Inflationary ecosystems in Cryptocurrencies
An inflationary ecosystem in crypto is one where a protocol is able to print more native tokens continuously over time. Some crypto projects have a predefined amount of tokens that can be minted within a specified time period — other projects do not have such limitations.
For example, crypto protocols like EOS operate on an inflationary model, where more EOS is minted into circulation all the time, without a limit.
Does this model sound familiar? In fact, it’s not that different from how governments manage fiat currency. For instance, the US government, according to Pantera Capital CEO Dan Morehead, “printed more money in June (2020) than in the first two centuries after its founding.”
So you may be thinking “If we need more money or tokens to solve our problems, shouldn’t we print more”? The answer is a resounding NO — here’s why.
Impact of inflationary ecosystem on users
As token value reduces, users are the most impacted:
- Firstly, the intrinsic valuation of your tokens drops.
- When the value of a token reduces, the people’s interest in purchasing it drops, leading to a situation where supply exceeds demand — further leading to price drops; for long-term holders, this compounds into huge monetary losses.
- Over time, the protocol team may be forced to discontinue the project altogether and render your tokens useless.
It’s important to consider prices, charts, and the protocol to which a token belongs before investing in it. However, another important factor to consider is whether the token you’re buying is inflationary or deflationary.
TribeOne is proud to boast a deflationary model ecosystem for our native token $HAKA — follow this space for more details on the same!
TribeOne is the world’s first AI-powered decentralized financial platform backed with RAROC (Risk-Adjusted Returns On Crypto) technology. TribeOne is an NFT, lending, borrowing, saving, and credit risk platform that offers a seamless experience; to all the users through its innovative consumer-centric products. The platform will break barriers in the traditional financial ecosystem and revolutionize the DeFi sphere as a whole. Providing the community with a platform to lend, borrow and invest in crypto assets and NFTs. Therefore, offering an unconventional experience for all.