Avalanche Tries Zero-Inflation Model for Validators

Avalanche Foundation economists are proposing a new model for validators that would eliminate inflation and tie rewards to the value generated by the network. Currently, validators earn around 6-7% annually through continuous minting of new AVAX tokens.

The proposed zero-inflation model aims to break the link between network security and inflation, which is a common issue in proof-of-stake blockchains with supply caps. AVAX has a hard supply cap of 720 million tokens.

The current model creates problems because validators are paid in newly created tokens, which dilutes existing holders' stakes. Additionally, transaction fees are burned on Avalanche's C-Chain, creating a structural gap where validators do more work as network activity increases but see none of the fee revenue that generates value.

The Foundation is exploring alternative reward mechanisms, such as revenue sharing, to redirect a portion of fees or protocol revenues back to validators. This would eliminate the need for new token creation and approach zero inflation.