Dogecoin is Now Catering to Inflation

Most coins that are released come with a set number of them that will be created (except for a couple, such as Devcoin and Infinitecoin). Once the coins are released, they generally do not deviate from their original plan, as that would cause changes in their value. If there are 100 of a coin and they are $1 each, that puts the cap at $100. If we then add another 50, the price would have to go down in order to keep the cap at around the same (unless more money was brought in to the network, but in that case it would have gone up even more without the new 50 coins anyways).

Worldcoin went through some changes a while back that actually decreased their coin generation rate in order to deflate their prices (raise them up). This worked for a while until we ran in to the Scharmbeck situation, but it has shown that changes to the coin generation rate can definitely make an impact on what each of the coins are worth out on the market.

Dogecoin has decided to change up the rules on their coin's creation as well, in an effort to “allow inflation.” The coin was originally created with a cap of 100 billion coins. Now, however, after all of those coins have been successfully mined there will still be rewards of 10 thousand coins per block in perpetuity. The idea behind this is that it helps trickle more coins in to the market, making the coin go through a theoretical inflation instead of deflation (like Bitcoin). Of course, how much difference the extra 10 thousand coins per block will make is anyone's guess, but it should help out at least some. It is important to realize that people are still losing their wallets, losing their coins by sending to invalid addresses, etc. While this is probably cutting down some as people get more and more used to crypto coins, it is undoubtedly going to be a problem going in to the future. And at 10 thousand coins per block extra, it may seem a lot, but with a cap of 100 billion, that is almost nothing. Compare this to economies where the rate of inflation is in the 2-3% range per year, and it should become pretty clear.

It has been declared that this is a type of “experiment.” I think that we already know the results, though, which is that it is going to have a more steadying effect than an inflating one. While it is adding the extra coins, I feel that the amount lost will still more than compensate for it, leading to a system where the supply and demand are more stable, rather than supply constantly increasing or decreasing above and beyond demand. Only time will tell this for sure, and it is going to be a long time away, but I am definitely looking forward to seeing how all of this pans out. If nothing else, it should help keep the market pretty healthy, with trading happening often.

As for the current prices, after this announcement was made they have actually gone up. Exactly what caused this is anyone's guess, but I am hopeful that they will stay up where they are or will fall only a little, rather than a lot like last time!



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