Smart Coin Amount Cap — Transactions that are destroyed in Telos

This is Part 2 of explaining about Telos Coins Infinite Supply and Coin Cap. You can read part 1 here: https://medium.com/@samuli.holopainen1/does-infinite-supply-of-telos-coins-also-mean-infinite-inflation-c93ed5e18ba1

Telos does not have infinite supply of coins in practice.

In Part 1 I was explaining how infinite supply of Telos coins is not such a bad thing as it seems.
However, Telos will not actually have infinite amount of coins, but there is a cap to the amount of Telos coins that can exist. This cap is however not clearly defined, but is a flexible cap that automatically balances itself reacting to different situations:

Telos transaction fee

You might have noticed if you have ever transferred any Telos to somewhere, that actual amount you need to pay is actually bit higher than the amount you are transferring. This is because you have to pay transaction fee when ever you send some Telos coins.

This transaction fee is not unique to Telos, and as far as I know, every other coin has it too, including BitCoins.

However, in Bitcoins case the transaction fee goes to miners, while in Telos coins case, this transaction fee is destroyed from circulation.

This means that more transactions are done, more coins will be destroyed. Therefore, while new coins are coming all the time, some of the old coins are at same time being destroyed. And eventually there will come something I call Point of Balance, which is a situation where there will come same amount of new coins in a day, as are being destroyed in same day.

At that point you can say Telos have basically reached the maximum amount of coins it can have, as although new coins will keep coming, the total amount of coins wont increase, as same amount of coins is being destroyed at same time.

Point of Balance is flexible

What is interesting in this system is, that this point of balance is actually flexible. Depending upon how people use their Telos, depends also where the Point of Balance will happen, and naturally when spending behavior changes, so will Point of Balance as well.

Lets take example. Suppose no one sells any of their Telos coins for 10 years, but everyone just keep keeping them and getting more. At that point there will be roughly 1 billion coins existing, and it is likely that just buying a toothbrush might cost 100K telos, since everyone has more than enough Telos Coins in their wallets.

So now people start buying lots of toothbrushes, and lots of transactions happen. What happens now is, that lots of coins get destroyed. Perhaps enough that while 288k new coins are coming each day, there might be more coins being destroyed than that, meaning that amount of coins would actually be getting less every day, until the point of balance is reached.

On another example B people keep using Telos coins for their everyday needs right from beginning at normal rate. Some coins would get destroyed each day, but new coins would be coming at same time.

What would happen would be that amount of coins would increase every day, but amount would increase less and less every day, as more coins there would be existing, more transactions would happen, and more coins would be destroyed.

Eventually situation would go to point where closer and closer to the amount of new coins would be destroyed every day, until eventually the amount would daily increase only by 10..5..2..1..0 coins. And then we be at the Point of Balance.

Point of Balance is like having Lottery every minute

One of the interesting things about reaching point of balance is, that coins value will basically stay more stable at that point since amount of coins would stay about same. And while currently if you get new coins through running masternodes or staking, while you are getting more Telos coins, you are not necessarily getting any more value, since basically when new Telos coins are currently created, it increases the total amount of Telos coins, which basically means that those new coins are increasing the inflation.

However, with Point of Balance reached, situation is different. Since at that point new coins dont increase the inflation anymore as total amount of coins stays the same. Therefore, every time you receive new coins in Point of Balance situation, is like winning in some small lottery.

To understand this idea better. Lets suppose price of Telos would be same as Bitcoin is now (this could well be the situation 10 years later if some of the positive speculations about cryptocoins become true), then think about if there would today be 200 bitcoins randomly given to someone every minute. Now that would be pretty nice to notice one morning that your wallet have just received even just 20 bitcoins.

And this is basically what happens with Telos when Point of Balance is reached. Although naturally how exciting that lottery is, depends upon the price of Telos coin.

Another perspective is the savings account perspective. When Point of Balance is reached, you can simply keep Telos in your wallet and year later come and look how many Telos there are. You might have gained some nice interest to your money, more than you would get in savings account, just by keeping money in your wallet.

I trust you now understand how Telos supply works better, understand what infinite coins supply means to the price as well as understand how there is a cap to the amount of Telos coins through transaction fees being destroyed, and how those two put together make an interesting little flexible cap mechanism and lottery.

If you got curious about Telos Coin,

you might like to read another article of mine about it: https://medium.com/@samuli.holopainen1/3-main-fears-that-investors-have-towards-new-cryptocurrencies-and-does-telos-coin-pass-them-8a9ad0df70fe

Or maybe read MightyMickes short article about it on Steemit:
https://steemit.com/cryptocurrency/@mightymicke/transcendence-blockchain-telos-opportunity-for-safe-investment-and-passive-income