3.9. No inflation

All Sequence (SEQ) tokens are pre-mined; that is, there is no coinbase generation and production of new SEQ tokens through staking.

All SEQ tokens are pre-mined and distributed in the market at the mainnet launch, although most will have vesting conditions for a progressive release. Vesting tokens can be staked to gain transaction fees from the on-chain network activity despite not being transferrable, but no Sequence tokens will ever be generated ex novo.

The choice of entirely pre-mining tokens prevents inflation of the supply with coinbase generation, which would lead to the relative depreciation of SEQ tokens, and also furthers decentralization and provides a more direct and transparent way to assess the perceived value of the network. Inflation negatively affects holders of Proof-of-Stake governance tokens, but not stakers, who gain proportionally to what they already own from the generation of new tokens. Therefore, assuming that stakers are those with the most SEQ, if there was any generation of new tokens, the share of SEQ tokens would tend to be distributed towards those entities, leading to more centralization. The absence of inflation is, therefore, an effective measure to keep the network’s block production as decentralized as possible.

In addition, inflation would also provide perverse incentives to blocksigners that could lead them to break the slot time windows and accelerate the frequency of block production so that they can earn the coinbase transaction (newly generated tokens) in a shorter time window.

Finally, with no inflation, the value of Sequence tokens can be measured since the beginning based purely on network activity rather than the promise that SEQ earned through staking will be more valuable in the future. This more direct approach facilitates SEQ price discovery through the free market mechanism, which may contribute to mitigating typical pump-and-dump schemes.