As part of its periodic review, the Treasury Management & Coin Economics Committee (CoinCom) of the Governing Council has voted to adopt the following changes to the Hedera staking rewards program, which align with current industry average adjusted reward rates (1.4% across the top 20 PoS networks). These changes are expected to further the sustainability of the staking program as network utilization continues to grow.

Changes that will be implemented on August 11th include:

• Adjusting the maximum staking reward to 2.5%

• Adjusting the reward emission cap

• Implementing additional controls to algorithmically govern the reward rate

Background:

Dr. Leemon Baird first introduced his vision for de minimis staking rewards in the HBAR Economics White Paper (pages 6 and 13), as part of its proof of stake consensus mechanism. The primary objective of Hedera's staking system is to ensure the long-term security of the mainnet when the nodes are operated in a permissionless manner.

These adjustments follow the code changes related to staking that were proposed and adopted by the Governing Council at the June 2023 Council meeting. Together, these changes are designed to adjust rates more dynamically in the future to better match market conditions and the supply of hbars in account 0.0.800. The Governing Council continues to monitor market conditions and may make further refinements to the staking algorithm over time as network utilization grows.

Further details*:

The current maximum staking reward rate of 6.5% will be changed to 2.5% The maximum percentage of coins staked that are eligible for the full reward rate of 2.5% will be 13% of the total supply of 50B HBAR (released and unreleased), in other words, 6.5B HBAR. This is a change from the reward emission cap currently in place, which effectively capped the max reward rate of 6.5% to 15.38B HBAR staked for reward, or ~31% of supply. If the total amount staked for rewards exceeds 13% of the total supply, the reward rate will drop accordingly (e.g. if 26% is staked for rewards, then the effective reward rate for all stakers will be 1.25%). Large ecosystem holders of Treasury and hbars, including Hedera, Swirlds, and Swirlds Labs, currently stake without receiving rewards.

Whenever there are more than 85M hbars in account 0.0.800, the reward rate is set at 2.5%. If the account balance (excluding rewards already accrued but not yet paid out) were to go below 85M hbars, the max reward rate would be automatically reduced programmatically. The reward rate may also decrease if an account is staked to a node where the amount staked for reward exceeds the staking maximum, or the total staked is below the staking minimum.

* These changes only affect the calculation of rewards once implemented and do not affect rewards accrued but not yet received.