XVI Tokenomics

Currently, the XVI token supply is set to follow a mildly inflationary model.

With each new block created every 12 seconds on Xvitesse, the validator who creates it, and the delegators who staked with them, receive the block rewards in newly issued XVI tokens. This is designed to secure the network's consensus mechanism.

The reward amount per block is currently set such that every year, the XVI total supply increases by approximately 5%.

The main reason for choosing an inflationary model at the early development stage was to ensure a certain predictability of the flow of revenue for network validators and delegators. If they had to exclusively rely on transaction fees as the reward for staking XVI and validating, it would be harder for them to predict their future returns, as transaction activity on the network can fluctuate a lot. The relative predictability of validator revenue is an important assumption behind the blockchain consensus theory on which the Xvitesse consensus mechanism is based.

Having substantial block rewards also makes it possible to keep transaction fees on the network low, facilitating the adoption of Xvitesse.

Potential inflation reduction

Xvitesse Improvement Proposal aimed at reducing the XVI inflation is currently under discussion by the community. If adopted by the validators, it will result in an annual inflation rate of 2% for the third year of the network's existence and a fixed amount of tokens issued in the subsequent years.