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Stabilizing the Staking Rate, Dynamically Distributed Inflation and Delay Induced Oscillations

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  • Carlo Brunetta
  • Amit Chaudhary
  • Stefano Galatolo
  • Massimiliano Sala

Abstract

Dynamically distributed inflation is a common mechanism used to guide a blockchain's staking rate towards a desired equilibrium between network security and token liquidity. However, the high sensitivity of the annual percentage yield to changes in the staking rate, coupled with the inherent feedback delays in staker responses, can induce undesirable oscillations around this equilibrium. This paper investigates this instability phenomenon. We analyze the dynamics of inflation-based reward systems and propose a novel distribution model designed to stabilize the staking rate. Our solution effectively dampens oscillations, stabilizing the yield within a target staking range.

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  • Carlo Brunetta & Amit Chaudhary & Stefano Galatolo & Massimiliano Sala, 2025. "Stabilizing the Staking Rate, Dynamically Distributed Inflation and Delay Induced Oscillations," Papers 2510.11065, arXiv.org.
    • Handle: RePEc:arx:papers:2510.11065
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    References listed on IDEAS

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    5. Nicolas Oderbolz & Beatrix Marosvolgyi & Matthias Hafner, 2024. "Towards an Optimal Staking Design: Balancing Security, User Growth, and Token Appreciation," Papers 2405.14617, arXiv.org.
    6. Michael Neuder & Mallesh Pai & Max Resnick, 2024. "Optimizing Exit Queues for Proof-of-Stake Blockchains: A Mechanism Design Approach," Papers 2406.05124, arXiv.org, revised Jun 2024.
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