I'm happy to see someone is getting into the details. Most economists would agree a little bit of inflation is good for the economy. The current US Fed target is 2%. Other fiat currencies have worse inflation. We're in a strange world now that even USD inflates less than this target. At this moment, deflationary Bitcoin is really competing with USD. They both have low inflation. Gold also inflates at 1.5%.

When I started thinking about cryptocurrency inflation, I think it should be a moderately high rate, maybe, 10%. But I dialed back a little bit to 7%. It has a nice feature. Supply will double every 10 years (Rule 72). I thought about dynamically adjusted rate. But I think we'll end up with some version of centralized rate manipulation. I don't know what the right rate is. Maybe, 3-4%. If you think 7% is too crazy, try to come up with a rate that you think would work.


If it's 1.5% like gold, it will turn into deflationary asset, Store of Value. It'll behave like gold or Bitcoin. Central banks are doing QE to their economies. So fiat supplies are increasing much faster than inflation.

I want to discuss about the economic incentives of inflation. Having a reference implementation of Bitflate makes the conversation easier. But most people don't get into the details but reject inflation outright.

I agree an inflating coin would compete directly with fiat currency. That is the idea. We want a better currency. Rejecting inflation is hindering adoption of cryptocurrency. Fiat has the ability to change inflation but it needs a central authority. With cryptocurrency, we can make a coin that inflates without a central authority.

A 7% inflation rate is moderately high. It's designed to accommodate for growth and move away from Store of Value use case. A coin with 7% inflation is better than the Zimbabwe dollar.

I use a fork of Bitcoin because it is good for money use case. I want to bring attention back to inflation. It's the main point. I think other designs are too fancy and unnecessary.

There is a tragedy of common scenario. We will end up with only Bitcoin and fiat currencies. People are too self-fish to pick an inflating coin that they understand the rule. They end up with whatever authorities issue and deflationary Bitcoin.


Coins, like Dogecoin and Ethereum, have tail emission. It's a constant amount. This constant amount is designed to support mining. It'll diminish relative to supply over time. See a reference for Dogecoin here:

https://bitcoin.stackexchange.com/questions/19867/reward-schedule-and-maximum-number-of-dogecoins

These coins use tail emission as a mechanism to keep mining alive. Their goal is still Store of Value. I think an inflating coin needs a new design. It really needs to inflate at a percentage rate. We want to answer some questions:

- Will the economics of inflation work for cryptocurrency?
- What are the incentives for user to adopt a chain with inflating supply?

For Bitflate, in particular, I want to test out a design and validate the incentives.

- A reward system tilted to early adopters.
- Moderately high inflation rate of 7%.
- Adoption rate of inflating coin.

Bitflate is experimental. It may not have enough incentives. If someone can think of a better design, I think cryptocurrency would be more successful.

Hi everyone,

I'm working on a cryptocurrency with constant supply inflation. I wrote an article about its economic incentives.

Original Post: https://bitflate.org/post/2019/11/01/economic-incentives-for-inflating-cryptocurrency.html

Bitflate is a cryptocurrency with a constant inflation of 7% per year.

Skeptic: Your Bitflate coin supply inflates. It’ll devalue people’s bag of money. Nobody will want to hold it.
Me: Inflation creates more coins. More people will adopt it. That’s how it will retain value.
Skeptic: That’s a ridiculous idea. It won’t work.
Me: Yeah, it is kinda weird. But it may work.

Everyone got into crypto because they don’t like fiat inflation. Bitcoin is the pioneer. It has limited supply, really limited, eventually zero supply. This is more limited than gold which has about 1% inflation. Inflation has become a touchy subject in crypto. Most people reject it.

I think this rejection of inflation hinders crypto adoption. This is the reason why I decided to create Bitflate, a cryptocurrency with 7% per year inflation. Crypto enthusiasts question me about the incentives for people to adopt Bitflate. I thought a lot about these. Candidates are the technology, the marketing, the community, the belief, the hope, the opposite of Austrian economics, the solution to cryptocurrency adoption. But I think none of these are the incentives. Inflation is about economics. The answers are economic.

