coin supply & inflation
- Green area: Total network coin supply outstanding;
- Blue line: Annual % inflation rate.
coin supply & inflation explained
If you remember only one thing about cryptocurrency and blockchain technology, remember this: the supply of money is limited. It's restrained. It cannot be increased beyond its defined protocol. No market participant can manipulate this or decree otherwise, no matter what. The supply of coins that incentivize a blockchain network are constrained exactly to their protocol description. No more, no less.
If you were to look at a chart of any nation's currency supply in the world today (be it dollars, euros, rupees, yen or other), it would be hard to miss the trillions of currency units rising across the graph in a trajectory and pace similar to that of Felix Baumgartner's balloon. This is inevitable. Governments cannot resist the urge to print money. Blockchains can.
This has profound implications for markets, economies, business and productivity.
To be sure, one of the most important benefits of blockchain and cryptocurrency will come in the form of better market information, and thus less severe business cycles. With a predictable, understandable and constrained money supply, the plans of producers (those who sell goods and services) will be much better coordinated with the plans of consumers (those who buy goods and services). Unlike a centrally planned money supply, a decentralized, algorithmic and automatic money supply will vastly improve entrepreneurs' understanding of real market demand, and thus what "should" actually be produced to meet that demand, as opposed to what any one economist, politician or central banker might think "aggregate demand" should be.
Aggregate demand is a 20th century idea. Welcome to the blockchain.