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What Is Ethereum’s Inflation Rate?

Posted in Cryptos

One of the most over-looked topics in Ethereum is its inflation rate. You almost never hear people talk about this or see people post about this, though I will show a few exceptions to this later in this post. I find it interesting that people are dollar-cost averaging into Ether, even though most of these same people have no idea what the inflation rate is of Ether.

“You Don’t Know Or You Can’t Say?”

Below are some links where this topic is discussed, which are rare finds in general:

  1. This question from the user Brian Armstrong, which might actually be Brian, though you never know on the internet.
  2. This revealing question on Ethereum’s Reddit page, though how much of this has changed?
  3. Finally, this post at the beginning which clearly states, “Every year, in perpetuity, 18,000,000 ETH will be issued though the mining process.”

Note that on the last post – which is before Ethereum officially existed – the assertions appear to no longer carry weight. We should also realize that initially, Ether would inflate, but Ether would also burn, so in theory, the original intent would have achieved a balance or deflationary status at some point, assuming mass adoption.

The reality is that no one actually knows what Ethereum’s inflation rate is: not only has the intent since the original post changed, we must realize that any change means that a future change is possible. In a sense, Ethereum is flexible if you’re a glass-is-half-full kind of guy, or unpredictable if you’re a glass-is-half-empty kind of guy.

One Thing We Know (Now): Ether Inflates

Like George Soros, I grasp that inflation is an expectation phenomena, not a fundamental phenomena. This means that bitcoin does not have an inflation rate, but an emission rate because rational market players have already priced the max supply since the beginning. If one does not know what the max supply will be in the long run, then the project is inflationary with the exception of deflationary projects, like Counterparty or Bitcrystals – both which permanently reduce their supply. I do not expect many in the cryptosphere to grasp this because many traders do not understand human behavior and inflation is a human reaction to events involving supply – this is why you don’t see people dumping the US Dollar, even though the US can’t control it’s money supply and it constantly increases.

Because we don’t know what Ether’s supply will be in the future, it inflates. Until this is changed, whether it’s changed to a fixed supply, or a burned supply-reduction, we can assume there will be more Ether.

We’re Talking Apples and Uranium

Ether and bitcoin differ significantly, though you will see them thrown together often. You must realize that when people compare these, they are demonstrating how absolutely clueless they are. Comparing Ether to bitcoin is like comparing gold to Visual Studio. Huh?

My point exactly.

I’m not complaining here: one of the many reasons for receiving disproportionate results in markets is people’s misunderstanding of reality. In some cases – like Ether and bitcoin – this is self-inflicted. People are making a choice to follow people who don’t grasp the differences. Is a financial analyst a developer? In many cases, they see the world very differently. This is one of many reasons why people are confused about these projects: the “experts” don’t really understand how different bitcoin and Ether are.

Because Ether intends to be a platform, it must be adaptable to an extent, in the same manner that you must sharpen your saw from time to time, or even adjust it according to your needs. Inflexibility for something designed for architecture could be a disaster waiting to happen. One might state that an adaptable token may not be a good investment and they may be correct. Ether is a token for the platform Ethereum and that comes before anything. Weighing Ether as an investment misses this. This is a choice some make because they continue to listen to people who do not grasp the difference. On the other hand, if a person is an entrepreneur, developer or engineer with an idea for Ethereum and they look at Ether (correctly) as fuel for their idea, they will win because of their idea.

Bitcoin’s competitors are Monero, Dash, Zcash, and a whole range of other cryptocurrencies, while Ethereum’s competitors are Counterparty, Ethereum Classic, and other platforms. While I understand that most people like to look at a simple website that puts everything on the same page, you must realize that this website is actually misinforming you daily by implying these all belong on the same page together (or in the same category). They do not. This will only grow worse in time because we now see another range of ideas that also don’t belong in the same category, like bitcoin or Ethereum. Enjoy the misinformation – but you’ve been warned!

Those Are Your Experts, Not Mine

If I hosted an Ethereum conference – and luckily I won’t – I couldn’t invite a single “expert” on Ethereum as a whole because none exist. I’ve seen strong developers in Ethereum with ideas and I would invite them about their ideas and the practices they follow. I’ve seen strong companies in Ethereum, who see some applications with it, and I might invite them to share what gave them their ideas. I’ve also seen people who grasp where Ethereum may be applied in the future in other areas. But none of these are experts across the board on this platform (or other related platforms); people are choosing to have experts in something that will be deeper than they imagine because the applications are numerous.

That’s their choice. On my end, there is no “expert” in Ethereum – there are applications and I will listen to those as experts in their own application of the Ethereum platform. For this reason, I can read the Ethereum blog from early in its history and understand why Ethereum may differ now – it must be flexible and even the original designers must adjust accordingly.

So Why The Fight?

First, most bitcoinaires like Ether and they own both bitcoin and Ether. Bitcoin maximalists view Ether as a threat, which is a misguided view. We warned you in I Just Lost Everything that competition would begin to get nasty. We can explain part of this due to money, but some of it is due to the reality that people did not understand what was in front of them and they missed it. They can either eat their pride and admit they were wrong (very rare), or double down and continue wasting time by reflecting their misunderstanding of projects. This won’t just be true for Ethereum either; as ideas in the cryptosphere evolve, we will see many future misunderstandings of some projects. I can think of at least 6 projects right now that many misunderstand.

One final warning here: don’t mistake a correction for, “See the project failed!” This naive view is what Wired asserted when bitcoin fell from $32 to $10 and as we know, this view was incredibly inaccurate. Corrections happen and they do not mean a project is a failure.

Warning

The following article covers a token or element in the cryptosphere. The cryptosphere is new and exciting, but changes rapidly and often in ways that do not benefit users. By the time this article is published, changes may have already occurred. Most tokens in the cryptosphere are complete scams that are get-rich-quick-schemes for insiders. Often, we cannot know this beforehand and only later discover this. A person should only trade with money that they’re willing to lose because losses are guaranteed. If you choose to participate in purchasing a token in the cryptosphere, you should do so with the full expectation of a loss and you should also expect it to change in a manner that does not benefit you. There are very few good ideas in the cryptosphere. Finally, by reading this post, you agree that you’ve read our disclosure.

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