Explaining Infinicoin’s Monetary Policy
In our last blog post, we announced the details for the upcoming airdrop and airgrab of Infinicoin (INF), the virtual currency that powers the Infiniverse economy. We also touched on the fact that INF is not designed for profit or speculation, but rather to be a stable store of value for the Infiniverse economy. Several users have had questions about why we need such a monetary policy and even why we need our own token. In this article, we hope to clear up any concerns about the design of Infinicoin.
At Infiniverse we are not just building an augmented reality platform and marketplace, but an entire virtual world economy for digital assets, land, rents, jobs and businesses. We are convinced that some form of stability is required to ensure the long-term success and growth of that economy, just as it is required for real-world economies. If we were to use a highly volatile currency such as Bitcoin or EOS for Infiniverse, it would be chaotic.
Marketplace sellers and businesses would constantly need to adjust their prices, as a change in the value of EOS would not reflect a change in the utility of digital assets in Infiniverse. Marketplace buyers would always need to consider the current value of EOS before making purchasing decisions. Businesses that set up shop in Infiniverse would need to accept foreign-exchange risk, an extra uncertainty to consider before opening their business. Instead, we want them to feel safe to invest their time and resources into building a successful business on top of Infiniverse.
Why not just use a stablecoin?
Just as a small country needs their own currency to control monetary policy in their economy, we need the same for ours. Using a stablecoin linked to the US dollar or even a basket of major fiat currencies, would not fit that purpose. The US dollar provides a stable store of value for the US economy. That is, $100 should feel to be worth the same amount of goods and services in several months time, or even a couple of years time (minus a small amount of inflation). INF on the other hand, provides a stable store of value for the Infiniverse economy. 100 INF should provide a similar amount of digital goods and services over time.
However, let us examine the outcome if we had instead used a USD stablecoin as our currency. If the utility of goods and services in the Infiniverse economy doubles, then someone holding USD-linked coins would now be able to buy half as much land/digital assets as before (assuming utility in the US economy remains constant). On the other hand, since they are holding INF, and our monetary policy is designed to provide a stable store of value for the Infiniverse economy, their INF holdings will continue to be worth a similar amount of land and digital assets over time.
How does the monetary policy work?
The monetary policy functions purely by measuring internal prices in the economy, and adjusting the token supply in response. An increase in average prices on the Infiniverse marketplace will lead to a decrease in the supply of Infinicoin, while a decrease in prices on the marketplace will lead to an increase in the supply of Infinicoin. Therefore, average INF prices of goods and services on the marketplace should remain relatively stable. While new INF can always be issued, yearly land registration fees provide a constant source of INF that can be burned when the token supply needs to be reduced.
In order to maintain the integrity and decentralization of the system, token supply adjustments should be done automatically via an algorithm running on the smart contract, rather than using discretionary monetary policy. However, the token supply adjustments will not take effect until after a period of sustained marketplace activity to measure against. Nonetheless, we strive to provide a stable economy for users as soon as possible. You can read about exactly how the monetary policy works in greater detail in our whitepaper.
What about investors?
As a result of Infinicoin’s monetary policy, holding INF is not designed to be an attractive undertaking for investors or to fuel speculation. However, in the future we may provide a second token which is designed for profit, in order to raise funds and increase decentralization. This token would award holders a proportional amount of the newly-issued INF from the algorithmic monetary policy. However, navigating the legal issues involved in issuing a token designed for profit would take a significant amount of time.
On the other hand, if you wish to earn money with the Infiniverse platform, there are a number of opportunities, but they substantially involve your own effort. In our next blog post, we will expand upon all the ways in which users will be able to earn Infinicoin by contributing to the Infiniverse economy.
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