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Synthetix project’s solution to revolutionize the existing monetary policy and control inflation

By Inkarias - 2019-12-10

With an original fixed supply of 100m SNX tokens, Synthetix altered its monetary policy in March 2019 to inflate the supply to about 250m over the next five years and to incentivize SNX holders to bootstrap the network to give it time for trading fees from Synthetix.Exchange in order to become a sufficient incentive to collateralize the network. This policy was front-loaded, so about half of all the additional supply would be distributed in the first year, halving each year after that. On November 25 the community voted on Github for a 1.25% weekly rewards decline starting at week 40 corresponding to the December 11, 2019. Shortly after that on November 25th , the community voted for a 2.5% annual terminal inflation rate starting at week 235 (September 6, 2023), with a strong support for both SIP’s.

What solution in mind to control the monetary policy ?

The solution that was proposed to the core team is to have rewards gradually declining each week versus having them halve every year, and community member gmgh explained why this solution is one of the most interesting:
a smooth inflation reduction solves this by removing an "event" to trigger this people will just come and go and do all the above actions based on their own accord, rather than being "forced" to take action in response to an obvious future event. A lot of the game theory of what other people will do, and when they do it, will be removed.
In an initial draft proposed by a community member , the system starts reducing weekly rewards by 1.3% at week 30 instead of previously proposed week 32 and then introduce ongoing terminal inflation of 3% per year thereafter starting at week 208.
The complete schedule and monetary changes can be found at https://www.synthetix.io/