An inflationary cryptocurrency is one whose total supply increases over time, typically through the creation of new tokens as mining or staking rewards. Most traditional currencies are inflationary, and many cryptocurrencies follow a similar model.
How Crypto Inflation Works
New tokens are created to incentivize network participants (miners or validators). These new tokens dilute the existing supply, which can put downward pressure on price if demand doesn't grow proportionally.
Inflation Rates
Different networks have different inflation rates. Ethereum's net inflation can be positive or negative depending on network activity (thanks to fee burning). Solana has a starting inflation rate of ~8% that decreases over time. Cosmos-based chains typically have 7-20% annual inflation.
Inflationary vs Deflationary
Neither is inherently better. Inflationary models ensure ongoing incentives for network security. Deflationary models create scarcity. The important factor is whether the inflation rate is reasonable, predictable, and offset by genuine demand and utility.