Hi everyone,
The Bitflate community brings up a new idea: Hybrid Coins. They have the potential of making cryptocurrencies work for the payment use case.
Post:
https://bitflate.org/post/2020/07/17/hybrid-coins.htmlBitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange.
Bitflate is an inflationary cryptocurrency. Its inflation rate is 7% per year. People are often critical of this inflation rate. It is too high. It will make Bitflate coins worthless. The rate of 7% is intentional. Bitflate is not designed to be a Store of Value (SoV). Its goal is to be a Medium of Exchange. If we chose a low inflation rate (e.g. 1%), Bitflate supply will behave more like an SoV. It will have no place in the market. Bitcoin has already occupied the SoV use case. There is a nice feature of 7%: supply doubles every 10 years. Therefore, having a moderately high inflation rate, like 7%, is a clear differentiator.
Intellectuals, like Milton Friedman and John Nash, had discussed a constant inflation rate for money [1] [2]. The problem is how we would know the right inflation rate. The US Federal Reserve sets its inflation target at 2% [3]. Gold supply inflates around 1.5% [4].
Hybrid Coins (Created by @JacobBarnette)Cryptocurrencies can offer new options: hybrid coins. Using a sidechain, we can create a synthetic crypto. By mixing Bitcoin and Bitflate, we can create a coin with a supply inflation rate between 0 and 7%. Developers and engineers can get out of the business of picking an inflation rate. The market can decide the inflation rate. They will do this by issuing a sidechain coin with the backing of Bitcoin and Bitflate coins.
Here’s an example. In 2030, a financial provider wants to issue a coin that inflates at 3% per year. Let’s call this coin Bit3. For simplicity, let’s assume the Bitcoin supply is 21 million. It no longer inflates. Bitflate supply is 30 million. It inflates at 7% per year. In 2031, Bitflate supply will reach 33 million. At the time of this Bit3 issuance, 1 Bitcoin is equivalent to 1.4 Bitflate (30 million/21 million). If we mix ratio 1/1.4, we’d get a coin that has a supply inflation of 3.5%. To lower the inflation rate, we need to mix less Bitflate coins. In this case, the mix ratio is 1 Bitcoin and 1.2 Bitflate.
In 2040, Bitflate supply will reach 60 million. To issue a Bit3 coin, we’ll need a different mix. 1 Bitcoin is equivalent to 2.8 Bitflate. We’d need a mix ratio of 1 Bitcoin and 2.4 Bitflate. By using a mix of Bitcoin and Bitflate, the market can issue coins with any inflation rate between 0% and 7%. As builders, we no longer have the problem of deciding the inflation rate. The market can decide what it wants. The mixed coins with inflation are better suited for lending and staking. They will generate new businesses. They will create demand for Bitcoin transactions.
Hybrid coins is a novelty of cryptocurrencies. We no longer need central planning or complicated models for inflation targeting. The free market can decide what it wants.
[1] Friedman’s k-percent rule
[2] Ideal Money
[3] Inflation targeting
[4] Gold Supply Increase
Bitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange.
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But I think we will eventually come to this conclusion. It took me a while. Without inflation, we can't have a crypto that people can use for transactions. Bitcoin's problem with transactions is volatility. It's an inherent property of halving. No amount of liquidity can fix volatility. Inflation can reduce volatility. A cryptocurrency with inflation does not compete with Bitcoin. It can also be mixed with Bitcoin to create hybrid crypto. I started a project called Bitflate.
