Things you didn’t know about Tezos Inflation. I have seen a lot of articles about the #Tezos protocol, spreading a common misconception about the Tezos’ supply inflation rate. Since inflation rate is an important part of a coin’s tokenomics that people are looking at, I wanted to write a few things to clarify those misconceptions and explain how exactly Tezos inflation works. Does Tezos have a fixed percentage of yearly inflation? You might have read in many articles or Tezos reviews the misconception that Tezos has a fixed inflation rate of ~5% per year, which...is wrong. Tezos doesn’t have a fixed percentage (%) of inflation. It has a fixed max number of coins that can be created every block. Is that an important difference? Well in my opinion, yes, pretty huge I would say as with a fixed percentage, the number of coins created each year is rising exponentially since the total supply is also rising much faster. Meanwhile when you have a fixed number of new coins created, the inflation as a percentage, keeps dropping lower and lower. Let’s get more specific. What is the actual Tezos inflation rate? Tezos’ inflation is 21.25 Tez (max) per block and they are distributed as follows: 10 Tez (max) for the block producing validator 10 Tez (max) for the bakers that are endorsing the block and 1.25 Tez sent into the Liquidity baking CPMM You might have noticed I used the word “max” when talking about the tez created for the endorsers and the block producer and the reason is that in most blocks, the actual tez created are a bit less than the max because of bakers missing blocks or endorsements etc. An easy way to see that is to go to random blocks on the tzkt.io explorer and see the actual rewards that were distributed on each of them. Here is an example. As you can see in this block the new Tez that were created are 9.83 (5+4.83) for the block producer and another 9.99 for the endorsers so a total of 19.82 Tez. Add to that the 1.25 Tez for Liquidity Baking (not shown in the screenshot) and we have a total of 21.07 newly created Tez for that specific block which is also a fair representation of the average. So now that we know how many new Tez are created per block, and since we know that the block time of Tezos is 15 seconds, we can easily do the calculations and see that each year we have approximately 2,102,400 blocks that we multiply by 21.25 Tez (per block) and we get 44,676,000 (~44.6 million) new Tez per year which is the approximate yearly inflation of Tezos supply. You can see the current inflation percentage on the tzkt.io first page. But as I said before, we must keep in mind that this percentage goes down with every block produced. How does it affect holders? We now know how much the actual Tezos inflation is, but what does that mean for you as a holder of the Tez coin? Does your “purchasing power” decrease at that rate each year? The answer is NO and the reason for that is the (Liquid) Proof Of Stake consensus mechanism that Tezos is using which allows any user to delegate their coins’ staking rights and in return get a share of the newly created Tez proportional to their holdings. (Delegation is really a 3 click process that anyone can do from inside their wallet with NO risks) That means that even though the total supply of the asset is growing, your personal holdings are also growing by the same (and as we can see in the screenshot above, actually even bigger) rate so you technically don’t feel any inflation. If for example today you own 1% of the total supply and you stake your coins, you will still own (at least) 1% of the total supply in one, ten or a hundred years. This is the power of the delegation feature Tezos offers to its users. It's also important to note that there is a proposal in the works for a new inflation system for Tezos which is called "Adaptive Inflation" (or Adaptive Issuance) which -if approved and implemented- will totally change Tezos Inflation model. I will probably cover that in more detail in the future so if you are interested in learning more about these stuff, consider dropping a follow. Cheers.