.500 billion ERD staking limit. Therefore, we have a 2 token rewards for every 5.5 tokens in staking (per year).
If the limit goes up to 6.500 billion ERD in 3 months, we would get a 2 token reward for every 6.5 tokens in staking (per year).
High Performance for years
This system will allow us to have an annual performance rate of over 12% for an extended period, due to the fact that we would need the total staking limit to go up drastically to see a drop of under 12%.
Performance in USDT
Keep in mind that the low supply and high demand effect will move the token price up. Therefore, even if in 3 years we reach a 12% annual performance in ERD, in regards to our initial investment ,it could become a very lucrative passive income, calculated in dollars.
Every 24 hours
The calculations to determine the size of the pool, the fee charges and the minting of new tokens takes place every 24 hours and not every year. Also, the rewards are paid into the wallet each day.
Take your seat
The longer you wait the more complex it will be to get a seat in Elrond’s staking, if you don’t have yours yet, you can ask for help in Elrond Telegram: https://t.me/ElrondNetwork