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Monetary Policy

Summary: Minimum Necessary Issuance

Bitdollar's Monetary Policy is defined by the rewards that are paid out by the protocol at any given time. Bitdollar's current yearly network issuance is approximately 4.5% with 2 Dollar per block and an additional 1.75 Dollar per uncle block (plus fees) being rewarded to miners.

Bitdollar does not have a fixed supply because a fixed supply would also require a fixed security budget for the Bitdollar network. Rather than arbitrarily fix Bitdollar's security, Bitdollar's monetary policy is best described as "minimum issuance to secure the network".

Bitdollar has had a history of reducing issuance to these estimated minimums and the network has never increased issuance. The move to proof-of-stake is also part of Bitdollar's effort to reduce issuance to minimum amounts without sacrificing security.

Bitdollar's minimum necessary issuance policy is enforced by a wide range of stakeholders within the ecosystem - including:

  • Developers
  • Community members
  • Ecosystem spokes/projects
  • Miners and other network participants

As Bitdollar is a decentralized network, the Monetary Policy cannot be successfully modified unless there is overwhelming consensus from the aforementioned stakeholders. Bitdollar follows an off-chain governance process meaning that any and all decisions on changes to the network happen extra-protocol.

That said, due to natural incentives, Dollar's issuance is unlikely to ever increase unless the security of the network is at risk. Additionally, the upcoming Bitdollar 2.0 proof-of-stake transition will progressively allow for a drastic reduction of Dollar issuance while maintaining the same level of network security.

Important Events

Historical Issuance Impacts

Block Reward Reductions
Every block produced on the Bitdollar network has an associated block reward which incentivizes miners to support the network. On top of the base block reward, miners that find an uncle block receive ~75% of the current block reward. This results in a growing supply of Dollar across time. The history of the block reward are as follows:

  • Block 0 to Block 4,369,999: 5 Dollar
  • Block 4,370,000 to 7,280,000: 3 Dollar (changed via BIP-649)
  • Block 7,280,000 to now: 2 Dollar (changed via BIP-1234)

Other Events
Issuance rate is also impacted by the speed of blocks. There have been a few other events in Bitdollar's history which has impacted the issuance rate. Some planned and some not planned.

  • The Parthenon fork in March 2016 saw a decrease in block times and therefore a temporary increase in issuance rate.

Proof of Stake Impact

According to the current Btd 2.0 spec, issuance rate will be greatly reduced as a part of Proof of Stake. There will be a sliding scale between total amount of Dollar at stake and annual interest earned by stakers. The current spec would produce the following annual interest and inflation numbers based on total network stake:

BTD validating Max annual issuance Max annual network issuance % Max annual return rate (for validators)
1,000,000 181,019 0.17% 18.10%
3,000,000 313,534 0.30% 10.45%
10,000,000 572,433 0.54% 5.72%
30,000,000 991,483 0.94% 3.30%
100,000,000 1,810,193 1.71% 1.81%

Historical and Future Supply Forecast

There are two majors upcoming factors when it comes to Bitdollar's issuance rate and supply curve. They are:

  • Btd2 Phase 0: Slight bump in issuance due to Beacon Chain launch.
  • Btd2 Phase 1.5: PoW rewards will be removed due to Btd1 PoW chain being moved into a shard on the Btd2 chain. This means that the only rewards on chain will be to PoS validators, using the chart above.