The Paris protocol proposal introduces Adaptive Issuance: a mechanism where the amount of regularly issued tez depends on the global staked funds ratio — that is, the ratio of staked tez to the total supply. This lets issuance roughly match the actual security budget the chain requires, the amount needed to encourage participants to stake and produce blocks, but no more. At the end of each blockchain cycle, the regular issuance is adjusted, to nudge the staked funds ratio towards a protocol-defined target, set at 50%, and participation rewards are recomputed to match that budget.
When the staked funds ratio decreases and diverges from the target, emission rates increase, incentivizing participants to stake funds to re-approach the target. Conversely, incentives decrease as the ratio increases beyond the target.
To ensure a smooth transition, the minimum and maximum values of the issuance rate will be initially set so that the issuance rate changes smoothly over a period of time, with the window between the maximum and minimum values progressively widening. The schedule consists of three periods.
An initial period (10 cycles), where the minimum and maximum issuance rates are close to the current issuance rate and stay constant.
A transition period (50 cycles), where they widen lineary, with the minimum going lower and the maximum higher.
A final period where the minimum and maximum have reached their minimum and maximum values.
The adaptive issuance rate is the sum of a static rate and a dynamic rate. The final result is clipped to ensure nominal emissions remain within the minimum and maximum bounds.
The static rate is a static mechanism, which approximates a Dutch auction to compute a nominal issuance rate as a function of the staked funds ratio for a given cycle. Its value decreases as the staked funds ratio increases, and vice versa.
The dynamic reward rate adjusts itself over time based on the distance between the staked funds ratio and the 50% (±2%) target ratio, increasing when the the staked funds ratio is less than 48% and decreasing when the staked funds ratio is greater than 52%, provided the total issuance rate is not hitting its lower or upper limit.
In the following charts, one can modify the staked ratio and observe the impact on the issuance rate, together with the static and dynamic rates and the clipping effect produced by the progressive minimum and maximum rate bounds.
The total supply, total delegated, and total staked values are derived from the mainnet network as of cycle 718. Adaptive issuance is scheduled to activate at cycle 748, which occurs five cycles following the adoption of the Paris protocol, if adopted. The initial phase commences at cycle 748 and concludes at cycle 758. Subsequently, the transition period begins, ending at cycle 808, after which the final period commences.
The following simulation allows one to estimate the delegate rewards according to the issuance rate provided by the charts above and the delegate staking policy. It a projection given the delegate balances for the cycle 718.
Once adaptive issuance is activated (cycle 748), the charts allow to play with two different ratios. The first one concerns the delegate spendable balance and its staked balance. The second one, providing the delegate limit of staking over baking is non-null, allows to balance between the delegate third-party delegated balance and its third-party staked balance.