How Divi Controls Inflation
It’s important to have this discussion because of the comparison between Divi and other masternode cryptocurrencies that promise huge ROIs. Most of these are scams to lure in fools who assume that producing massive numbers of coins in their nodes will make them money. What inevitably happens is that the price falls and their coins are worth next to nothing. You can produce all the coins you want, but if the value is zero, then they’re still not worth having.
Divi has a far different scenario. We do have a large number of coins produced in the first two years, and this is done to attract people to participate in our network, but there’s a lot more to Divi than just a high-ROI play. We’re solving a trillion-dollar problem by making crypto easier for non-technical people to use. Our one-click masternode installer is just the start of this, and our whitepaper and other article detail the many problems we’re solving.
We’ve built our MOCCI to make it easy for anyone to join in, regardless of technical skill. Our goal is to expand our network and ecosystem by including a diverse group of people, not just coders. When many people join in, the rewards per node inevitably go down, so producing more coins ensures a decent ROI for initial node owners. The current bear market in some ways plays in our favor. With most cryptos going sideways, a solid coin with a great team and good rewards make sense.
Is Inflation Bad?
That depends. We are trained to assume inflation is negative because that usually means a central government is printing more cash. The winners are bankers, and the losers are everyone else. However, in a cryptocurrency, the winners are the coin holders themselves who make up the network. While some of the minted coins go to a governance treasury, those are used to improve the value by adding new features or doing marketing. They don’t go into fancy yachts and mega-mansions for banksters. You can read about this subject here: Why Inflation Can Be Good
Inflation can be negative if too many masternode holders and stakers decide to sell their block rewards if there are not enough new people coming into the system. That’s why we have a five-tiered system. Gamifying it in this way, and paying substantial rewards at higher tiers, makes people want to save their DIVI to reach a higher tier. Alternatively, for stakers, they hope to save enough to be able to afford a copper masternode.
So What is the Projected Inflation Really?
I’m going to print here a chart, but keep in mind that the block rewards can change with our DVS system. Our community can vote to lower the block rewards in case the inflation rate seems too high. This scenario might happen if the crypto market continues on its bear run for a long time and we thus see more people leaving the market than entering. It could then be prudent to slow the rate of inflation, and then ramp it up later when the markets recover.
So take this chart as a suggested projection based on current knowledge and expect it to change based on community votes that keep Divi’s value moving in a positive direction.
You’ll also note that with this system we’ll be targeting over 5 billion DIVI in total circulation. What we’re trying to do is build a blockchain that, like Dash, is designed to support 50 million users. With 100 DIVI or more needed per person, we need at least that many, particularly if we’re targeting an eventual minimum DIVI valuation of $1 or 1 EURO per DIVI so that our payment amounts seem relatively familiar to people. Bitcoin is a big problem for the average math-impaired person.
Deflationary Pressures
So far, we’ve only talked about inflation, as reflected in the chart above.
LOST DIVI: Most cryptocurrencies have a built-in deflationary effect because so many people lose their coins by accident, such as by misplacing their private keys. Divi shouldn’t have that problem if we’re doing our jobs well. By reducing user errors and guiding people with excellent UX design to make good decisions, we don’t expect a lot of lost DIVI.
FEE BURNING: The main deflationary source with Divi comes from the fact that we burn all the transaction fees. Although our fees are low, this still can add up, and we can raise the fees if needed to create a balance. To be clear, this only applies to transaction fees. Other fees, such as named account registration, can be used as a funding source for our nodes or the Governance treasury and may be especially important once the block rewards are low. This structure solves a massive problem with Bitcoin, whereby eventually there are no block rewards, and miners only get transaction fees for running the network.
DUST CLEANUP: We also burn “dust” which is small portions of transactions that can sometimes get left over. Dust is so small that it doesn’t add up to much, however.
For further information, join the discussion in our forum here: https://forum.diviproject.org/t/the-big-100-roi-inflation-thread/255
Originally published at 142.93.136.59 on September 25, 2018.
