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Cryptocurrency-Limited OR Unlimited-which is best? Let's find out

Cryptocurrency-Limited Or Unlimited


 Cryptocurrency are launched with fixed/limited or infinite/Unlimited supply, this means that when a crypto is launched in the market in can be mined in limited numbers like Bitcoin or it can be mined in unlimited numbers like Doge coin.

The main feature of limited coins or tokens is that, they are deflationary in nature on the other hand unlimited digital currencies have a constant flow of new coins and tokens added to their ecosystem which makes them inflationary. 

Talking about inflation, it has been always seen as a negative aspect in case of money because it makes money cheaper. In this article we will understand how unlimited and limited cryptocurrency will impact your investment. 

Unlimited Cryptocurrency-Inflation

Inflation is not a very big or complex topic to understand, the concept of inflation is pretty simple-anything (here the value of cryptos) loses its value when more money enters the ecosystem. 

One of the best example of inflation can be seen in the price of milk. In 1913, one gallon of milk costed 36 cents, a century later in 2013, a gallon of milk costed $3.53, which is nearly 10 times higher. The cost of producing milk hasn't gotten more expensive it is just that the $USD is less valuable than it was 100 years ago. In cryptocurrency ecosystem, the protocols with unlimited supply play the roles of central banks and have their own rule for issuing the new coins.

The most popular cryptocurrency with the unlimited supply is Ethereum, However the developers of ETH issue a fixed amount of ETHER per year. It has inflation but in practice, the more ETH is mined lower goes the inflation. The reason behind this is, Ethereum developers decided to issue fixed numbers of coins every year so the same 18 million coins are mined per year irrespective of the total supply. 

When you will look into the math it will appear more simple than it sounds. When the supply of ETH is at 100 million and 18 million coins are mined. the inflation is 18% after few years when the supply of Ethereum will be at 200 million the same 18 million coins will be mined resulting in just 9% inflation. 

Limited Cryptocurrency-Deflation

Deflation is just opposite of inflation. It means that the value of money/asset (here crypto) will gain value over a circulation in a period of time

This doesn't mean that people should just focus on saving money, people holding their assets for long will affect the economy of a country in a negative way. If consumers will focus on saving money for too long their will be less circulation of money in the active circulation. This will automatically weaken the economy resulting in increase of unemployment as the financial system would not be able to support the business. Consumers could even wait for the low price to get even lower which cause the "deflation death spiral" in this case the economy will shatter completely.

The best example of deflation is japan, it was even called "deflation monster". Back in the 90's, Japan faced a massive problem of deflation when goods were oversupplied over the demand of Japan's population. The situation was so bad that they even paid people to take loans to fix the problem. 

In the case of Cryptocurrency almost all of them are set to have a limited supply few like Ethereum and Dogecoin are exception. The best example of limited cryptocurrency is Bitcoin which was launched with a limited supply 21 million coins. At this moment close to 90% of the Bitcoins are already mined. 

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 What will happen if all the Bitcoins are mined?

The most interesting question to be asked is what happens when there are no Bitcoins left?
The answer to which is although it is estimated that the last Bitcoin will be mined in 2140, nothing really big is going to happen. On the other hand according to Satoshi Nakamoto, known for inventing Bitcoin and implementing the first blockchain predicted that the source of dividends for miners will be changed from producing new bitcoins to receiving rewards in fees for transactions. 

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Conclusion

Limited and unlimited supply of cryptocurrency have different impact on the consumer and economy. Inflation in one hand is healthy for economy but forces consumers to overspend, Deflation on the other hand is good for the consumer but weakens the economy and businesses. 

In the ecosystem of cryptocurrencies fixed supply forces the price of the asset to increase at constant rate, in the case of unlimited cryptos, infinite supply could lead to high inflation rate, but developers design the overall system in the way that it is never really unlimited. 

  

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