There has been a lot of discussion about how Block Producers will be paid and in our efforts to better understand this ourselves, we have created an infographic that illustrates how inflation is paid out.
EOS Inflation and Block Producer Rewards Explained
EOS is one of few blockchains that does not use transaction fees to pay for infrastructure but instead uses inflation. At first, the annual inflation is 5%, but as times goes on and the EOS tokens are worth more, the token holders can vote on decreasing or increasing the inflation rate.
The inflation rate is split up into different pools because maintaining the blockchain includes Block Producers (BPs), who run the network, and worker proposals for improving the blockchain. The inflation is split up between those two groups with BPs earning 1% and worker proposals with 4%. Worker proposals are presented to the community and token holders vote on what improvements to make.
The BP funds are split up differently to maintain higher value for those most trusted in the community and whom runs one of the active twenty one BPs.
As written in the code, 25% of the BP pay goes to active producers and 75% goes to standby BPs calculated from a percentage of the votes received. 318 EOS tokens are awarded to the 21 active BPs per day. 200 EOS per percentage of the vote per day are awarded to all standby BPs.
Standby BPs include the active BPs producing blocks. What that enables is BPs who are not included within the top 21 active Block Producers are able to participate for added network redundancy and hopes of becoming an active BP.
For example, let us go over the rewards of a BP who is voted in the top 21 nodes and receives 4% of the vote. That BP will receive 318 EOS per day for being an active BP and an additional 800 EOS based on vote percentage for a total of 1118 EOS per day.
Below we have created an infographic to illustrate the inflation of EOS and how it is distributed to those maintaining the network.
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