How Does the PoS Transition Affect the Issuance Rate and Overall Supply of the Cryptocurrency?
The transition to Proof-of-Stake typically leads to a dramatic reduction in the cryptocurrency's issuance rate. In PoW, high issuance is needed to cover miners' operational costs.
In PoS, validators' rewards are much lower, as they only need to cover capital opportunity cost. This lower issuance often leads to a deflationary or near-zero inflation environment, reducing the overall supply pressure on the market.
Glossar
Issuance
Origin ⎊ The term 'Issuance,' within the context of cryptocurrency, options trading, and financial derivatives, denotes the initial creation and distribution of a new asset or contractual right.
Transition
Equilibrium ⎊ Transition, within cryptocurrency and financial derivatives, signifies a shift in market states, often driven by evolving liquidity conditions and order flow dynamics.
PoS Transition
Mechanism ⎊ A Proof-of-Stake (PoS) transition represents a fundamental shift in consensus protocols for blockchain networks, moving away from energy-intensive Proof-of-Work (PoW) systems towards a model reliant on validator stakeholding.
Issuance Rate
Mechanism ⎊ Issuance rate, within cryptocurrency and derivatives, defines the proportional quantity of a new asset created relative to existing supply over a defined period, fundamentally impacting price discovery and market dynamics.