Bitflate is a cryptocurrency with a constant inflation of 7% per year.
Skeptic: Your Bitflate coin supply inflates. It’ll devalue people’s bag of money. Nobody will want to hold it.
Me: Inflation creates more coins. More people will adopt it. That’s how it will retain value.
Skeptic: That’s a ridiculous idea. It won’t work.
Me: Yeah, it is kinda weird. But it may work.
Everyone got into crypto because they don’t like fiat inflation. Bitcoin is the pioneer. It has limited supply, really limited, eventually zero supply. This is more limited than gold which has about 1% inflation. Inflation has become a touchy subject in crypto. Most people reject it.
I think this rejection of inflation hinders crypto adoption. This is the reason why I decided to create Bitflate, a cryptocurrency with 7% per year inflation. Crypto enthusiasts question me about the incentives for people to adopt Bitflate. I thought a lot about these. Candidates are the technology, the marketing, the community, the belief, the hope, the opposite of Austrian economics, the solution to cryptocurrency adoption. But I think none of these are the incentives. Inflation is about economics. The answers are economic.
For Bitflate cryptocurrency, I see two incentives: Bitflate Reward System and Bitflate Adoption Rate.
Bitflate Reward System
Although Bitflate chain has inflation, I design a reward system to give more coins to early adopters. The idea is to encourage people to hold on to their coins and create some restriction of supply. I think this create incentives to hold Bitflate coins early on. This way people with coins don’t dump them. The reward system is as follows:
- 0: 50 (supply: 10 million)
- 1: 25 (supply: 15 million)
- 2: 12.5
- 3: 6.25 (end of halving)
- 4: 6.56 (start of inflation 7%)
- 5: 7.02
- 6: 7.51
- 7: 8.04
- 8: 8.60
- 9: 9.20
- 10: 9.85 (supply: 31 million)
For the first 3 halvings, Biflate follows the same reward schedule as Bitcoin. But it will switch to inflation after 4 halvings. I think the reward schedule create incentives to hold Bitflate coins early on before Bitflate reaches critical mass. Even with inflation, it will take 10 years for supply to reach 31 million coins.
Bitflate Adoption Rate
After the chain passes its 4th halving, reward will start to increase. There is no supply restriction. Bitflate survival is dependent on adoption rate. There are now 3 possible scenarios:
- If adoption rate is around 7%, the coin will retain its value.
- If adoption rate is greater than 7%, the coin may gain more value.
- If adoption rate is less than 7%, the coin will decline and die.
Long-term Transaction Coin
If Bitflate manages to survive for many years, its adoption will eventually plateau. This is inevitable. At that point, I’m not sure what will happen. People don’t have incentive to hold it. Does it implode and collapse? I think we may be able to develop interest banking to prevent value loss. Because it is digital, it could be easier to manage than inflationary fiat currencies. It may become a transaction coin. Businesses may accept it.
Bitflate is experimental
Despite the two incentives, Bitflate can fail. If Bitflate fails to reach critical mass, it may implode. Price and hashrate will crash. Users may need more than just these two incentives. Historically, authorities force people to use whatever inflationary currencies they issue. On the other hand, people like deflationary assets like real estate, gold, Bitcoin. Bitflate is a new digital alternative. It is better than inflationary fiat. But it may not provide enough incentives.