Mass adoption of the Request Network will not lead to the expected surge in demand. Here's why.

First off, it's important to understand that the REQ token is not meant to be used as a general purpose currency. It's an ERC-20 token that will be used to pay for invoicing, accounting, and payment facilitation services on the Request Network. Paying with Request will not mean paying in REQ--it'll mean paying in some other currency, by way of that currency's own existing value transfer infrastructure, and paying a small fee in REQ for the privilege of using the Request Network platform.

Many investors in REQ seem to be under the impression that if the Request Network manages to achieve mainstream adoption--which is far from certain in the first place--demand for REQ tokens will surge, leading to a commensurate increase in their price. But dramatic price increases would be problematic for the Request Network, because it would translate to higher fees for people who do not already hold REQ, and one of the main value propositions of the Request Network is that it will be more affordable than competing services.

Fortunately, there's an easy solution to this problem. To quote the Request Network white paper:

The fees will be adjusted by the Request Network operators depending on the decreasing supply of REQ and the exchange rate with the different currencies authorized by the network.

In other words, the price of the one and only thing that REQ tokens can be used to buy will be entirely under the control of a central authority that has promised to adjust it downward in response to any meaningful increase in demand. The fee can also obviously be increased if the price of the token crashes, so the utility of the Request Network is fully independent of the token's exchange value. That's great news for the platform, but not for speculators.

Many people excitedly point to the fact that REQ tokens are burned after being used, making REQ a deflationary asset in some sense. But that view ignores the fact that the price of services on the Request Network will be artificially reduced, which is effectively the same thing as printing new REQ tokens.

Think of it this way: a currency's market value is a function of the relationship between supply and demand. Inflation is what happens to a currency when the supply of that currency exceeds demand for it. The obvious way to cause supply to exceed demand is to increase the supply, but decreasing demand would have exactly the same effect--even if the supply is also decreasing, just at a slower rate. Reducing the cost of transactions on the Request Network is essentially a way of decreasing demand for REQ, because it means that Request Network users will need to buy less REQ in order to make their transactions.

You might expect demand for the Request Network to be so great that the price will surge anyway. But the whole point of the fee adjustments will be to prevent that from happening. Demand increases and fee reductions will have to cancel each other out by design in order to ensure that the platform remains affordable for all users. And here's the most important part: when speculators finally realize that utility-based demand will never deliver the promised moon landing, they will exit en masse.

That's why I don't personally own any REQ, despite the fact that I think it's an excellent project with an extremely bright future ahead of it. Owning a project's utility token is not the same thing as owning a share of stock in that project. That said, you can trade on the common misconception that it is the same thing, and I have traded REQ with some success--but that's a topic for another post.