Table of Contents
The value of Devcoin
The basic info .... is missing
Lately, someone asked how he could obtain some Devcoins. Besides pointing him to the usual exchange websites like Vircurex and Cryptsy, the topic went to the basics of Devcoin. How much Devcoins have been generated, what is the rate of generation, is there a hard cap, etc. Well, those proved to be good questions. Question an investor definitely wants answered before stepping into Devcoin.
The official Devcoin website provides some very basic information on these points. The Devcoin thread at Bitcointalk does provide some snippets of information, but scattered over hundreds of pages. Therefore, I went digging into available documentation and did some ground work.
Although it is hard to find an exact date, it seems Devcoin was started in August 2011. As a Bitcoin clone, a block is made every 10 minutes on average. Instead of the 50 Bitcoins per block (nowadays reduced to 25), Devcoins are generated at 50,000 per block. 5,000 go to the miner and 45,000 to the people distributing Devcoins to artist and contributors.
With this information, we can establish the amount of Devcoins generated over time:
- every 10 minutes: 50,000 DVC
- every day: 7,200,000 DVC
- every year: 2,628,000,000 DVC
There is no hard cap. As long as Devcoin remains existing, the annual increase of DVC will be some 2.6 billion DVC. The 50,000 DVC each block does not half at set moments in time like Bitcoin. This sounds very spooky for an investor who is looking for an increase in value. Other coins have hard caps, like the 21 million Bitcoins or 84 million Litecoins.
However, the lack of a hard cap is less concerning over time. I do not consider this a problem in view of Devcoin's potential. The graph below will make this clear.
Below, the total number of Devcoins generated is projected over a time span of several decades.
Year 1 can be regarded as the first time period from August 2011 to August 2012. For each year, the following items are mentioned:
- annual inflation: (besides year 1)
- the percentage of 1 million DVC versus total DVC
- the drop in value of a fixed amount of DVC compared to the previous year
Disregard the items of year 1 other than the total DVC at the end of year 1.
The lack of a hard cap proves hardly an issue. Looking at this overview, it is clear that with each additional year of Devcoin, the annual increase of DVC with an fixed amount will be less and less inflationary over time. We are currently just pas year 2 into year 3, so the annual inflation will be 33% this year (August 2013 to August 2014). A steep amount in normal monetary measures, but rather benign in crypto currency land.
The rate of inflation can easily be surpassed by the increase in value of DVC, related as it is to the price of Bitcoin. If DVC increases in value due to increased interest and usage, the annual inflation rate is hardly an issue. Crypto currency is still very young, and can provide multipliers up to several orders of magnitude. Remember, Bitcoin is also still inflating with some 10% annually.
The charts illustrate this mechanism: the increase in DVC is linear, but the annual inflation decreases over time. After a few years from now, it will go below 15% annually and after some 10 years, it will go below 10%. This inflation can easily be shrugged off with orders of magnitude of value growth.
The investment outlook
So how about that investor outlook for DVC? Well, I am not an investment adviser and not planning to become one. The purpose of this contribution is to shed some light on the basics of Devcoin and to clearly show that having no hard cap becomes less of an issue over time.
Currently, a stack of DVC will be inflated away at a steady pace for several years to come. On the other hand, the value of DVC is increasing due to better wallets, increased application and acceptance, and - in general - increased awareness of the public with crypto currencies and true financial freedom. The inflationary aspects will wane over time, whereas it will most likely become harder over time to 'earn' Devcoins: buying could become the only way to obtain a sizable stack in the future.
Whether this is a good time to step into Devcoin cannot be foretold, but the real inflation in Devcoin is almost behind us. We are about to enter the time of increased battle of diminishing DVC inflation versus building the value of the Devcoin network.
How this all pans out, is up to us.