Bitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange.

I came across a thread from Ari Paul (@AriDavidPaul), a crypto analyst, about Bitcoin and Ethereum. He mentioned the valuation challenge with Ethereum. With Bitcoin, there’s a simple and compelling pitch: Bitcoin is digital gold. We can compare Bitcoin with gold. We can roughly derive Bitcoin’s valuation. Ethereum does not have a clear valuation model. Its supporters tout the DeFi potential. But DeFi is a vague concept. We don’t know how to quantify the DeFi market.

Altcoins have introduced a lot of new ideas to improve upon Bitcoin. They’re based on the assumption that Bitcoin is going to be money. Its problems are technical. That’s a false assumption. Bitcoin is a speculative asset, and possibly, a long-term and volatile Store of Value. Altcoins are failing because they assume Bitcoin is the future of money.

Bitcoin is not money

Bitcoin has made a lot of progress since the start in 2008. It has evolved from an experiment into a large and stable network. People’s views on Bitcoin vary. Prominent economists like Nouriel Roubini and Paul Krugman remain skeptical. I’ve devised a list of views ranging from disbelief to maximalism.

  • The Ideal Money
  • A Store of Value and a Medium of Exchange
  • A Store of Value
  • A Speculative Asset
  • A Digital Collectible
  • A Fun Experiment
  • Junk

Given Bitcoin’s progression since its start, many people believe Bitcoin would become the Ideal Money. It is currently trading somewhere between a Speculative Asset and a Store of Value. I think Bitcoin is a short-term speculative asset and a long-term Store of Value.

Bitcoin is going to have its third halving on May 2020 (from 12.5 to 6.25). Its price experienced a 50% drop during March 2012. This is the second-biggest price drop in Bitcoin’s trading history. As Bitcoin matures, its volatility has not gone down. I think volatility is an inherent property of Bitcoin due to the 21 million supply cap. Bitcoin will not be a medium of exchange.

Altcoins were too early

Crypto builders made a mistake. They assume that Bitcoin is money. They think that Bitcoin will eventually become a Medium of Exchange. People will use bitcoin to buy coffee. Therefore, they start working on Bitcoin’s improvements. They want to create “better” money. The problem is Bitcoin has not figured out how to become money. It’s unlikely that Bitcoin will become a Medium of Exchange. Volatility is an inherent property of Bitcoin.

Altcoin platforms like Ethereum don’t address this fundamental problem with Bitcoin. Instead, they try to generalize Bitcoin technology to blockchain. The most useful products of the Ethereum platform are pegged stablecoins. They are useful for trading bitcoins on centralized exchanges. Ethereum’s DeFi is an over-promised and under-delivered product.

The market needs to focus its attention on making a Medium of Exchange. I believe inflation is the missing ingredient.

Bitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange.