With Lelantus, we have an important choice to make. We can still retain some form of auditability by forcing all coins to always come back to the base layer. This means that even if there’s inflation, this will be limited since if it exceeds the number minted, it will raise a warning.
Lelantus can be further extended to allow people to transfer coins to each other with hidden amounts WITHOUT bringing it back to the base layer. This offers very high anonymity since it’s direct p2p with the values hidden too. Inflation is kept in check through the use of range proofs and balance proofs relying that both proofs are correct to ensure that coins aren’t created out of thin air. This is similar to the kind of checking that is provided by Monero/Grin as well. The main issue with this is if there is a flaw, you can create hidden inflation and since you don’t need to ever bring it to the base layer, it can remain hidden forever.
I’ll need to speak to our cryptographer, Aram as to weigh the risk of this but appreciate everyone’s thoughts. Or whether my assumptions on whether such inflation can remain hidden. (will get Aram to weigh in here).