For Bitflate cryptocurrency, I see two incentives: Bitflate Reward System and Bitflate Adoption Rate.

Bitflate Reward System

Although Bitflate chain has inflation, I design a reward system to give more coins to early adopters. The idea is to encourage people to hold on to their coins and create some restriction of supply. I think this create incentives to hold Bitflate coins early on. This way people with coins don’t dump them. The reward system is as follows:

0: 50 (supply: 10 million)
1: 25 (supply: 15 million)
2: 12.5
3: 6.25 (end of halving)
4: 6.56 (start of inflation 7%)
5: 7.02
6: 7.51
7: 8.04
8: 8.60
9: 9.20
10: 9.85 (supply: 31 million)

For the first 3 halvings, Biflate follows the same reward schedule as Bitcoin. But it will switch to inflation after 4 halvings. I think the reward schedule create incentives to hold Bitflate coins early on before Bitflate reaches critical mass. Even with inflation, it will take 10 years for supply to reach 31 million coins.

Bitflate Adoption Rate

After the chain passes its 4th halving, reward will start to increase. There is no supply restriction. Bitflate survival is dependent on adoption rate. There are now 3 possible scenarios:

- If adoption rate is around 7%, the coin will retain its value.
- If adoption rate is greater than 7%, the coin may gain more value.
- If adoption rate is less than 7%, the coin will decline and die.

Long-term Transaction Coin

If Bitflate manages to survive for many years, its adoption will eventually plateau. This is inevitable. At that point, I’m not sure what will happen. People don’t have incentive to hold it. Does it implode and collapse? I think we may be able to develop interest banking to prevent value loss. Because it is digital, it could be easier to manage than inflationary fiat currencies. It may become a transaction coin. Businesses may accept it.

Bitflate is experimental

Despite the two incentives, Bitflate can fail. If Bitflate fails to reach critical mass, it may implode. Price and hashrate will crash. Users may need more than just these two incentives. Historically, authorities force people to use whatever inflationary currencies they issue. On the other hand, people like deflationary assets like real estate, gold, Bitcoin. Bitflate is a new digital alternative. It is better than inflationary fiat. But it may not provide enough incentives.

I got into Bitcoin after 2017 crash. I studied the tech and thought it was pretty interesting. First, I read on ETH but decided to stay with Bitcoin. Then I thought about why people don't use crypto for transactions. I currently run a project to experiment with inflation. Through the project, I learned a lot about Bitcoin and crypto in general. I hope my project goes somewhere. If not, I hope someone would come up with something interesting in the next decade.

Bitcoin has 10 minute block time and 4 year subsidy halving. Besides inflation, Bitflate has 2.5 minute block time. It'll hit subsidy adjustment every 1 year for 7% inflation. Otherwise, it's similar. I also design block reward system tilted to early adopters. It'll give users more coins before inflation starts.

0: 50 (supply: 10 million)
1: 25 (supply: 15 million)
2: 12.5
3: 6.25 (end of halving)
4: 6.65 (start of inflation 7%)
5: 7.02
6: 7.51
7: 8.04
8: 8.60
9: 9.20
10: 9.85 (supply: 30 million)

We're at block 53k now. The first halving will happen at block 210k. I think this feature would give users incentive to hold the coins. It's similar to Bitcoin's limited supply incentive. But Bitflate is experimental. I'm trying to bootstrap a chain with inflation. This is my best design.

I found the numbers here: https://materials-risk.com/the-gold-stock-to-flow-model/

"While the entire amount of gold ever mined totals approximately 190,000 tonnes (the stock), annual production is about 2,900 tonnes (the flow). If you divide the stock by the flow you get a stock-to-flow ratio of 66 years. Silver meanwhile has a stock-to-flow ratio of ~22."


