When people research new projects to potentially invest in, one of the questions that is often asked is: "What's the inflation rate?"

What is inflation?
Inflation or Inflation rate, is the increase in money supply. So the increasing amount of Dollars, Euro's , BTC, etc. If more Dollars are added to the total circulation supply of Dollars that are available for people to spend, then we speak of inflation. The result could be: If there is more of something, it gets less scarce and possibly less valuable. This depends on many other factors though. Bottom line is: Supply and demand.

How does this matter in blockchain and cryptocurrency?
In cryptocurrencies, new coins are added to the supply daily. This is because in consensus mechanisms that are used in blockchain, the amount of total coins in circulation is constantly increased by reward distribution. This happens both in Proof of Work (PoW) and Proof of Stake (PoS).

Very short explanation about consensus mechanisms: information that is being registered on the blockchain needs to be verified. If John sends an amount of coins to Michael, then information that is registered on the blockchain about the amount of both users, needs to be changed. After the transaction, John has less and Michael has more. Changing this information is done by sending a transaction that is mathematically signed by both parties. The blockchain network needs to confirm and authenticate the transaction before it is added to the next block on the blockchain. This process is a mathematical process and costs calculation power: computational power. "The blockchain network" is (very simply put) computers running the same program that check eatch others calculations. These computers are called nodes (People who run nodes are called Miners in PoW or Stakers/Bakers in PoS). To run a node, you have to invest in special hardware and running a node costs a certain amount of electricity. To break even or earn money, these costs need to be compensated. The blockchain program pays these nodes by adding extra coins to the circulating supply and award them to the nodes. These are miningrewards or stakingrewards.

If we take Bitcoin as an example: At this point of time, with each block (so every 10 minutes) a total of 12.5 new Bitcoins are rewarded. These are brand new Bitcoins. So with every block, the total circulating supply of BTC is growing with 12.5 BTC. Inflation rate for Bitcoin is now 4%. (This will change with the next halfening which will take place the 15th of May this year.) 

Inflation in PoW.
The basis of Proof of Work, is hard mathematics. To run a node you need very powerful hardware to make the needed mathematical calculations. Running this hardware costs a lot of electricity. This hardware is expensive and the electricity that is needed will cost a good amount of money too. So to break even, miners need to sell a good part of their rewards. Selling these rewards causes selling pressure and pressure on the price. So if we look at PoW chains, the inflation rate is something to take into account.

Holders of PoS coins are more likely to be unaffected by inflation.
The basis of Proof of Stake is mathematics and additionally, people who run a node need to own a certain amount of coins from the blockchain which they need to put at stake. If they cheat in the process of authenticating transactions, they can lose their stake. Due to this additional factor, the mathematical part can be less hard and therefore you need less expensive hardware and running a node costs very little electricity. The costs of running a PoS node are pretty much negligible. So to break even, a substantial lesser amount of the rewards will need to be sold to cover costs. This results in the fact that there is practically no forced extra selling pressure in PoS.

An additional important factor for DPoS or LPoS is the fact that people that hold coins of a DPoS or LPoS chain, can choose to "delegate" their coins to a node. This means that you don't need to run a node to earn rewards. You can choose a Staker/ Baker and virtually add your stake to his node without actually sending your coins. (So you stay in full control of your coins, you don't share your private key.) The node receives a certain percentage of your rewards for his services (this percentage is agreed on in advance).
This means that in DPoS or LPoS chains, all holders can earn rewards:

• There is no or very little forced selling pressure to break even in the costs for people running nodes.
• Everyone can earn rewards.

So in PoS, the inflation rate does not necessarily mean the price goes down due to forced extra selling pressure caused by nodes needing to break even. And in DPoS and LPoS, everyone gets about the same amount as the inflation rate so if the price goes down due to inflation, this is compensated in extra coins.

In reality, not everyone stakes. So if you stake you have an advantage over people who don't bother to stake or delegate. Which makes PoS even more interesting if you are willing to put that little extra effort in and Stake, Bake or Delegate.