Inflation

Inflation

The HC Net distributed network has a built-in, fixed, nominal inflation mechanism. New HCX are added to the network at the rate of 1% each year. Each week, the protocol distributes these HCX to any account that gets over .05% of the “votes” from other accounts in the network.

How inflation voting works

Using the set options operation, every account selects another account as its inflation destination, or nominee to receive new currency. The inflation destination will persist until changed with another set options operation.

Voting is weighted according to the number of HCX the voting account holds. For example, if account A has 120 HCX and sets its inflation destination to B, the network counts 120 votes for B.

The distribution of new HCX is limited to once a week. Inflation is run in response to an inflation operation that anyone can submit to the network. This operation will fail if the inflation sequence number isn’t one after the last sequence number. It will also fail if (sequence number * 1 week) of time hasn’t elapsed since the network start date.

Each time inflation is run, the HCX used to pay transaction fees since the last voting round are also included in the total HCX distributed.

When inflation is run, nodes carry out the following algorithm:

  • 1. Calculate the inflation pool by (number of HCX in existence)*(weekly inflation rate) + fee pool.
  • 2. Calculate the MIN_VOTE by (number of HCX in existence)*.0005. This is .05% of the existing HCX, the minimum amount of votes needed to get any part of the inflation pool.
  • 3. Tally the votes for each account based on the inflation destination set for every account.
  • 4. Determine which accounts exceeded the MIN_VOTE. These accounts are the winners.
  • 5. The winners each get their pro rata share of the inflation pool, if their account can receive that amount of HCX and still satisfy its HCX buying liabilities. Otherwise, the winner receives the maximum amount of HCX that it can receive while still satisfying its HCX buying liabilities, with the rest of their pro rata share returned to the fee pool. For example, if a winner gets 2% of the votes, it will get 2% of the inflation pool assuming the account can receive that amount.
  • 6. Return any unallocated HCX to the fee pool.

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