Thanks. 7% is a lot and designed to behave opposite of Bitcoin.


You can't. Block size and block time is fixed.
Off-chain scaling will add more fee to transactions if you want to secure on-chain transactions. I think high fee will prevent average people from using bitcoin.


I think 1% is near gold inflation. So if Bitcoin does not have inflation, fee needs to rise to cover similar amount. So that would be about 210000 BTC for 1% or 105000 BTC for 0.5% per year. Bitcoin is digital and more efficient than gold. But it'll come in as some percentage of supply.


I think this is because price has been rising much faster than hashrate. When price growth slows, I think fee will rise.

I wrote a thread on Twitter about Bitcoin and Inflation.

Original Thread: https://twitter.com/bitflate/status/1189401591226355719

1/8. Some thoughts on inflation and Bitcoin. Zero inflation will need high fee to incentivize miners.

2/8. High fee requires high coin price. People are not paying high fee if bitcoins are not worth a lot.

3/8. Price drop and fee drop will drop hashrate. That'll make 51% attack cheaper.

4/8. Bitcoin is going for digital gold use case. So high fee is expected. That'll make Bitcoin money for rich people. Normal people can't afford transaction in Bitcoin.

5/8. A little inflation, like 1%, can reduce fee. The cost of running Bitcoin network spreads to HODLers through inflation. It'll make Bitcoin more accessible to more people.

6/8. 1% inflation is lower than gold. Bitcoin can still be digital gold.

7/8. If you truly believe in digital money for people, you should consider support for small inflation of Bitcoin supply.

8/8. Higher inflation (but not too high) will make Bitcoin even more accessible to people. But it'll diminish Store of Value use case. Bitcoin won't support this. But no worry, there's @bitflate with 7% inflation.

I've written some articles about Libra, Facebook cryptocurrency. I think they highlight the need for a crypto like Bitflate. Check out the discussions below.

Market is Not Ready for Libra
https://bitcointalk.org/index.php?topic=5196266.0

Building Stablecoin: Bitflate vs. Libra
https://bitcointalk.org/index.php?topic=5194840

Join our discord community: https://discord.gg/utnEyp8

I feel like I need to write another article explaining emerging cryptocurrencies. All these crypto designs have different tradeoffs. There is market for each of them. I'm not here to defend Libra. I'm only interested in promoting Bitflate.

Politicians reflect public opinion. I think crypto market is ready. But the general public is not ready. For example, look at Bitcoin adoption.


I don't think coins like Libra is for investment. They are semi-centralized and designed to peg with assets. Maybe people can trade them to make money like forex.

Many are critical of my semi-centralized label for Libra. Let me explain the design tradeoff from user perspective.

Centralized currencies: These currencies are issued by centralized authorities. Their governance is often opaque, driven by political agenda. There are few public guidelines. We rely on proxies (e.g. political representatives) to voice our opinions. Examples of this type are obviously fiat currencies. The US Fed operates under dual mandate: maximum employment and stable price. These guidelines are vague, very difficult for normal people to understand. Tether and other pegged stablecoins are also centralized currencies. They're controlled by the issuing companies. We don't have independent audit. From user standpoint, we have little control and transparency. It's hard to get audit and insight.

Semi-centralized currencies: This type is new and emerging. It has potential of being more transparent than centralized currencies. Libra is an example. It is governed by the Libra Association. The ledger is likely to be public. Association members have different interests. They can serve as check and balance. From user standpoint, this type is an improvement from existing centralized currencies. Users get price stability and more transparency. But the main hurdle is competition with centralized currencies.

Decentralized currencies: These are cryptocurrencies starting with/inspired by Bitcoin. They are decentralized and governed by consensus. Most aspects are public and transparent. Users understand rules of engagement. They can also inspect the currencies. But consensus change requires all users to buy in. It is very difficult to alter these currencies. Because they are decentralized and digital native, they are detached from the financial system. They rely on market for price. Examples include Bitcoin, Litecoin, Dogecoin. My coin design, Bitflate, has a 7% inflation rate. It is set for the chain. Nodes are already running the software. It'll be difficult to change. With decentralization, user gets transparency, but need to live with price volatility.

