Deflationary & Inflationary, these are terms used when talking about crypto. What do they mean though? I will try explain in the simplest form in this article.
Simple definitions: Deflationary, meaning a supply which is reducing in the number in circulation/total supply. & Inflationary, meaning a supply which is growing in number in circulation/total supply. What does each mean in the crypto world?
Token X, has minted a max supply of 5 Million tokens in the tokenomics there is a “burn” mechanism. This will “Burn” or destroy a number of tokens at certain points. When this takes place the token is at a deflationary or reducing supply stage.
Token Y, this time has an infinite supply, only 2 Million have been created initially & through rewards or bonding mechanisms more tokens will be minted. This increases the circulating supply & making this token inflationary.
Side note there can also be hybrids of these where there is a max supply set but initially minting is done only to a certain level of supply, with the goal to over time to hit the maximum supply, or there is an equilibrium set to balance min/max supply.
All of them have their use cases Keep in mind inflation can be seen to dilute price as there is no scarcity where as deflation can be seen to increase the value with scarcity of a token.
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