Will the decrease in the inflation of the Ethereum supply to almost 0 percent by 2022 benefit ETH positively?

Last year, the inflation rate of Ether, the native cryptocurrency of Ethereum (ETH), was around 17 percent. It is expected to decline to near zero by 2022 as the inflation rate continues to fall.

Ethereum researcher Eric Conner stated that the release of any major hard fork or solution like Constantinople and Casper will lower the rate of ether inflation many times over.

Here is the updated Ethereum supply / inflation chart. This requires:

-EIP-1234 in November over Constantinople hard fork
-Hybrid Casper in 2020 (0.6 ETH / block for PoW miners, 0.22 ETH / block for PoS stakers)
-Full Casper in 2022 (0.22 ETH / block to PoS staker). pic.twitter.com/qsl3rhY922

– Eric Conner (@econoar) September 4, 2018

Significance of the fall in inflation rates

In 2014, Ethereum co-creator and ConsenSys CEO Joseph Lubin explicitly explained the purpose of inflation in ETH’s offering.

Lubin explained that while the supply of ETH is increasing due to a fixed rate of inflation, the rate is decreasing from year to year which does not affect the market valuation of ETH by increasing the supply.

He wrote:

“New participants in the system can purchase a new ETH or a mine for a new ETH, regardless of whether they live in 2015 or 2115. We believe we have struck a balance between the two goals of promoting inclusivity and maintaining a stable business of value. And constant issuance, especially in the early years, will likely make using ETH to build businesses in the Ethereum economy more lucrative than speculative hoarding. “

For Ethereum and other smart contract protocols like Cardano and EOS, it is important that the circulating supply of native tokens remains large so that decentralized applications (dApps), developers and projects can acquire enough tokens to support their operations.

The main use case of ETH is its ability to act as a gas to fuel and process smart contracts. Without ETH, it is extremely impractical for dApps and tokens launched via Ethereum to process information.

Related: Buterin Debunk’s argument made by experts that ETH, not Ethereum, will hit zero

As CryptoSlate reported this week, a new proposal from the Ethereum open source community will soon put a tough requirement on block producers to cover the Minfee with ETH, which will essentially prevent the use of tokens to cover gas instead of ETH .

In March, the co-creator of Ethereum, Vitalik Buterin, stated that the Ethereum network would reduce the ETH inflation rate by 90 percent to just 0.5 percent per year.

“Currently, an expected value of 10 million ETH stakes at 5 percent interest, which corresponds to 500,000 ETH per year (~ 0.22 ETH per block),” wrote Buterin about the ETH research and added that the interest to 0 , 22 ETH per block can be reduced. of 3 ETH per block from September 2018 – which leads to an annual inflation rate of 0.5 percent.

The decline in the inflation rate is certainly good for ETH

Earlier this year, Darryl Morris, an independent Ethereum developer, stated that implementing a firm offer or one that is slowly increasing will only benefit early investors. Fixed supply leads to higher demand and, according to Morris, benefits early investors directly.

He added:

“What I want to see in relation to the issuance is a dynamic that follows and encourages adoption of the platform itself, not just the currency. This introduction is a long-term path that should be just as fair to future generations as it is to us. I fear that a FOMO that introduces hardcaps will put these future users at a disadvantage. “

The economics and supply around Ethereum and other intelligent contract blockchain networks are considerably more complex than payment-oriented blockchain networks like Bitcoin, as the community has to consider the entry of new projects and developers into the market who want to use the network, to create large networks -scale applications.

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