For those placing their hard earned cash into potential and risky investments across the new cryptocurrency exchange market, there is a wide birth of businesses that are creating networks with an even wider variety of token supply or infinite token supply. It can be exhausting and nearly impossible to sift through hundreds of potentially captivating and groundbreaking decentralized projects. Before engaging with the prospect of purchasing into a new crypto or crypto-related business, it is important to understand that a majority of these have crypto allocations that can have significant long term problems. These cryptocurrencies, and practically all digital currency do not have the same economic or financial models of Fiat currency. We should also acknowledge that these tokens are not the native currency of a nation state, so they are not necessarily backed by substantial entities.
Typically speaking, businesses with an unlimited token supply are subject to multiple examples of inflation. One of the biggest issues with inflation, which is similar to issues with fiat currency, is that it can potentially devalue the existing supply. This in effect may devalue a current members’ economic status on the crypto market, or render them incapable of future purchases. This is a negative since the constant ability to buy and sell can lead to economic growth.
Inflation within an unlimited token cap also makes it difficult for a potential buyer to estimate the risks of a cryptocurrency investment. In cases where a token has an unlimited cap, fluctuations in price occur and tend to be violent compared to those with a limited supply.
While fiat currency and unlimited token supply share some of the same problems relating to inflation, there is reason to suggest that unlimited token supply is potentially more disruptive because of its distribution capabilities.
Fiat Currency can be duplicated as much as a Government may need. However, the rate of distributing this new supply is much slower than their unlimited token counterparts. Because fiat exists as paper in the open real life market, it could take months for the currency to exchange hands and filter through an economy, which can create stabilization.
In cryptocurrency settings, a new supply can be distributed to thousands of wallets instantly.
Slow inflation has some stability in the physical markets, but rapid inflation on the level of cryptocurrency is simply not sustainable if created by developers that care more about their technology than economic well-being on a global scale.
If a blockchian developer releases a new token or coin supply over a period of time, it could potentially have resemblance to fiat currency.
This is not something we should strive for, since day trading in cryptocurrency is valued against the fiat markets. Trying to emulate fiat currency will only infect cryptocurrency trading and the multiple exchanges it resides on.
The Nation State And Cryptocurrency Organizations
Inflation is just one economic model that currently does not work for cryptocurrency markets. It is important to point out that this article does not factor in more complicated payments such as loans. We are not including this because cryptocurrency has not reached that level of complexity yet. When it does, the models for token supply may change.
The biggest concern for Decentralized Organizations and the unlimited token supply that exists come from Nation State laws.
The protocols that exist on a blockchain network, as well as how a “Miner” is compensated has strong similarity to a monetary policy.
Countries have their own monetary policy for their native fiat currency, and a majority don’t completely approve of borderless policy because it infringes on a countries particular economic interest or domestic markets. Beyond that, countries must meet their own type of consensus. If a country must meet their own structured financial consensus and the consensus of a borderless currency, then there is a good chance of diplomatic confusion.
A good example is the Euro.
However, the opposing argument might be that a blockchain protocol could make amendments in accordance with a more unified borderless currency, something many nations could agree on for better economic flow.
It is important to understand that unlimited token/coin supply is very new technologically compared to fiat currency.
That is not to say that unlimited token supply and managed inflation is not viable, but at this early stage, limited token supply has less volatility in a market that is still learning.
NewCurr’s Reasoning On Its Own Network
We want to explain why we personally chose a limited coin supply, rather than an infinite supply.
Our blockchain, and its proof of information protocol, is being built on the basis that we handle the content of information as a primary objective, not as a product of a currency. Therefore, it is logical to limit the coins for this concept, because future members/node rewards are derived from their commitment to valid information and its applications on the network. We believe information, and its transparency, has a larger value within the ecosystem. This works effectively in our network because altruistic behaviors, whether made in good faith or for monetary gain, increases each coin and its value.
We also believe that our coin can work more efficiently in this system as an access token/membership value. This goes beyond the idea of cryptocurrency resembling fiat, because you’re not purchasing a Pallas Coin just for potentially gaining future value, but to access the membership of multiple decentralized applications in partnership with us. It can also be used as an access key for our future search engine. This engine manifests from the circulation of information that was created by our architects and members. AND all of this data must being transparent, accessible, and consent structured. Pallas Coin or Token is simply the facilitator for this process.
In short, a limited coin supply is the best measure at NewCurr because we’re utilizing cryptocurrency as a unit of accessibility, NOT as general currency. In the future, financial speculation from outside viewers may not just arrive from our limited coin supply and amount of traffic, but from the actual products and services we distribute that attain real world value.
The intention of this article is to invoke thought about the economic models currently in play within blockchain networks.
We do not rule out unlimited token supply as a future economic model. For now, in this stage of this new technology, limited token supply is a much safer buy because its value hinges on the products and services that are offered.
Follow us on Twitter at NewCurr.
We discussed and decided (in our whitepaper) that there should be a limit of 130 million coins in the Pallas-Athena Blockchain. READ WHY @ https://t.co/cdZxK02cgP #blockchains #cryptocurrency #cryptocurrencynews #TechNews #VitalikButerin #Ethereum #Tech https://t.co/gSUi81eCiL
— NewCurr (@NewCurr) April 2, 2018
Written by Jonah Blake, Founder and Managing Member of NewCurr and DebtMet.
Prepared and edited by Andrew Carroll, Journalism MA in DIT.