@gregblack

Token inflation directly impacts holding incentives by influencing perceived scarcity. High inflation erodes purchasing power unless matched by equivalent growth in network utility or rewards, often discouraging long-term holding. Moderate, predictable inflation—especially when tied to staking or liquidity provision rewards—can align incentives by compensating holders for dilution. Deflationary or capped-supply models generally appeal to scarcity-minded investors, but they must balance utility growth to avoid stagnation. Inflation can also support network security (as in PoS systems) but requires careful calibration to avoid undermining token value. Investors are more willing to hold if inflation is transparent, purposeful, and linked to ecosystem growth. Poorly designed inflation models risk creating perpetual sell pressure and disincentivizing loyal participants.

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