Bitcoin's Inflation Rate Will Drop Below 2 Percent

in bitcoin •  3 months ago

Bitcoin's inflation rate will be lower than the US dollar inflation rate in 2020


Image source: pixabay - Alicja

If you had stored your money as US dollars in the bank back then 40 years ago (1980s), the same item you paid $100 for would have cost you $386 today. You thought you worked hard in your younger days, only to realize whatever you earned is no longer enough to afford today's items. This is the main issue with fiat currencies.

I chanced upon an article written by Paul Krugman titled, "Transaction Costs and Tethers: Why I’m a Crypto Skeptic" on NYTimes. The article has left me in quite a bit of a shock about what Krugman says.

Born in 1953, Krugman is a grandfather of our time, having awarded the highest awards in Economics, and publishing books on Economics. His recent article could leave with quite a sour aftertaste, but nevertheless I am reading it to see what Grandpa has to say.

Krugman believes that today's fiat currencies will serve all purpose of our economy and that cryptocurrencies are redundant. He calls "cryptocurrency enthusiasts are effectively celebrating the use of cutting-edge technology to set the monetary system back 300 years".


Image source: pixabay - skeeze

Having a traditional mindset and total trust on the banking system, Krugman faithfully trusts that banks and governments would keep their reputation, and thus "exercise restraint" on the abuse of fiat currencies. If fiat currency really had true value, it should have become more valuable after time in history -- similar to an antique's worth. But no, the US dollar loses 3% of value every year because more US dollars are printed but they were never given to you.

Bitcoin's true value is much more powerful than you might think it is. Due to the limited supply of Bitcoin, less Bitcoin will be generated and will be halved every 210,000 blocks, which is equivalent to 4 years.


Source: bitcoin plots

Bitcoin is currently having a 3.8% inflation rate. However by 2020, after the next Bitcoin block halving event, the inflation rate would drop to 1.7%. In 18 years' time at year 2036, Bitcoin's inflation rate falls below 0.01%. This would almost mean that 1 BTC you possess today will still be 0.99 BTC in 2036. This is of course without factoring in the US dollar price of Bitcoin. Even without factoring in that information, we could be expecting BTC to store the true value of the coin.

Government intervention always benefits its country, not its people. Hence Bitcoin stands as the people's money, tearing away governmental abuse of fiat currencies to store the true value of money a person owns.

What about the large energy consumption, transaction fees and drop in mining rewards?
The confidence that the world has on technology would meant energy efficient mining chips, higher transaction fees but lowered mining costs for the miner.

In addition here, we are also considering the rarity of Bitcoin as its supply reaches the limit of 21M BTCs. While Gold is still being mined from the ground, Bitcoin's mining decrease drastically. Hence we are definitely looking at a price increase in Bitcoin -- as in any antique that carefully preserves its value through history and time.


Image source: pixabay - envasa

Roman coins were long gone. Ancient monetary systems barely lasted more than a thousand years. If you believe that banknotes will see you through the next 50 years of your lifetime, then it's fine. You'll live. For those low and middle income earners struggling to close the income gap, there is a need to move forward with the times to preserve that few dollars you earned. This will then promise a future for you. Hence Bitcoin.

-tysler

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this ignores USD/BTC...