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Inflationary vs Deflationary Cryptocurrency | Brickstreet



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Hey guys, we are back with a brand new video and in this video we have explained you what is inflationary and Deflationary Cryptocurrency and how can you differentiate them.

Cryptocurrency inflation and deflation refer to how the overall purchasing power of a specific
cryptocurrency changes over time. Inflationary cryptocurrencies have declining purchasing

power over time due to increases in supply; deflationary cryptocurrencies increase in
intrinsic value over time as total supply remains constant or decreases.

1. Inflationary Cryptocurrencies

An inflationary cryptocurrency is one with an increasing number of tokens in circulation.
Some of the common approaches for introducing new tokens through mining, staking, and
other methods can help in increasing the circulating supply of tokens. The increasing supply
of the token would cause a drop in its value. As a result, users have to spend more tokens
for purchasing a specific product, asset, or item.
Dogecoin is the best example of inflationary cryptocurrencies. Dogecoin, has an unlimited
supply after one of its creators, Jackson Palmer, abolished a hard cap of 100 billion DOGE in
February 2014. That means increases in supply could outpace increases in demand,
potentially decreasing the value of each individual dogecoin over time.

2. Deflationary Cryptocurrencies

Deflationary cryptocurrencies are the ones where the supply of coins would decrease over
the course of time. Therefore, the value of every coin would increase even in scenarios with
consistent demand.
Bitcoin is the ultimate example of a deflationary cryptocurrency. From the moment of
Bitcoin’s creation in early 2009, there was a hard limit of 21 million BTC available for mining.
No more BTC will ever exist.
As of today, approx around 2 million BTC are left for mining. Mining difficulty has increased
substantially[1], and as a result, each new BTC is increasingly expensive, making BTC
deflationary.
Let's Take the example of Ethereum. With the launch of the London upgrade, when the
network is congested, the burn rate is very high, making it deflationary. According to
calculations made by the Ethereum Foundation, it would take a gas price of about 15 gwei
for ETH to be deflationary.
As the overall supply decreases, the intrinsic value of the currency increases, and its
purchasing power goes up accordingly. This makes deflationary cryptos good choices for
longer-term investing.

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Category
Cryptocurrencies
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