Is this true? Is this how the POS interest works? This is really bad news for regular investors who are not stalking...
I thought the interest is 5%, and if only 1/3 of the coins are used for staking, than the total inflation would be only 1.66%
That would mean lower inflation. It's really unfair for those who are not staking if the system works as you describe it. If some people get 10% to 20% interest while others get zero, the difference is very big. 5% vs zero would be more fair.
It's meant to be an
incentive to support the network, it's not meant to be fair. Some coins have 25% or even 100% per year. 5% isn't a lot actually. If you feel like you are missing out, just set up a Raspberry Pi for staking, or let the wallet automatically start on operating system start on your PC.
I get the incentive part, and it is normal to work this way, but the way it is described is misleading. When you say 5% interest for staking, I think about 5%, not 10%-20%.
When you get interest for a term deposit in a bank and the interest rate is 5%, you get 5%. It doesn't matter if other people keep their money in checking accounts and don't get any interest, you will still get only 5%. The bank doesn't calculate a 5% interest for all the money held by the bank, and then distribute it proportionally to those who have term deposits. It doesn't work this way, and any person who understand the concept of interest knows I am right.
This is why the way POS interest is described here is not the normal way interest works, but a very strange way.
I am also invested in NAV Coin, another POS coin, and from the discussions I've seen in their threads, it seems that the interest rate is exactly 5% and the coins that are not stalking are not generating any interest. In their case, the inflation is about 2.5% instead of 5% because around half of the coins are not stalking. This is how people are describing it. Now, after what I read here, I'm not even sure if NAV works the way I understood it does.
You also said "
Some coins have 25% or even 100% per year." which is true, but nobody would invest in such coins unless he/she is a staker.
There must be a balance between the incentive to support the network and the inflation that affects regular investors/users who are not staking. The major fiat currencies like USD and EUR have a target inflation rate of around 2%, and people still complain about it. As a comparison, 5% for the whole monetary mass is big. If the interest was working the way I thought it did and the stakers got 5% while the rest got zero, than the inflation rate would be only 1.66% if only one third of the coins are staked, which is much better.
Remember that Bitcoin got successful once the mining rewards got low, and regular people who just wanted to buy/hold/spend got into the game. If miners would still be earning thousands of Bitcoins without a cap on the maximum amount of potential coins, there would be zero interest from the general public. And a coin made only of miners/stakers is not a coin.