Many people are conflating the need for a semi-centralized crypto like Libra and Facebook. It is absurd that we are ok with Tether/USDC but we don't want Libra. The Libra Association has members with reputation. If we need to regulate the Libra, we should discuss about regulations. Opposition to Libra comes from tainted Facebook reputation and public misunderstanding.


Why does the market need Tether/USDC? Semi-centralized crypto is a better alternative.

To be honest, Libra's troubles highlight the need for my coin design, Bitflate, a decentralized (somewhat) stablecoin. But crypto would be more successful if we have more choices.

I think many people see cryptocurrency purely about narratives. Bitcoin is digital gold. Fiat is government money. I suggest you see currencies from its design. The design is how these currencies will work. We can decide whether they fit our needs. We won't fall into bogus narrative and marketing that people throw around.

Each design comes with tradeoff. You can't get everything you want in one design. I come up with this model to help others understand where the designs fit in.

Fiat <==> Bitcoin
Centralized <==> Decentralized

Centralized <=> Pegged/Centralized Stablecoin (Tether, USDC) <=> Semi-centralized Stablecoin (Libra) <=> Decentralized Stablecoin (Bitflate) <=> Decentralized


Libra's main obstacle is regulators. They reflect the public opinion. From engineering and operational, I don't see a big challenge. After 10 years of cryptocurrency development, we have many options to chose. Libra is a digital ledger shared and audited by the Libra Association. It's not difficult to implement. It's probably easier to implement Libra than Bitcoin. Libra is ready to go.

Another criticism is Facebook started Libra. If Libra succeeds, other big companies will try to do their own. I'd be excited to see other big tech companies creating their own cryptocurrency. That's big corporations working for the people.


Yes, I'm promoting our coin, Bitflate. It has a 7% inflation rate. Our goal is to create a digital native, decentralized (somewhat) stablecoin. I think Libra and Bitflate are on the same boat. The market has not fully understood the needs for Libra and Bitflate. Bitflate is ahead of Libra. We're live on mainnet now.

I'm the developer of Bitflate, a crypto with constant inflation of 7%. I think, by standard definition, it's the ultimate shitcoin . But I believe it has a place in the market, ie, long-term value. And the reward schedule favors early adopters.

0: 50
1: 25
2: 12.5
3: 6.25 (end of halving)
4: 6.65 (start of inflation 7%)
5: 7.02
6: 7.51
7: 8.04
8: 8.60
9: 9.20
10: 9.85

Come join the Bitflate community: https://discord.gg/utnEyp8

I'm the developer of Bitflate and its community. We're currently on Unnamed Exchange. I think exchange doesn't matter much. If we're on a bad exchange, we can always switch and find a different one. I opt out of paying lots of fee for exchange listing. Your community matters. If your community leaders want to dump, you're screwed. More expensive exchange means it'll cost you more.

Exchange is a tool. It doesn't control your project. What matters is your passion in the project and building good relationship with your community.

Join Bitflate community. https://discord.gg/utnEyp8 

I wrote a post on Libra's recent development. I think the market is not ready for a coin like Libra. People don't understand its benefits. Regardless, Libra is a coin with potential.

Market is Not Ready for Libra
https://bitflate.org/post/2019/10/25/market-is-not-ready-for-libra.html

Original Post: https://bitflate.org/post/2019/10/25/market-is-not-ready-for-libra.html

Facebook CEO, Mark Zuckerberg, recently appeared in front of the United States Congress for a hearing about Libra cryptocurrency. The hearing lacked substance. Most congress members did not inquire deeply about Libra. They instead delved into smearing Facebook and its credibility. Both sides point fingers at each other. Crypto aficionados laments the lack of openness from regulators to new technologies. Regardless, there is deep misunderstanding and distrust between the public and the tech community.

