> ## Documentation Index
> Fetch the complete documentation index at: https://docs.celo.org/llms.txt
> Use this file to discover all available pages before exploring further.

# Stability Fees

Overview of stability fee parameters, timing, frequency, amounts, management, and updates.

<Warning>
  As of block height 31,056,500 (March 26, 2025, 3:00 AM UTC), Celo is no longer a standalone Layer 1 blockchain—it is now an Ethereum Layer 2!
  Some documentation may be outdated as updates are in progress. If you encounter issues, please [file a bug report](https://github.com/celo-org/docs/issues/new/choose).

  For the most up-to-date information, refer to our [Celo L2 documentation](/build#celo-l2-mainnet).
</Warning>

***

### Parameters Governing the Stability Fee

`inflationPeriod` how long to wait between rounds of applying inflation

`inflationRate` the multiplier by which the inflation factor is adjusted per `inflationPeriod`

### Timing, Frequency, and Amount of Fee

The `inflationRate` is the multiplier by which the `inflationFactor` is increased per `inflationPeriod`. It is initially set to `1` which leaves it to governance to enable the stability fee later on.

Both, the `inflationRate` as well as the `inflationPeriod`, are specified for a given stable token and subject to changes based on governance decisions.

### Stability Fee Levied on Balance

Each account’s stable token balance is stored as ‘units’, and `inflationFactor` describes the units/value ratio. The Celo Dollar value of an account can therefore be computed as follows.

`Account cUSD Value = Account cUSD Units / inflationFactor`

When a transaction occurs, a modifier checks if the stability fee needs updating and, if so, the `inflationFactor` is updated.

### Updates to the Inflation Factor

To apply periodic inflation, the inflation factor must be updated at regular intervals. Every time an event triggering an `inflationFactor` update(eg a transfer) occurs, the `updateInflationFactor` modifier is called (pseudocode below), which does the following:

1. Decide if on or more `inflationPeriod` have passed since the last time `inflationFactor` was updated
2. If so, find out how many have passed
3. Compute the new `inflationFactor` and update the last updated time:

`inflationFactor` = `inflationFactor` \* `inflationRate` ^ `# inflationPeriods since last update`

### Changes to Inflation Factor

Desired inflation rates may vary over time. When a new rate needs to be set, a governance proposal is required to update the inflation rate. If successful, the above function is called, which ensures `inflationFactor` is up to date, then updates the `inflationRate` and `inflationPeriod` parameters.

### Inflation Factor Update Schedule

The `updateInflationFactor` modifier is called by the following functions:

* `setInflationParameters`
* `approve`
* `mint`
* `transferWithComment`
* `burn`
* `transferFrom`
* `transfer`
* `debitFrom`