The inflation rate in Hive decreases at the rate of 0.01% per 250000 blocks until it reaches 0.95%. After reaching a 0.95% inflation rate, there will not be any further reduction and it will become constant.
The Block producing time in Hive= 3 seconds
So for 250,000 blocks, it will take (250,000 * 3) seconds= 750,000 seconds= (750,000/(60 * 60 * 24))= 8.68 days
So every 8.68 days, the inflation rate will reduce by 0.01%. The current inflation rate is 8.05%.
New HIVE tokens minted per Block
new_hive = ( ( virtual_supply * current_inflation_rate ) / ( 10000 * BLOCKS_PER_YEAR ) )
No of blocks per year is fixed
Blocks per year- One block is created every 3 seconds, so per year it will be 10,512,000 blocks.
Every 3 seconds= 1 block
Every 1 minute= 20 blocks
Every day= 20 * 60 * 24= 28800 blocks
Every year= 28800 * 365= 10,512,000 blocks
So new HIVE tokens to be minted per block is dependent upon two variables:
- Virtual supply
- Current Inflation rate
Virtual supply= Total supply of HIVE including the HBD in the equivalent of HIVE at the current rate, as HBD is backed by HIVE. This figure can be obtained from Hiveblocks.com
The inflation rate is constantly decreasing at a rate of 0.01% every 8.68 days.
New HIVE tokens to be minted is directly proportional to "virtual supply" & "current inflation rate".
- Keeping the virtual supply fixed, the new HIVE tokens to be minted decreases every 8.68 days as the current inflation rate decreases by 0.01% every 8.68 days.
- Keeping the current inflation rate fixed, the new HIVE tokens to be minted depends on the total virtual supply(that includes HIVE and HBD both).
Interestingly as the HIVE price goes up, the HBD/HIVE ratio decreases in general. For instance, a week back, HBD/HIVE ratio was 5, but as the HIVE price surges with the recent pump, the same HBD/HIVE ratio presently stands at 2.6.
So as the HBD/HIVE ratio decreases with an increase in HIVE price, the total virtual supply (which includes both HIVE and HBD supply) also decreases.
For example, one month back the virtual supply was 370 million, but with the recent surge in HIVE price, the same virtual supply now stands at 366 million.
So, as the virtual supply figure is interlinked with HBD/HIVE ratio, so as the printing of new HIVE tokens. Simply put, as HIVE goes up, it lowers the HBD/HIVE ratio, which in turn results in minting fewer new HIVE tokens.
Combined effect of virtual supply and current inflation rate
In a risk appetite, when the HIVE will trade in a bull cycle, the HBD/HIVE ratio will decrease due to an increase in HIVE price. So in such a case, the virtual supply will be less leading to fewer new HIVE tokens to be minted.
On the other hand, as the inflation rate reduces every 8.68 days, it will lead to printing a few HIVE tokens over time.
So the combined effect of virtual supply and current inflation rate, in a bull cycle, will make the blockchain print fewer new HIVE tokens per block.
In a risk aversion, when HIVE will be in a bear cycle, the HBD/HIVE ratio increases due to decreases in HIVE price. So in such a case, the virtual supply will be more, so that will make the blockchain print more new HIVE tokens.
Even though the inflation rate gradually reduces every 8.68 days, the combined effect of virtual supply & current inflation rate, in a bear cycle, will make the blockchain print more new HIVE tokens.
The above consideration holds good when HBD trades around 1 USD or so. If HBD breaks out of the peg and goes higher, the virtual supply may keep on increasing.
So in this analysis, we are considering the HIVE to enter a bull phase and HBD to remain pegged at 1 USD.
So the bottom line is that 'the new HIVE tokens to be minted' reduces with a decrease in HBD/HIVE ratio, which can possibly happen when HIVE enters a bull phase and firmly trade higher.
Thank you.
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