Cannot understand inflation rate (not even approximately) please help

Hi,
I’m trying to figure out the inflation rate and having trouble as a mathematical novice. I am finding it hard because the actual starting number of coins appears to be 0 and then they are gradually released all the way up to 720 million. For example, when reading about another coin I might see that it stated with 1 billion coins issued (and in circulation - as in immediately distributed at the end of the ICO) to the users, and then for instance, a 5% inflation rate. This teaches me that the coin has a nice low inflation rate so that is a good thing.

However with Avalanch the 320 million coins that are unlocked are not distributed immediately but rather they are the inflation so I cannot understand what sums to do to find a fair comparison to the way mentioned above.

To make matters more complex, it makes sense in this ecosystem to compare inflation rates to bitcoin, and bitcoin is/was mined during its first year (Im interested in annual inflation rates for simplicity in understanding Avalanch for investment reasons). Bitcoin therefore grew from 0 to x number in year 1 just like Avalanch and those numbers appear to be very vaguely similar to me in terms of percentage of inflation. (e.g. by looking at the total hard capped number of coins and dividing by the number of coins released per year or just at the end of the first year and then dividing that number by the total number of coins ever to get a percentage per year. I calculate this for Avalanch to be 16% per year, yet it seems crazy to call it that given that the supply is going to increase by something like 40% from 76 million to 120 million during the rest of this year.

I don’t know which numbers to use, is it fair to say it is 16% per year (the hopeful option that doesn’t make any sense sadly but reflects a sensible - according to me who s terrible at maths - way to calculate bitcoins inflation rate or any other mined coin) or 40% by saying there will be 122 million at the end of the first year roughly, and we are up to 76 million released so far so 40% of 122 million is the difference between it and 76 million, or maybe that is backwards and I should call it:

122 million minus 76 million = 46 million which is 60.5% from the current supply levels to the end of year 1. This is very high!

Finally, your chart makes NO SENSE I have been trying to understand it for hours! Please make a simple explanation for maths dunses like myself to look at for business reasons. Look at this:

https://info.avax.network. The first chart which is called:
Chart #2. Schedule of Tokens Unlocking on Mainnet Launch Date

Has confused me for HOURS. We have 76 million tokens, yet we are only 3 months and a bit after main net launch, it says 3 months in we are maybe 13% (have to guess as there are not enough numbers on the side of the chart!) into the 360 million. 13% of 360 is 46.8 million, in which case why are we at 76 million tokens? The coin is inflation faster than the chart says! Furthermore why does the chart not include the staking inflation? Is this what I am missing here (in this final example - which is not the only issue, I don’t understand which is the best way to describe the inflation to understand the market dynamics either as illustrated).

My final attempt is that at the end of year 1 there is 34% inflation out of the 360 million. On top of that there is staking which is 7-12%, lets call it 10% for simplicity so the total is 44% actually. I have heard that the team plans to keep their coins during the first year (obviously, hopefully) and after 12 months the team has 5% inflation so this can be decided so we get 39% inflation out of 360 million (which I do not understand why it is relevant - if the coins are not released they are not effectively ‘on main net’ so its not relevant. The total is what matters. So 39% of 360 million is 140 million and we have 76 million so far so 64 million coins have to be released this year (somehow, despite only being 3 months in we are already over half way through the coin emission schedule, which doesn’t make sense important please explain why we are inflating much faster than the chart says!). Therefore the infantion percentage is very high indeed. I still can’t understand what it is due to the issues explained at the top (crap at maths sorry!).

What does 360 million have to do with anything anyway when it carries on inflating after that up to 720 million? The chart just stops after 48 months rather arbitrarily in my (rather confused opinion).

Please help me make sense of this so I have a ball park estimate of the inflation rate compared to bitcoin and any other ways that seem relevant to you from a business perspective. Is it high compared to other coins from your perspective? This is what I’m interested in.

Thank you! (sorry for the long post and any help much appreciated)

Hello,

You also need to take into consideration the Chart 4, otherwise you are missing the community unlocking part.

But indeed, I forgot to send you this site.
I think it will be easier to directly see the exact amount of unlocked tokens for the genesis part :slight_smile:

https://avascan.info/genesis

48 months is often taken as example because most of the unlocking for genesis part will be over at this time except the foundation ( 10 years ).

However, it isn’t because a token is currently locked that it isn’t usable ( Indeed, locked tokens can’t be withdrawed or sold but if you bought them during the public sales, they can be used to stake and for the future governance system )

Another thing to take into account is the real circulating supply, it isn’t because tokens from genesis are unlocked that they are on exchanges.
Part of the unlocked tokens are linked to foundations, partners and so on, these will be delivered based on projects.

So, there are 2 completely different kind of inflations on Avalanche and you need to distinguish the tokens unlocked from genesis ( which are already minted and most of them used for staking ) & the inflation linked to the staking rewards.

Analyzing the staking rewards inflation rate might be very complex as it fully depends on the numbers of stakers

However, I can share you this chart showing a comparison with BTC.

You can see there is a large gap between a 100% staked and 50% staked objectives.
However as 50% of tokens were already minted on Mainnet, the inflation is lower than BTC

There is another important point on Avalanche => The Governance.

In this context, the reward rate will be subject to it. This will allow token holders to choose the rate at which AVAX reaches its capped supply.

Finally, if you want to follow and do some math around staking reward inflation, i would invite you to check vscout.io site and more particularly the current supply stats => 373 820 693 AVAX which is, thus, the number of AVAX existing at this precise time minus the burnt ones.

You can easily deduct how many tokens were granted as staking rewards since the Mainnet ( +/- 14M ) :slightly_smiling_face:

Based on this number and the one from Genesis unlocking at the current time ( +/- 65M ), we can say there is approximatively 79M Avax in circulating supply

Using Genesis values and with a bit of speculation, at the end of the year, the circulating supply should be around 207M for Genesis part + 40/50M as staking rewards => 250M

As already said, circulating supply doesn’t mean on exchanges.
Avalanche uses a POS mechanism and most of the tokens will be hold and staked. ^^
In this, comparing Avalanche and BTC would be difficult.

I would also like to share you this very interesting article showing that at term, AVAX can be considered as a deflationary token :

Regards,

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Thank you very much for the explanation. That does seem like a lot of inflation! (250 million at the end of year one, up fro 79 million now, that is over 3x the current supply. Seems like an issue to me but I will read that article before forming a solid option.

It might sound like a lot, but Avalanche holders are in it for the long haul, evidenced by the massive unlocked in December, and the price barely moving.

Hello, not at the end of year 1 but end of this year => December 2021 ^^
So, it is 15 months after mainnet

But as mentioned, as POS, you can already count at least 60% that will stay staked, some distributed to different project by partners / foundations and finally as for all tokens a part that lays in wallet without staking.

At the end, you don’t have a lot of tokens really in circulating supply.
Checking the order books of exchanges, it is quite empty ^^

If we want projects to run on Avalanche, we definitively need this circulating supply. ^^