Cardano’s inflation rate drops to 2.5% over the last 12 months, after Cardano's inflation rate had been around 4-5% annually in recent years

Cardano (ADA), a prominent proof-of-stake cryptocurrency, has an inflation rate of 2.5% over the last 12 months. Cardano's inflation rate had been around 4-5% annually in recent years.

This rate is significantly lower compared to other major cryptocurrencies—6 times lower than Avalanche (AVAX) and 4 times lower than Polkadot (DOT).

ADA whale on X: "Cardano had an inflation of 2.5% over the last 1y. For comparison, Sol: 14%. Avax: 15%. Cosmos: 13%. Dot: 10% Cardano has achieved stable, significant levels of adoption with low inflation These are what we call the fundamentals. And it explains why Cardano will remain up there" / X

The Cardano community views this low inflation rate as a testament to ADA’s economic stability and a factor that positions it a sound money. Despite the low inflation, Cardano tries to make itself achieve stable and significant levels of adoption. It currently has $203 million in total value locked.

Bitcoin (BTC), known for its scarcity, has an rate of 0.86% after the 2024 halving, while Ethereum (ETH) demonstrates twice the inflation rate of Cardano.

Cardano (ADA) inflation model

For Monetary Policy, Cardano has a fixed total supply cap of 45 billion ADA. Initially, a large portion of this was distributed during the Initial Coin Offering (ICO), with the remainder set aside for future issuance.

For New ADA Creation, ADA is gradually introduced into the ecosystem through a process of minting, which is primarily done as staking rewards.

These rewards are given to stakers (those who lock up their ADA to help validate transactions) and stake pool operators (who manage the staking pools).

The staking rewards are a combination of new ADA (inflation) and transaction fees. A portion of each block reward comes from the remaining ADA that has not yet been minted.

Unlike some cryptocurrencies with an unlimited supply, Cardano's inflation is controlled and diminishes over time.

The rate at which new ADA is created decreases gradually, following a decay function that ensures a decreasing rate of inflation as the total supply approaches the maximum limit of 45 billion ADA.

As of August 11, 2024, ADA has circulating supply of 37,116,609,474 ADA.

The controlled inflation rate of Cardano is seen as a “sweet spot” in the crypto world, attracting investors looking for a balance between adoption and scarcity.