Algorand is supposed to have a max supply of 10B and was launched in June of 2019. As of Jan. 01st 2021 it had a price of $.399 and a circulating supply of 1.19B it ended the year with a price of $1.66 and a circulating supply of 6.36B. Meaning over the course of a year in 2021, Algorand inflated at a rate of 533%.
If we look at just the last year the circulating supply increased from 3.11B to 6.97B an increase of 224% over the last year. Meaning for every 1 Algo that was in circulation 1 year ago there is now 2.24 Algo. That huge increase in the total number of circulating Algo helps to explain why the price has crashed so hard during this bear market.
So the question is; What caused this mass inflation and should I be worried?
What Caused the mass inflation: The short answer is Algorand Accelerated Vesting played a huge role, the Algorand team gave away 3.1B Algo through this program with most of that being given away in 2021. Algorand Accelerated Vesting was designed to act as a loyalty system for early supporters of Algo and was proposed in Nov. 2019. It was designed to reward those vesting their Algo and provide an additional bonus for node runners.
The proposal was originally set to run through 2024, however there was a backup that would flood the market with Algo through the vesting program, if the price of Algo rose too quickly. Which as a result of the 2021 bull run – the vesting ended three and a half years early.
Should I be Worried: Yes/No
The good news Now that the accelerated vesting has ended, 2.63B of the remaining 3.03B Algo yet to be distributed is set to be distributed over the next 7 and a half years with the rate decreasing exponentially – through the Algorand Community Governance Program. So the market should not continue to be flooded with newly minted Algo at the same rate as it was in 2021. The Goodish Bad News Goodish: For those that were sitting on the sidelines looking to invest in Algo, you shouldn’t have to worry about having the relative value of your investment watered down in the same way as it was in 2021. Assuming the total supply of ALGO never passes 10B – the max amount Algo can inflate in the future is, 42.8%. Badish: If you’re already significantly invested and purchased prior to Sep. 2021 the amount of Algo in circulation since you purchased has doubled (or more). Meaning the relative value of your investment considering the circulating supply has decreased by over half – For every 1 Algo in circulation when you purchased there is now 2-6 (depending on when you purchased in 2021). The Bad News – The inflation rate of ALGO going forward isn’t “entirely clear” At least 2B Algo was released into circulation in 2021 through means other than Accelerated Vesting 603M Algo has been released into circulation in 2022 so far we’re barely halfway through the year The inflation rate of Algo is supposed to decrease exponentially and was supposed to be 6% in 2022 – However it’s currently at a 9.5% increase in the circulating supply for 2022 and again we’re only halfway through the year. This can partially be accounted for by a drop in the difference between circulating supply and total supply – from roughly 550M in Oct. 2021 to roughly 400M currently according to CMC. However even accounting for that 150M ALGO that was added to circulating supply outside of regular inflation – The inflation rate so far in 2022 is nearly 7%, and again there is still half the year to go to bump up the inflation rate.
The Algo Foundation website regarding distribution doesn’t exactly help with the confusion. In total the circulating supply has increased from 1.19B in the beginning of 2021 to roughly 6.97B today an increase of roughly 585% in a year and a half with the total supply sitting at 7.37B. According to the foundation website, Algo is supposed to have a total supply of about 6.67B by 2023 and we’re already at 7.37B – again this can partially be accounted for by the fact that accelerated vesting finished three and a half years early.
Also note according to the chart below the last roughly 1M tokens is supposed to be distributed from the end of 2025 to 2030.
So technically speaking ALGO inflation is “supposed” to decrease exponentially over the coming years so it’s not totally surprising to see high inflation in the short term. If it does as it’s supposed to we’re through the worst of the inflation and the rate of inflation in 2026 will be a very low single-digit percent.
If the ALGO 10B total supply number holds it’s just a matter of riding out the massive inflation in the short term. But a word of caution, JASMY was supposed to have a total supply of 4.7B yet in total, it is over 20B.
TLDR: Algo mass inflated 585% in a year and a half, could be good for some – bad for others, assuming the 10B total supply holds. But the future inflation rate isn’t clear at this point.