Every two months, I like to calculate the yearly rate of inflation for a number of cryptos. I believe it is important to confirm that the actual claimed supply of tokens matches what is reported. Is your project's rate still meeting the claimed rate?

It takes a bit of time to gather all the data, and I kind of wish there was a site that just did it for me. But for now, I just calculate it myself and share the results.

What is inflation of a crypto?

I am invested into a small number of projects, but one key factor I focus heavily on is the inflationary nature of the native token or coin for a project. At its core basis is the idea of supply and demand. Simply put, if supply outstrips demand, then the price of the crypto will drop.

The Inflation of a coin is simply the rate at which it is currently increasing its supply every year. I.e. If a token has a 2% inflation rate, then one year from now, 2% more tokens are available to buy.

The circulating supply of a token can drop for a number of reasons such as a burning or lost keys. Supply can increase for minting, rewards, staking or token unlocks.

Inflation can be a good thing for some projects in early stages, but overall a low rate of inflation will keep the buying pressure high. For example, Bitcoin's inflation rate in 2012 was 32% and halved the following year. So if the project is under a year old, you can cut it some slack for now. But if it's still hitting double figure inflation after three years, it is not in good shape.

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Max Supply:

It is worth noting that some projects have a maximum number of tokens that can ever be put into circulation, whereas some projects have an infinite supply, meaning the number of tokens can increase forever. For example, Bitcoin can never exceed 21million coins.

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Staking Rewards:

Most cryptos offer staking rewards. This is an important piece of tokenomics applied to ensure the value of tokens remains constant within the pool. If the staking rewards do not offset, you will need to adjust for inflation.

For example, if you are recieving 6% staking rewards, but the supply of the coin increases by 10% each year, you still essentially losing 4% each year anyway. So be careful about lucrative APY numbers.

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Calculations:

I calculated based on the values at CoinMarketcap at 12 Dec 2021 and 12 Dec 2022 (today). Anyone can verify these if they wish. I've calculated inflation simply as:

Inflation Rate % = (2022 Supply / 2021 Supply ) - 1

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Results:

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Some projects publish their expected inflation rate. For example, Bitcoin's estimated inflation rate for the year was 1.77% - which was absolutely perfect.

I will reserve judgement for now as to which projects show more or less potential for value increase based on supply and demand only. How does your project choice measure up? What is the advertised rate according the white paper tokenomics? How close is it to the actual numbers?

If you are concerned about your investments, check the numbers against several other sources. CoinGecko would be another good place to start.

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Also, if somebody can please give me a reliable circulating supply for Moons one year ago, I will add them to the table. The current circulating supply is already available at 108,563,715, but I need a solid figure for one year ago.

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Possible Impacts

There are a few events or governance proposals that have occured since the previous calculations. These are continuing to have an effect on the inflation levels of various cryptos:

• Ethereum Merge
• Luna Burn
• Binance Burn
• Algorand governance

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EDIT: Requested by users in the comments:

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