Staking Dilution

Staking Dilution refers to the scenario where a staker's relative share of the total network supply decreases because they are not participating in the staking process while others are. In a Proof of Stake network, the supply is constantly increasing due to staking rewards.

If an investor holds tokens but does not stake them, their share of the total supply is effectively diluted by the new tokens minted for those who are staking. This creates a "staking imperative" where holders feel forced to stake their tokens just to maintain their relative ownership of the network.

While this is an effective way to drive participation, it can also create barriers for smaller holders who may not have the technical ability or resources to stake effectively.