Tokenomics and Inflation

With each new block created every 5 seconds on Fuse Network, the validator who creates it and the delegators who staked with them receive the block rewards in newly issued FUSE tokens. This is designed to secure the network's consensus mechanism.

The reward amount per block is set so that the FUSE total supply increases by 5% yearly.

The main reason for choosing an inflationary model at the early development stage was to ensure certain predictability of the flow of revenue for network validators and delegators.

If they had to rely exclusively on transaction fees as the reward for staking FUSE and validating, it would be harder to predict their future returns, as transaction activity on the network can fluctuate.

The relative predictability of validator revenue is an essential assumption behind the blockchain consensus theory on which the Fuse consensus mechanism is based.

Having substantial block rewards also makes it possible to keep transaction fees on the network low, facilitating the adoption of Fuse.

As was mentioned in the Intro to Fuse section, the upcoming transition to Fuse V2 will also involve the implementation of new tokenomics for the FUSE token described in the Fuse V2 section.