# Stability Fees

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

### 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:

- Decide if on or more
`inflationPeriod`

have passed since the last time`inflationFactor`

was updated - If so, find out how many have passed
- 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`