5 ms·

Is it still deflationary? Wondering if I should invest in the coin itself (which makes sense for deflationary coins) or a company doing something with it (whic

by tormeh 6y ago

Is it still deflationary? Wondering if I should invest in the coin itself (which makes sense for deflationary coins) or a company doing something with it (which makes sense for an inflationary coin)

nootropicat 6y ago
At the current fee level and price eth is going to be deflationary after mining is gone (fees are going to be burned except for a small fraction). https://cryptofees.info/ https://cryptofees.info/
ur-whale 6y ago
ETH was never deflationary. As a matter of fact, knowing how many ETH will be produced over a given period of time is a question I never managed to get a satisfactory answer to. There's probably an algorithm buried somewhere in the code, but it's likely not a simple one.
- DennisP 6y ago
  On PoW, it's currently 2 ETH per block, with a little bit extra for occasional "uncle blocks." This is fixed but has been reduced a couple times by hard forks. For PoS, issuance is a formula depending on the amount staked. How that works out: https://docs.ethhub.io/ethereum-roadmap/ethereum-2.0/eth-2.0-economics/ https://docs.ethhub.io/ethereum-roadmap/ethereum-2.0/eth-2.0... If you want to dig into the actual formula, it's explained here: https://benjaminion.xyz/eth2-annotated-spec/phase0/beacon-chain/#rewards-and-penalties https://benjaminion.xyz/eth2-annotated-spec/phase0/beacon-ch... Until PoW migrates to PoS, probably in about a year, they'll operate in parallel and we'll have both rewards added together. A final factor is an upcoming change to the way transaction fees work, which will burn most of the fees instead of awarding them to validators. That will reduce net issuance further, possibly even taking it negative.
  - ur-whale 6y ago
    The point I was trying to make - apologies for not making it clearer - is that from the point of view of the ETH{insert favorite fiat currency here} market figuring out what the how the supply will behave is hard, and therefore hard to price.
    - DennisP 6y ago
      Maybe, but I didn't have that formula handy and found it with a couple minutes of googling, so it's not that hard. In any case, by the time the full transition to PoS is complete, one thing that will be easy for the market to know is that issuance will be substantially lower than BTC, and possibly negative depending on transaction fees.
Sargos 6y ago
BTC (2%) and ETH (4.5%) are both inflationary right now and have never been deflationary. BTC will be inflationary until about 100 years from now. ETH is a bit more complex but in about a year when it switches from proof of work to proof of stake the inflation will drop to <1%. When EIP-1559 is implemented next year then most of the transaction fees are burned which will likely drop the inflation rate into the negatives which will turn Ethereum into a deflationary asset.
- IronRanger 6y ago
  You forgot USD (30%)
- nabla9 6y ago
  Deflation = value of money increases. Inflation = value of money decreases. Sargos seems to be confusing 'inflation' and 'monetary inflation' (increase in money supply).
  - hanniabu 6y ago
    In the crypto world inflation/ deflation refers to change in supply.
    - ARandumGuy 6y ago
      So it's another area where cryptocurrency enthusiasts just decided to change the meaning of some words? Like they did with fiat?
      - csomar 6y ago
        I don't think the words deflation/inflation are linked to money. A ball can deflate, which has nothing to do with the value of the ball or money.
    - andrethegiant 6y ago
      I thought BTC had a hardcoded cap of 21M coins? How could its supply change?
tsujp 6y ago
Not in a literal sense. ETH is still awarded (and can be adjusted as it can on the PoW chain) but plateaus around 10MM ETH staked. The more people that use the network the more ETH that's being burnt due to gas (operation, practically 'network') fees. So Ether's (in/de)flationary behaviour is a consequence of multiple factors: network consensus participation (mine or stake), network utilisation (burn due to gas fees for using the Ethereum VM), and network parameters (block or epoch reward)
nickik 6y ago
It depends on what definition of inflation/deflation you use. Some people, Austrians define any change in the amount of base currency as inflation/deflation. This is the traditional definition. However the normal everyday usage of inflation/deflation talks about the 'General Price Level', usually measured with things like GDP Deflator, or CPI. Some way of trying to measure the general price level. All of those measures are imperfect. By the first definition, both Bitcoin and ETH are inflationary but only slightly so. By the second definition it is very hard to say because we don't really have a way to measure it.
andrewla 6y ago
This is a term thrown around a lot. "Deflationary" has different meanings in different contexts. Conventional economists use "deflation" to mean "price deflation" -- that is, the price of goods, on average, decreases over time, as denominated in the currency in question. Austrian (heterodox) economists often use the term "deflation" and "inflation" to refer to changes in the money supply, rather than prices. In the crypto space, people often use the term "deflationary" to refer to currencies that do not increase exponentially in supply; or more specifically whether the marginal change in supply is decreasing. For 1, no -- saying "Ethereum is deflationary" is equivalent to saying "the value of Ethereum will always go up", which is clearly nonsensical, because it's saying that Ethereum is a risk-free investment. For 2, no, Ethereum is not deflationary, the supply increases linearly, so the supply is always increasing. For 3, yes, Ethereum is deflationary, because the supply increases linearly, which means the marginal change in supply tends to zero. Your question about investments seems to be following the implication that if 3 is true, then 1 must be true, since they both use the word "deflationary". That may be the case, but I would hesitate to think that a mechanical system can guarantee an increase in value.
- tromp 6y ago
  > people often use the term "deflationary" to refer to currencies that do not increase exponentially in supply People use "deflationary" for hard-capped supplies, "disinflationary" for uncapped supplies that have yearly inflation rate going down toward 0 (such as with a pure linear emission), and "inflationary" for emissions whose yearly inflation rate stay above some constant greater than 0.
- imtringued 6y ago
  >For 1, no -- saying "Ethereum is deflationary" is equivalent to saying "the value of Ethereum will always go up", which is clearly nonsensical, because it's saying that Ethereum is a risk-free investment. It does make sense if you compare a less inflationary currencly to more inflationary currencies. It's risk free in the sense that the USD exchange rate will keep up with inflation of the USD in the long term.
  - 6y ago

