Definition
An inflationary token expands the quantity of its units over time or when specified conditions are met. New issuance may compensate validators, miners or other participants. In this context, inflation usually refers to token-supply growth, which is not identical to consumer-price inflation or a guaranteed decline in the token’s market price.
How It Works
Issuance can follow a fixed schedule, a percentage rate or an adaptive rule. Burns and other permanent removals may offset part or all of the expansion. The net supply change depends on both flows. Rewards distributed through new issuance increase recipients’ balances but can dilute the proportional ownership of holders who do not receive them.
Key Considerations
Nominal reward rates should be assessed alongside supply growth, fees and price changes. An asset can have a maximum supply yet still be inflationary during its issuance phase. Conversely, a system with ongoing issuance can experience net contraction during some periods. The term describes a supply process; it does not by itself establish whether the asset is useful, sustainable or attractive to hold.