Polkadot developer proposes inflation upgrade to enhance transparency

According to the proposal’s GitHub document, the Polkadot relay chain’s current state presents various challenges, including high inflation rates. These stem from outdated infrastructure and parachain slots’ ineffective influence on inflation.

Additionally, adjusting the inflation rate is complex, requiring manual intervention via source code modifications rather than streamlined on-chain governance.

The proposal further recognizes that Polkadot’s inflation rate is intricately linked with its staking mechanism and lacks ideal configurability. This interdependency complicates attempts to forecast inflation accurately and can disrupt staking events. So, the convoluted process of updating the inflation rate exacerbates these challenges.

However, the flexible inflation proposal aims to mitigate these issues by offering a framework for easier inflation rate adjustments through a new “pallet_inflation.”

This update “does not propose any changes to the actual inflation rate but rather provides a new technical substrate (pun intended) on which token holders can decide more clearly and transparently on the future of the DOT token’s inflation in a more clear and transparent way.”

If ratified, the upgrade promises greater transparency and comprehension of inflation mechanisms. It facilitates smoother parameterization through governance mechanisms while disentangling inflation from staking logic.

Paimani also pointed out that the proposal aligns with the economic vision outlined in the JAM Greypaper, indicating its potential as a viable economic solution for DOT.

He added:

“While mainly intended for Polkadot, the system proposed in this RFC is general enough such that it can be interpreted as a ‘general inflation system pallet,; and can be used in newly onboarding parachain.”