Crypto.org team proposes burning mechanism to slow down the inflation rate
Inflation for Crypto.org is recording a number of 2.5%, approximately. There are almost 26 billion CRO tokens in circulation with the ecosystem emitting around 646 million CRO tokens. A new burning mechanism by the team is now all set to lower the inflation rate to approximately 2.1%. Daily emissions have increased majorly as a result of technical improvements that have enabled the blocks to validate faster in 5.1 seconds, the previous best being 6.5 seconds.
If implemented, the proposed burning mechanism will lower the inflation rate and also look to sell the long-term pressure being built on the community. A major difference between the current mechanism and the proposed mechanism is in the construction of a Community Pool. It will collect a certain portion of the token for burning and lower the circulation. Additionally, it will enhance the CRO token economy with robust security.
The current mechanism begins with holders delegating their respective tokens to validators who then secure the chain by producing blocks based on how many tokens have been staked. CRO reward is then distributed to holders subject to the deduction of Validator Commission. Validators receive the reward as well based on their decided commission rate.
A new burning mechanism proposed by the team makes a slight change. While everything is intact till the point validators secure the chain, the difference comes into play when CRO is not emitted to the validator fully. It is instead redirected to Community Pool at the pre-decided rate. CRO rewards are transferred after deducting the portion that has been redirected to the Community Pool.
Funds in the pool are sent to a Burning address after successfully concluding the governance vote so as to remove them from circulation.
CRO holders will see the inflation come down to the mark of 2.1% against the current number of 2.49%. This is likely to improve the overall economy of Crypto.org while simultaneously selling pressure in the long term. Hence, it will also affect the performance of Cronos CRO token. CRO holders can find more details about the future of CRO token before taking any positions.
A point where CRO holders will be affected the most is in terms of staking rewards which will drop down to 11.5% in comparison to the current standing of 13.6%. The new burning mechanism is projected to take out nearly a hundred million CRO tokens from circulation in the first year, thereby bringing down the inflation to the said rate.
Per the announcement, it is important to note that almost 4.75 billion CROs are bonded. These represent 18% of the CRO supply to the network. An annual reward of 646 million CRO is distributed to stakers at the rate of 13.6%.
The development marks the first step in refining the economics of CRO tokens as a result of drawing inspiration from chains like Ethereum, Cosmos Hub, and Osmosis.
Crypto.org has recommended that community members actively participate in shaping its future by engaging in productive communication with their validator.