Why Cryptocurrency Inflation Can be Good-Divi’s Economic Model
Since the invention of Bitcoin, one of the qualities that attracted investors and cryptocurrency users was the fact that Bitcoin’s supply is limited to 21 million. (Total current circulating supply is ~16 million.) Once all the bitcoins have been mined, it will have to change to a transaction fee model to pay miners to keep growing and securing the blockchain. Some analysts say this fee model could be insufficient for miners to be kept financially solvent. Another widely accepted theory is that the Bitcoin’s price and the increased amount of transactions per block (meaning more total fees per block) will counter the fact that there will be no block reward. Still others say that transaction fees will be high due to high mining energy operation costs. But what if we had another energy efficient economic model that would never needs to rely on transaction fees?
Healthy inflation, and who benefits?
When is inflation bad? It’s when the increasing supply rate of the currency is too high compared to the demand, decreasing its value. Consequently the products and services bought with that currency will increase in price even though the intrinsic value will remain the same. This is of course a bad thing and fiat users suffer from this because THEY are NOT benefiting from inflation.
So if they’re not benefit, who is? Banks and Governments are printing money for themselves. They control where and to whom this new money is going and big surprise! Most of the time it’s not going to end in the pockets of regular people.
DIVI on the other hand, is a fourth generation cryptocurrency with unique aspects that will benefit from healthy inflation. First of all, it uses a Proof of Stake (Pos) consensus algorithm, which is energy efficient (as opposed to Proof of Work (PoW) like Bitcoin, which is an energy hog.) With PoS a person can “mine” depending on how many coins they hold in a masternode or Divi wallet. Stakeholders validate new blocks by utilizing their share of coins on the network, and this is done just by leaving their encrypted wallet connected to the Divi network, either on a home computer or on a cloud server. The schedule of new minted coins is a decreasing rate of inflation:
- 2018–19: 12 ½ coins minted per new block
- 2020–21: 10 ½
- 2022–23: 8 ½
- 2024+: 6 ½
New blocks are minted every sixty seconds. But, this rate can be changed by Divi’s governance system, which I’ll cover later in the article.
Divi is planning to release a smartphone wallet that will allow you to continue staking in the background, even though your cell phone may not always be on or connected to the network. Of course if you’re not connected your reward amount will be lower. There are now nearly three billion smartphones, thus creating the potential to build a huge community. It should go without saying that the bigger the community, the more demand the coin has in the market.
Returning to the topic of inflation in Divi’s ecosystem, the community, as opposed to banks, will benefit from inflation as they are the ones that are minting new coins. If the coin price goes down because of inflation, it will be made up for the fact that you have more of them!
Blockchain Governance and Control
DIVI is planning to build into the system the world’s most advanced governance system. The masternode holders will thus be able to vote to change this variable rate of inflation if they find that the community isn’t benefiting from the current settings. Divi’s system will also be the first that’s Democratic, rather than Technocratic, because ordinary people, through the one-click masternode setup, will be able to own a masternode.
Conclusion: Inflation isn’t necessarily bad
Because of most peoples’ experience with news media reports about inflation being a problem, people often think that it’s automatically bad. They may also wrongly come to the conclusion that it will be increasing exponentially over time. If DIVI has enough demand then no matter what, the coin price will go up even with a increasing inflation rate. Also, healthily controlled inflation has another huge advantage, which is that it helps with price stabilization, making it better for world-wide adoption.