Inflating Crypto and Inflating Fiat

[dnprock]

I discussed with others about inflating crypto and fiat. I wrote down some thoughts.

Original Post: https://bitflate.org/post/2019/11/14/inflating-crypto-and-inflating-fiat.html

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

Bitcoin is the first cryptocurrency. It has limited supply of 21 million coins. Since its creation, Austrian economics is making a comeback. Bitcoin is pitched as digital gold and deflationary asset. The world of economic theories collide: Austrian versus Keynesian economics. The line of divide is clear. Crypto is Austrian. Fiat is Keynesian.

Is the world going to be clearly divided between digital and human? Are we going to swing between these two extremes? When I work on Bitflate, I often think about this problem. Most people dismiss the idea of inflating crypto. I am optimistic. I think inflating crypto can serve as medium of exchange.

Fiat requires coercion

When we discover crypto, we took the red pill and found new freedom. We quickly dismiss the existing monetary system as fake. We were somehow forced to use fiat by authorities. Therefore, inflation is an authority made phenomenon to subjugate us into using fiat. People tell me that an inflating crypto won’t work. It needs authority to force people to use it.

Then, we discover crypto is also fake. It requires us to come to consensus, to believe that it has value. Money, at its core, is a Ponzi scheme. Store of Value cryptocurrency like Bitcoin needs new investors to push its price up. Otherwise, halving supply is a slow death sentence. It happened in many altcoins. And it is happening in Litecoin.

Fiat with inflation over crypto with inflation

This is another type of feedback I got. Some people rather use a fiat issued by authority than a digital native and decentralized crypto with inflation. Maybe, we dislike inflation more than government. Bad economic policies sure can trigger hyperinflation. But inflation is a natural phenomenon. It happens in healthy economy. Low inflation triggers other problems.

I think a crypto with constant inflation is appealing. The most important aspect is predictability. We can find ways to avoid value loss. It is not an asset for long-term investment. But it has its own use cases.

Inflating crypto is for transaction

With deflationary crypto, we are rent-seeking and waiting for price to go up. Holders contribute nothing to price rise. We are discouraged from spending and investing in its ecosystem. The goal of inflating crypto is transaction, not Store of Value. It discourages HODL behavior. Because inflating crypto loses value over time, we are forced to put it to use. We will need to lend, spend, or invest the money.

Is the world either Austrian or Keynesian? Do we need to pick a side? I don’t think so. The world is full of contradictions. Cryptocurrency gives us monetary freedom. We are free to choose whatever money that fits our needs.

Read more about inflating crypto economic incentives: https://bitflate.org/post/2019/11/01/economic-incentives-for-inflating-cryptocurrency.html.

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[exstasie]

The world of economic theories collide: Austrian versus Keynesian economics. The line of divide is clear. Crypto is Austrian. Fiat is Keynesian.

Cryptocurrency is totally programmable; it merely allows for trustlessness through decentralization. Bitcoin may be modeled after Austrian economics, but there is no reason all cryptocurrency must be.

Is the world going to be clearly divided between digital and human? Are we going to swing between these two extremes? When I work on Bitflate, I often think about this problem. Most people dismiss the idea of inflating crypto. I am optimistic. I think inflating crypto can serve as medium of exchange.

There are intelligent people who don't dismiss it at all. Even some folks like Peter Todd have said perpetual inflation would have been optimal for Bitcoin's security, let alone other considerations.

Then, we discover crypto is also fake. It requires us to come to consensus, to believe that it has value. Money, at its core, is a Ponzi scheme. Store of Value cryptocurrency like Bitcoin needs new investors to push its price up. Otherwise, halving supply is a slow death sentence. It happened in many altcoins. And it is happening in Litecoin.

That's how all money works, including failing fiat currencies. There needs to be popular confidence that money will store value, otherwise people won't demand/accept it and holders will dump for whatever they can.

I think a crypto with constant inflation is appealing. The most important aspect is predictability.

That's the great thing about cryptocurrency: predictable economic policy. I agree about that. High/uncapped inflation will make it unattractive for speculative investment though, which is a source of adoption in and of itself.

[dnprock]

That's the great thing about cryptocurrency: predictable economic policy. I agree about that. High/uncapped inflation will make it unattractive for speculative investment though, which is a source of adoption in and of itself.

I think there is speculation for inflationary asset. Inflating crypto may inflate slower than its demand. I design Bitflate. Although it has constant inflation of 7%, it is still limited by its inflation rate. The reward schedule 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)

Reward does 4 halvings like Bitcoin before inflation starts. Supply reaches 31 million in 10 years. I wrote about economic incentives for inflating crypto here.

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

[cotton ball]

Fiat currency have big chance to inflation than using bitcoin as currency payment, many people keep use cash money or fiat currency because only available payment right now, when they are trying with bitcoin and altcoin they will really know how bitcoin as currency payment can increase their money assets without have inflation.

[dnprock]

Fiat currency have big chance to inflation than using bitcoin as currency payment, many people keep use cash money or fiat currency because only available payment right now, when they are trying with bitcoin and altcoin they will really know how bitcoin as currency payment can increase their money assets without have inflation.

I think people don't use bitcoin for transaction because of its volatility. Near the end of 2019, bitcoin is widespread and accessible. Yet people have not used it outside of speculative investment. Bitcoin design and feature make it a Store of Value. I think we need an inflating crypto. Many crypto users understands the issue. But they don't see how to incorporate inflation into crypto.

[exstasie]

That's the great thing about cryptocurrency: predictable economic policy. I agree about that. High/uncapped inflation will make it unattractive for speculative investment though, which is a source of adoption in and of itself.

