Inflationary Reward Model

Definition ∞ An Inflationary Reward Model is a system where new units of a digital asset are regularly introduced into circulation as compensation for network participants. This increase in the total supply incentivizes actions such as validating transactions, mining, or providing security to the blockchain. The primary purpose is to encourage active participation and secure the network’s operations. While providing incentives, it also dilutes the value of existing holdings over time.
Context ∞ The economic implications of an Inflationary Reward Model are a frequent topic in discussions about tokenomics and the long-term sustainability of digital assets. A key debate often concerns the optimal rate of inflation to balance network security with value preservation for token holders. Future developments involve dynamic inflation adjustments or hybrid models that adapt to network activity and security requirements.