Emerging markets of cryptocurrencies

Since the birth of Bitcoin, crypto builders have been developing the wrong solutions. The first generation of cryptocurrencies were hard forks of Bitcoin. They tried to create so called better versions of Bitcoin. Then there were efforts to generalize Bitcoin to blockchain technology. These trends continue. But we still end up with no cryptocurrency that we can use for everyday transactions.

It’s time to resolve the ideological debate between centralization and decentralization. Historical trends in technology told us that we swerve between these two polars. We cannot completely settle into one place. That would be utopia or dystopia. We went from mainframe (centralized) to personal computers (decentralized). Then we made the transition to cloud computing (centralized). There is now effort to decentralize the cloud computing stacks. The cycles never end.

Each cryptocurrency makes their own design tradeoff. It it useful to think about monies in a spectrum.



As we move from Centralization and Decentralization, we get different kinds of currencies. Each comes with their own advantage and disadvantage.

The potential of semi-centralized cryptocurrencies like Libra

Libra is a semi-centralized cryptocurrency. It is a better version of centralized cryptocurrencies like Tether or USDC. These coins are issued by a single entity. There is no way to audit their record. We rather have a stablecoin issued by an association of companies. The Libra Association has a governing charter. It is beneficial for consumers having member companies audit the Libra record. These member companies have competing agenda. They serve as check and balance for consumers.

Libra is too early

Unfortunately, Facebook initiated the Libra project. The company was involved in many data and privacy scandals. Consumer’s trust in Facebook is low. Another hurdle for Libra adoption is the public’s misunderstanding. Bitcoin is difficult to understand. Most people don’t have time to dive into its details. Its price fluctuates wildly. They don’t see benefits of cryptocurrencies. Bitcoin has as many critics as believers. The public has not accepted a crypto future. To normal people, Libra is another effort by big corporations to intrude and control their lives.

Filling the gap with Bitflate, a decentralized stablecoin

Bitflate is a cryptocurrency with constant inflation rate of 7%. The project’s goal is to create a digital native and decentralized stablecoin. By adding inflation, Bitflate price will not rise forever. It will have less price volatility. Bitflate can be a gentler introduction for people to the world of cryptocurrency.

Cryptocurrency Future

A cryptocurrency future is inevitable. There will be many cryptocurrencies. Each will have a different design and tradeoff. Instead of thinking about zero sum games, we need to look forward to this future. We will have greater financial freedom. We can choose the best currencies for our financial goals. Governments and companies will soon join this vision. At the end of the day, we the people, are in control.

Mining update.

Since last update, difficulty went up a lot, from 700K to 2.3M.

Block: 52.7k.
Coin supply: 2.6 million.

https://explorer.bitflate.org/

Bitflate (BFL) is now trading on Unnamed Exchange.

https://www.unnamed.exchange/Exchange?market=BFL_BTC

Join our discord community: https://discord.gg/utnEyp8

I have a different take. I think Libra is too early for its market. Semi-centralized money has a market. People don't understand it yet. Especially, it is tainted by Facebook reputation. However, I think Bitflate probably appears at the right time.

Fiat <==> Bitcoin
Centralized <==> Decentralized

Centralized <=> Pegged/Centralized Stablecoin (Tether, USDC) <=> Semi-centralized Stablecoin (Libra) <=> Decentralized Stablecoin (Bitflate) <=> Decentralized

When people are used to crypto with less price volatility, I think they'd understand Libra.

Bitflate mining update. We've reached 50k blocks!

Block: 50k.
Coin supply: 2.5 million.

https://explorer.bitflate.org/

Bitflate (BFL) is now trading on Unnamed Exchange.

https://www.unnamed.exchange/Exchange?market=BFL_BTC

Join our discord community: https://discord.gg/utnEyp8