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I'm wondering how much staking rewards offset the circulating supply inflation rate right now. We know that annual staking rewards are around 5.5%, but the only metrics I could find about annual inflation rate are here:

https://datastudio.google.com/u/0/reporting/3136c55b-635e-4f46-8e4b-b8ab54f2d460/page/azvBC

So it's around 2% per year.

Which means that people who don't stake actually lose 2% (if we're ignoring coin price appreciation) per year, while people who do stake gain 5.5% - 2% = 3.5% per year.

Does anyone have more information about this?

Edit: I also found this but I'm not sure if it is valid data: https://pastebin.com/raw/a7x2Gu2g

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Each epoch .22 % of the remaining pool are distributed as rewards (therefore .22 % of a slowly declining pool) . So there will be a smooth reduction of inflation. This is unlike Bitcoin where inflation rate only adjusts every four years (when it gets cut in half). Although I have not done the math, I've heard that the .22 % rate was chosen so that the rate of inflation will effectively be the same as Bitcoin (i.e. four years from now it will be about half what it is today.)

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Cardano's staking rewards are a fairly consistent 5.5%

Annual inflation of fiat currencies varies by time and country. Unless or until the volatility of ADA drops dramatically it will have far more impact on offsetting fiat inflation than staking rewards.

It is a bit like asking how is inflation in Australia offsetting inflation in the USA.

Cardano’s monetary policy addresses two issues:

  • The necessity to offer rewards for people who participate in the network

  • Funding the treasury

Rewards

The expansion and future improvement of the Cardano blockchain will be greatly influenced by its community, who need to be incentivized through rewards to participate in Cardano’s development.

Staking rewards for delegators and stake pool operators come from two sources:

  • Transaction fees - fees from every transaction from all blocks produced during every epoch go into a virtual ‘pot’. A fixed percentage (ρ) of the remaining ada reserves is added to that pot.

  • Monetary expansion - a certain percentage (τ) of the pot is sent to the treasury, and the rest is used as epoch rewards.

This system is designed to ensure that the portion of rewards taken from the reserves is high at the beginning, when transaction numbers are still relatively low. This incentivizes early adopters to move quickly to benefit from high initial rewards. Over time, and as the number of transactions increases, additional fees will compensate for smaller reserves.

This mechanism also ensures that available rewards are predictable and do not vary dramatically. Instead, rewards change gradually. The fixed percentage taken from remaining reserves every epoch guarantees a smooth exponential decline.

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  • Yes, I know, which is why I mentioned that I'm ignoring coin price appreciation. So assuming Cardano is an isolated system and ignoring anything else in the markets, how does its staking rewards offset its inflation rate? Does anyone have more info on how inflation rate will evolve as circulating supply gets closer to total supply of 45B?
    – Mr. D
    Commented May 26, 2021 at 9:50
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    Added quote from Cardano's Monetary policy docs. Click on link to read full document.
    – gRebel
    Commented May 26, 2021 at 10:23

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