It's been a long time.
I haven't commented on Hive mechanics outside of HBD in forever. It's one of those things everybody does once and then you're kinda like, "Been there done that," while moving on to all the other stuff there is to talk about. But I have seen this conversation popping up here and there recently and it seems like there are a still a decent amount of users around here that don't know the basic facts about how money is printed on this network.
You'll notice from this chart that total network inflation started out just below 10% in the beginning. A respectable number considering the absurd rates that came later from other tokens (especially in DEFI 2020). From there we see it drops around 0.42% a year, with 2025 listing inflation at 5.71%. Crazy because the last time I checked up on this number officially I remember it being just under 8%, so again that would have been back in 2020 during all that ridiculous DEFI shitcoinery.
Once the inflation rate drops to around 1% in 2036 it just sits there and doesn't get any lower to insure everyone can still get paid. That might be x5 less percentage than we're doing today, but the hope is that price going up from less supply would more than make up for the difference. That's how it works on Bitcoin anyway, assuming that was even a comparable technology.
It's interesting to see from this chart that 2026 is the first year where Hive will actually start printing less tokens than the year before. This is due to the exponential nature of inflation; inflation creates more inflation creates more inflation. Notice how in 2021, 2022, 2023, 2024, and 2025 the network expected to produce just over 25M new Hive each year even though the percentage was going down.
To better clarify this phenomenon for those who might not understand compound interest: 2022 has more raw inflation than 2021 because even though 2022 has a 0.42% lower rate there are still 28M new coins from the year before that also generate inflation to account for. So the inflation of the inflation for 2022 creates about 2M new coins, but the 0.42% reduction on inflation only saves around 1.7M, leaving us with about 300k more static tokens minted in 2022 vs 2021 due to the compound interest mechanic.
As stated earlier, we see that 2026 is the first year where this static inflation number actually goes down (by 600k Hive in that year alone). That number will then continue to deflate until we reach the 0.95% floor in 2037 down to 7M tokens per year. Then compound interest kicks back in and the number will slowly go up again. Of course all this assumes that we don't hardfork the chain to modify these numbers, which is a real possibility (unlike BTC).
Pop quiz:
At 1% inflation rate how many coins would we mint after 100 years? If we do the math additively we'd get +100% more tokens, but because even a 1% inflation rate is still exponential growth the real number is more like +170%. Food for thought.
Personally I do not believe that a 1% floor is high enough and we should freeze the floor at a higher level, but that's not really something we have to worry about for another decade so why argue about it now? Still, that drop from 16M/year to 7M/year from 2033-2036 could be extremely brutal and cause volatility/liquidity problems. Something to think about.
Inflation Schedule:
- 10% Witnesses
- 10% Decentralized @hive.fund
- 15% HP Dividend
- 65% Reward Pool
- 32.5% Discussion Rewards
- 32.5% Curation Rewards
I came to this network before the DHF even existed, so it used be 75% to the reward pool (plus curation rewards were also half as much as well). At one point author rewards were quite high on a relative scale (56% of all network inflation), but 32.5% is still pretty decent when considering it much easier to get upvotes from a curator with greater monetary incentive.
15% HP Dividend
Out of all inflation on Hive this is definitely the weirdest one. It's also one which I've suggested could be removed on a couple of different occasions, but it has the advantage of providing a little yield (~3%) to accounts that delegate their stake to others, so it just hangs around being weird and potentially redundant.
What makes it even weirder is that HP isn't actually HP. Hive Power is not the Hive token, and exists as a different asset called VESTS on-chain. The 15% doesn't increase the amount of Hive you have, but rather the amount of VESTS you have... but then when you powerdown convert those VESTS back into Hive it can appear as though it was Hive the entire time on most of the frontends we have available (for simplicity and to lower newbie confusion).
Separate HBD inflation
Pre 2021 HBD inflation was 0% to the savings accounts. Since then we've seen numbers ranging from 3% to 7% to 10% to 12% to 20% and now back down to 15%. The amount of "Hive" created here is completely separate from all the other inflation we've talked about thus far. The "total inflation" amount earlier does not include HBD minted in the savings accounts, which can be seen as either a good or bad thing depending on perspective. Personally I'm more pro-inflation than most people in crypto so I see it as a very good thing.
Ninjamine
At the very beginning of the network OG accounts got their stake from POW mining. The biggest chunk of these coins is referred to as the "ninjamine" or "premine" which now sits in the @hive.fund account "for development". I for one will be happy when this number gets a lot closer to zero so it stops being an existential threat to the community that creates needless volatility and drama. But that's just like, my opinion, man. I'm trying quite hard to just stick to the facts and steer clear of my opinions... or the size of this post would surely balloon to a 3000 word juggernaut.
Conclusion
Well I think that pretty much covers all sources of Hive inflation.
Again, it's been a long time since I've covered this topic, so it's nice to do a little rehash every once and a while so I can look back and see what I've learned or how my stance on these topics has changed over the years. It's easy to get lost in the weeds on Hive and see certain accounts "exploiting the reward pool" and whatnot but in the grand scheme of things a couple thousand dollars here or there is a tiny drop in the bucket for a network with a market cap in the nine-figure range. Hive inflation looks a lot worse and daunting when you try to measure it by static numbers and the feeling of "that's a lot of money" vs just looking at the actual macro percentages in play.