The inflation rate is independent of the perceived USD value of the SPN token in the free market. Connecting the USD value of the token with the inflationary formulation would forever make the SPN token tied to the ebb and flow crypto market, which is known to be volatile. Instead, the inflationary formulas will be a function of the Network activity (commenting, posting, voting, and other activities that are deemed valuable). These newly minted tokens will be distributed to users according to the perceived value of each of those actions. Of course, the idea of “value” is complex but can be crowdsourced with the community’s engaged reputation or other metrics that measure attention given to a particular activity. The key here is that attention itself can be monetized - a concept that is captured in the staking-based ad platform that not only aligns the interests of users and Sapien, but also provides a heuristic for what communities, posts, and content has a higher perceived value.
The inflationary model should by no means devalue the token if there is indeed value being generated within the Network. Similarly, the Sapien core team never implements technology to “pump” the token value. A democratized social Network requires a token economy that efficiently captures and reflects the value being created within a Network. There are other limitations and cognitive overheads of a tokenized Network with a limited token supply - namely, humans tend to hoard and treat digital assets as a store of value. Much like the BTC vs BCH debate currently happening. For Sapien, this would be counterproductive to the purpose of a utility token, which is only as useful and “valuable” as its Network. For accountability, minting computations will be handled transparently on the blockchain and approved with Proof-of-Stake consensus in the Network. Staking SPN for utility reduces the unstaked SPN as more SPN is committed to the longevity of the platform. Lastly, the concept of Adaptive Staking compliments an inflationary model by ensuring that equilibrium is maintained in the token economy. For more details on Adaptive Staking, please view this blog post.
[Example] Suppose the Network Value “V” is 100 V represented by 100 SPN tokens. Therefore, 1 SPN represents 1 V of value in the Network (Please note: Network Value is NOT equivalent to monetary value - the fact that they are different makes an inflationary model work. Revisit the first paragraph). Now consider after a week of new activity, where new posts, comments, and content have been created, 10 V worth of value was created in the Network, for a total score of 110 V. To ensure a sustainable token economy, it would be justifiable to mint exactly 10 tokens. Now we have a 110 V, captured by 110 SPN tokens. The important part is that 1 SPN always corresponds to a fixed amount of value in the Network, and also important to note that just like Ethereum, the USD price of token is not factored into any of the inflationary formulas. Access to the platform is 100 SPN, for example. This is a simplified example but it should give an idea of how we see the formulas working.
For Sapien, the SPN token allows for the creation of novel incentive models, powerful governance principles, and sustainable revenue models that would not otherwise be possible. The inflation formula is designed to help grow the entire Network and is a direct response to new value being created in the network.
– Ankit, CEO