Inflation

Crypto inflation, in the context of tokenomics, generally refers to an increase in an asset’s supply caused by the issuance of new units. A meaningful analysis considers not only the absolute amount issued but also the amount relative to the existing supply.

A simplified annual inflation rate can be estimated as net supply growth during a period divided by the supply at the beginning of that period. Actual protocol-specific calculations can be more complex.

Issuance vs. net inflation

New issuance does not necessarily produce the same amount of net supply growth. If a protocol simultaneously performs token burns, the final increase in supply can be smaller or even negative.

It is therefore useful to distinguish gross issuance from net supply change when analyzing tokenomics.

Why inflation matters

Issuance affects how new units are distributed and can change the relative share of existing holders. Inflation alone does not determine an asset’s price, which also depends on demand, utility, liquidity, and other market factors.