Bitflate is a cryptocurrency with constant inflation of 7% per year.
Bitcoin is the first cryptocurrency. It has limited supply of 21 million coins. Since its creation, Austrian economics is making a comeback. Bitcoin is pitched as digital gold and deflationary asset. The world of economic theories collide: Austrian versus Keynesian economics. The line of divide is clear. Crypto is Austrian. Fiat is Keynesian.
Is the world going to be clearly divided between digital and human? Are we going to swing between these two extremes? When I work on Bitflate, I often think about this problem. Most people dismiss the idea of inflating crypto. I am optimistic. I think inflating crypto can serve as medium of exchange.
Fiat requires coercion
When we discover crypto, we took the red pill and found new freedom. We quickly dismiss the existing monetary system as fake. We were somehow forced to use fiat by authorities. Therefore, inflation is an authority made phenomenon to subjugate us into using fiat. People tell me that an inflating crypto won’t work. It needs authority to force people to use it.
Then, we discover crypto is also fake. It requires us to come to consensus, to believe that it has value. Money, at its core, is a Ponzi scheme. Store of Value cryptocurrency like Bitcoin needs new investors to push its price up. Otherwise, halving supply is a slow death sentence. It happened in many altcoins. And it is happening in Litecoin.
Fiat with inflation over crypto with inflation
This is another type of feedback I got. Some people rather use a fiat issued by authority than a digital native and decentralized crypto with inflation. Maybe, we dislike inflation more than government. Bad economic policies sure can trigger hyperinflation. But inflation is a natural phenomenon. It happens in healthy economy. Low inflation triggers other problems.
I think a crypto with constant inflation is appealing. The most important aspect is predictability. We can find ways to avoid value loss. It is not an asset for long-term investment. But it has its own use cases.
Inflating crypto is for transaction
With deflationary crypto, we are rent-seeking and waiting for price to go up. Holders contribute nothing to price rise. We are discouraged from spending and investing in its ecosystem. The goal of inflating crypto is transaction, not Store of Value. It discourages HODL behavior. Because inflating crypto loses value over time, we are forced to put it to use. We will need to lend, spend, or invest the money.
Is the world either Austrian or Keynesian? Do we need to pick a side? I don’t think so. The world is full of contradictions. Cryptocurrency gives us monetary freedom. We are free to choose whatever money that fits our needs.
Read more about inflating crypto economic incentives.