R4R: Minting mechanism explanatory docs

.pending/improvements/sdk/3752-Explanatory-doc

@@ -0,0 +1 @@
+\#3752 Explanatory docs for minting mechanism (`docs/spec/mint/01_concepts.md`) 

docs/spec/mint/01_concepts.md

@@ -0,0 +1,23 @@
+# Concepts
+
+## The Minting Mechanism
+
+The minting mechanism was designed to:
+ - allow for a market evaluation of the inflation rate
+ - optimize between market liquidity and staked supply.
+
+In order to best determine the appropriate market rate for inflation rewards, a
+moving change rate is used.  The moving change rate mechanism ensures that if
+the % bonded is either over of under the goal %-bonded, the inflation rate will
+adjust to further incentivize or incentive being bonded. Setting the goal
+%-bonded at less than 100% encourages the network to maintain some non-staked tokens
+which presumably encourages liquidity. 
+
+It can be broken down in the following way: 
+ - If the inflation rate is below the goal %-bonded the inflation rate will
+   increase until a maximum cap is reached
+ - If the goal % bonded (67% in Cosmos-Hub) is maintained, then the inflation
+   rate will stay constant 
+ - If the inflation rate is above the goal %-bonded the inflation rate will
+   decrease until a minimum cap is reached
+

x/mint/minter.go

@@ -61,8 +61,8 @@ func (m Minter) NextInflationRate(params Params, bondedRatio sdk.Dec) (
 		Mul(params.InflationRateChange)
 	inflationRateChange := inflationRateChangePerYear.Quo(sdk.NewDec(int64(params.BlocksPerYear)))
 
-	// increase the new annual inflation for this next cycle
-	inflation = m.Inflation.Add(inflationRateChange)
+	// adjust the new annual inflation for this next cycle
+	inflation = m.Inflation.Add(inflationRateChange) // note inflationRateChange may be negative
 	if inflation.GT(params.InflationMax) {
 		inflation = params.InflationMax
 	}