Token inflation occurs when a protocol's smart contracts mint new tokens and distribute them to participants. This differs from currency inflation, which erodes purchasing power; token inflation directly increases the supply available in the market. Common sources include validator staking rewards (Ethereum, Solana), ecosystem incentives (Uniswap liquidity mining), and treasury emissions tied to governance decisions. Inflation schedules vary widely. Bitcoin has a fixed, diminishing emission that reaches zero. Ethereum has no hard cap but maintains modest inflation through validator rewards. Polkadot uses governance-controlled emissions. The impact on token holders depends on whether inflation rate exceeds organic demand growth—if the protocol's utility and user base grow faster than new supply enters, price appreciation can offset dilution. Inflation's severity is often measured relative to circulating supply and compared against unlock schedules. A protocol with 2% annual inflation but significant investor vesting cliffs faces different supply pressure than one with 5% inflation spread evenly. Projects sometimes temporarily increase inflation to bootstrap adoption (liquidity mining surges) or decrease it as the protocol matures.