The issuance of NXS is independent of a central bank or government, it has zero debt or interest associated with its distribution, and its supply is regulated by mathematics. This is in direct contrast to the creation of new loans of fiat currency by ‘Fractional Reserve Banking’, which people are required to pay back to a bank.
The process of creating NXS requires mining (similar to that of Bitcoin) or staking, which gives a base value to the currency backed by the physical resources required to create each individual coin. Both miners and stakers contribute real resources or equity to the Nexus ecosystem, such as energy, hardware, and time. In return, they receive newly created NXS. Defining the rewards to miners and stakers is very important. Too low and rewards are not significant enough to encourage nodes to mine and stake. Too high and the growth in supply could erode the value of the currency over time.
The growth rate in the supply of NXS is currently 1.20% per annum for Proof of Stake, and 5.08% per annum for Proof of Work totaling 6.28%. After September 2024, both Proof-of-Work channels combined will increase the supply by a maximum of 1 NXS per minute, resulting in the creation of 525,000 NXS per year or a maximum of 0.67% inflation per annum. The growth in supply of NXS from the Proof of Stake channel will be capped at a maximum of 3.00% per annum. This makes the post 2024 inflation a maximum of 3.67% that can only be realized if the entire NXS supply were staked at the maximum Stake rate. Currently it takes one year of consistent staking to build up enough Trust to earn a 3.00% rate of return.
This model is designed to produce an annual growth rate in the supply of a NXS similar to the annual growth rate of the total world supply of gold. Gold is an asset which has often been favored in times of economic crisis as a hedge against the inflation of fiat currencies, due to the scarcity of its supply and difficulty to increase it.
Unlike Bitcoin or conventional cryptocurrencies, the transaction fees for NXS are ‘burned’ (destroyed) and removed from the available supply of NXS. The result of this, being 0.01 NXS per transaction on average, is that with enough transaction volume the growth of the supply of NXS due to mining and staking rewards can be eliminated. New growth in the supply helps to build an ecosystem around NXS, while the burned transaction fees maintain the scarcity of supply. If post 2024 transaction volume exceeds 9 transactions per second, the supply of NXS would not increase, because the total amount of fees burned would equal the total NXS produced for that year.