Merge PR #3894: Minting mechanism explanatory docs

* minting spec concepts * cl * Update docs/spec/mint/01_concepts.md Co-Authored-By: rigelrozanski <rigel.rozanski@gmail.com> * typo address @alexanderbez * Apply suggestions from code review Co-Authored-By: rigelrozanski <rigel.rozanski@gmail.com> * commit for CI to restart
2019-03-18 11:11:31 -04:00
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+# Concepts
+
+## The Minting Mechanism
+
+The minting mechanism was designed to:
+ - allow for a flexible inflation rate determined by market demand targeting a particular bonded-stake ratio
+ - effect a balance between market liquidity and staked supply
+
+In order to best determine the appropriate market rate for inflation rewards, a
+moving change rate is used.  The moving change rate mechanism ensures that if
+the % bonded is either over or under the goal %-bonded, the inflation rate will
+adjust to further incentivize or disincentivize being bonded, respectively. Setting the goal
+%-bonded at less than 100% encourages the network to maintain some non-staked tokens
+which should help provide some liquidity.
+
+It can be broken down in the following way: 
+ - If the inflation rate is below the goal %-bonded the inflation rate will
+   increase until a maximum value is reached
+ - If the goal % bonded (67% in Cosmos-Hub) is maintained, then the inflation
+   rate will stay constant 
+ - If the inflation rate is above the goal %-bonded the inflation rate will
+   decrease until a minimum value is reached