Clear DefinitionsMonetary Policy (Token)
1 min read
Pronunciation
[muh‑net-uh-ree pol-uh-see toh-ken]
Analogy
Token monetary policy is like a central bank’s rules for printing money and setting interest rates.
Definition
The set of rules governing token supply issuance, inflation, and deflation to achieve economic objectives like stability or growth.
Key Points Intro
Token monetary policies shape economies via:
Key Points
Inflation schedule: Defines annual issuance rates.
Supply caps: Maximum totalSupply to limit inflation.
Burn mechanisms: Deflationary tools to counter inflation.
Governance adjustments: Policy parameters can be updated by DAO.
Example
Technical Deep Dive
Policy contract stores `baseRate`, `decay`, `floorRate`. Each epoch, `inflationRate = max(floorRate, baseRate × e^(−decay×epoch))`. `mint()` uses this rate to calculate new tokens.
Security Warning
Abrupt policy changes can erode trust; enforce governance quorums and timelocks.
Caveat
Rigid policies may not adapt to market crises; include emergency adjustment mechanisms.
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