I think there is speculation for inflationary asset. Inflating crypto may inflate slower than its demand. I design Bitflate. Although it has constant inflation of 7%, it is still limited by its inflation rate.

All currencies are limited by their inflation rate, including the US dollar. That doesn't make it any more attractive as a speculative vehicle if the inflation rate is particularly high. 7% is very high even compared the USD. I don't see speculators lining up to buy something that is being devalued so quickly.

It's not that you need speculators but they can massively help to bootstrap adoption. Bitcoin was totally bootstrapped that way.

[dnprock]

All currencies are limited by their inflation rate, including the US dollar. That doesn't make it any more attractive as a speculative vehicle if the inflation rate is particularly high. 7% is very high even compared the USD. I don't see speculators lining up to buy something that is being devalued so quickly.

It's not that you need speculators but they can massively help to bootstrap adoption. Bitcoin was totally bootstrapped that way.

There's a forex trading market where people speculate on currency value. If you take the existing USD base and inflate 7%, that is high. But with a new inflating crypto, we start from 0. Here's the reward schedule I design.

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)

Even at 7%, supply reaches 31 million coins in 10 years. And 100 million coins in almost 30 years. 7% is a few points higher than target inflation rate for USD. But it is lower than many other fiat currencies.

[tonyvo2017]

in fact, the "deflation" is just the illusion of the idols bitcoin. The fact that miners have fewer and fewer rewards makes the price of bitcoin grow higher, which is just one of many manipulation plans of many organizations.
Therefore, for Bitflat, not mining bitflat will not affect the surrounding economy, so the value of bitcoin should not be equated as such.
So this is just a hypothesis and the price increase is due to someone pushing the price high, bitcoin is completely incapable of raising its price.
Please, be alert and do not rely on such big traps. I always believed in fiat money, it was really logical and had no manipulation.

[dnprock]

I always believed in fiat money, it was really logical and had no manipulation.

This comment makes me laugh. At least, someone is a degree sillier than me in this forum. But then I realize I have some fiat money.

I think an inflating crypto is a good alternative to inflating fiat. It's true if your fiat money happens to be Venezuela bolivar.

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

[naikturun]

Indeed since Bitcoin came out the first time, we see that the price continues to rise from year to year some people use Bitcoin or crypto to take advantage of trading and investing for the long term, and also people use it To avoid inflation I think this is the future because digital use already happens where, and also do not need to use new money to make the price rise because of the limited amount then, if the demand in the market more and more Then the price will rise.
I just add a little, about what you convey.

[FanEagle]

Fiat currency have big chance to inflation than using bitcoin as currency payment, many people keep use cash money or fiat currency because only available payment right now, when they are trying with bitcoin and altcoin they will really know how bitcoin as currency payment can increase their money assets without have inflation.

Everyone is beginning to understand that fiat has been the real problem of inflation and not only inflation alone, the main payment system that has really made a lot of people not to have control and freedom over their own money, but as time passes by, they will learn to also start understand why they should use bitcoin, and how bitcoin can solve the inflation problem, both the government and individual users and even financial institutions.

For the asset aspect, I think that people understand this more than you can imagine and that is why you see those that already knows about bitcoin begin to hold bitcoin in their wallet with the believe that it could increase their holding, which I think that there is no balance yet between holding it as asset and using it as payment.

[Fundamentals Of]

Fiat currency have big chance to inflation than using bitcoin as currency payment, many people keep use cash money or fiat currency because only available payment right now, when they are trying with bitcoin and altcoin they will really know how bitcoin as currency payment can increase their money assets without have inflation.

Everyone is beginning to understand that fiat has been the real problem of inflation and not only inflation alone, the main payment system that has really made a lot of people not to have control and freedom over their own money, but as time passes by, they will learn to also start understand why they should use bitcoin, and how bitcoin can solve the inflation problem, both the government and individual users and even financial institutions.

The problem of fiat is not inflation. Inflation is increase in the prices of goods and services. Inflating means increasing. Fiat is not increasing in value. It is deflating. It loses value over time. Attached to the problem of inflating prices of goods and services is the deflating value of fiat, which will consequently demand a lot from the consumers. They need to spend more and more fiat in order to buy the same amount of goods and services. Bitcoin will counter this because the value of Bitcoin is not deflating but inflating.

[gantez]

But they don't see how to incorporate inflation into crypto.

That exactly what I have been thinking. How is crypto going under the name inflation. Inflation is known to fiat just as volatility is known to crypto, they are both different things and operate differently. How will it be that bitcoin will suffer inflation when it is not really affected by a policy. Example, China banning crypto/ico in 2017 had no effect on bitcoin, that year was ATH for bitcoin. I think decentralization is one factor against inflation of crypto.

[dnprock]

But they don't see how to incorporate inflation into crypto.

That exactly what I have been thinking. How is crypto going under the name inflation. Inflation is known to fiat just as volatility is known to crypto, they are both different things and operate differently. How will it be that bitcoin will suffer inflation when it is not really affected by a policy. Example, China banning crypto/ico in 2017 had no effect on bitcoin, that year was ATH for bitcoin. I think decentralization is one factor against inflation of crypto.

I come up with a way to incorporate inflation into crypto. The chain is Bitflate. It does reward halving for the first 4 halvings. Then inflation starts. This way, early adopters are rewarded. The chain inflation is never more than 7%. There isn't a flood of new coins. I think it is a way to bootstrap an inflating crypto.

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)

Even though supply inflates. It is still limited by its inflation. Supply reaches 31 million coins in 10 years. Bitflate is still early and experimental.

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