What Is the Difference between a Deflationary and an Inflationary Token Model?

An inflationary token model continuously increases the total token supply, often through staking rewards or mining, leading to dilution of existing holders unless demand outpaces supply. A deflationary model actively reduces the token supply, typically through token burns funded by protocol revenue, leading to increased scarcity.

Deflationary models are generally preferred for intrinsic value as they create a net positive value accrual for holders, assuming the burn rate is sustained.