by tormeh 6y ago

Is it still deflationary? Wondering if I should invest in the coin itself (which makes sense for deflationary coins) or a company doing something with it (which makes sense for an inflationary coin)

nootropicat 6y ago

At the current fee level and price eth is going to be deflationary after mining is gone (fees are going to be burned except for a small fraction). https://cryptofees.info/ https://cryptofees.info/

ur-whale 6y ago

ETH was never deflationary. As a matter of fact, knowing how many ETH will be produced over a given period of time is a question I never managed to get a satisfactory answer to. There's probably an algorithm buried somewhere in the code, but it's likely not a simple one.

DennisP 6y ago
On PoW, it's currently 2 ETH per block, with a little bit extra for occasional "uncle blocks." This is fixed but has been reduced a couple times by hard forks. For PoS, issuance is a formula depending on the amount staked. How that works out: https://docs.ethhub.io/ethereum-roadmap/ethereum-2.0/eth-2.0-economics/ https://docs.ethhub.io/ethereum-roadmap/ethereum-2.0/eth-2.0... If you want to dig into the actual formula, it's explained here: https://benjaminion.xyz/eth2-annotated-spec/phase0/beacon-chain/#rewards-and-penalties https://benjaminion.xyz/eth2-annotated-spec/phase0/beacon-ch... Until PoW migrates to PoS, probably in about a year, they'll operate in parallel and we'll have both rewards added together. A final factor is an upcoming change to the way transaction fees work, which will burn most of the fees instead of awarding them to validators. That will reduce net issuance further, possibly even taking it negative.
- ur-whale 6y ago
  The point I was trying to make - apologies for not making it clearer - is that from the point of view of the ETH{insert favorite fiat currency here} market figuring out what the how the supply will behave is hard, and therefore hard to price.
  - DennisP 6y ago
    Maybe, but I didn't have that formula handy and found it with a couple minutes of googling, so it's not that hard. In any case, by the time the full transition to PoS is complete, one thing that will be easy for the market to know is that issuance will be substantially lower than BTC, and possibly negative depending on transaction fees.

Sargos 6y ago

BTC (2%) and ETH (4.5%) are both inflationary right now and have never been deflationary. BTC will be inflationary until about 100 years from now. ETH is a bit more complex but in about a year when it switches from proof of work to proof of stake the inflation will drop to <1%. When EIP-1559 is implemented next year then most of the transaction fees are burned which will likely drop the inflation rate into the negatives which will turn Ethereum into a deflationary asset.

IronRanger 6y ago
You forgot USD (30%)
nabla9 6y ago
Deflation = value of money increases. Inflation = value of money decreases. Sargos seems to be confusing 'inflation' and 'monetary inflation' (increase in money supply).
- hanniabu 6y ago
  In the crypto world inflation/ deflation refers to change in supply.
  - ARandumGuy 6y ago
    So it's another area where cryptocurrency enthusiasts just decided to change the meaning of some words? Like they did with fiat?
    - csomar 6y ago
      I don't think the words deflation/inflation are linked to money. A ball can deflate, which has nothing to do with the value of the ball or money.
  - andrethegiant 6y ago
    I thought BTC had a hardcoded cap of 21M coins? How could its supply change?

tsujp 6y ago

Not in a literal sense. ETH is still awarded (and can be adjusted as it can on the PoW chain) but plateaus around 10MM ETH staked. The more people that use the network the more ETH that's being burnt due to gas (operation, practically 'network') fees. So Ether's (in/de)flationary behaviour is a consequence of multiple factors: network consensus participation (mine or stake), network utilisation (burn due to gas fees for using the Ethereum VM), and network parameters (block or epoch reward)

nickik 6y ago

It depends on what definition of inflation/deflation you use. Some people, Austrians define any change in the amount of base currency as inflation/deflation. This is the traditional definition. However the normal everyday usage of inflation/deflation talks about the 'General Price Level', usually measured with things like GDP Deflator, or CPI. Some way of trying to measure the general price level. All of those measures are imperfect. By the first definition, both Bitcoin and ETH are inflationary but only slightly so. By the second definition it is very hard to say because we don't really have a way to measure it.

andrewla 6y ago

This is a term thrown around a lot. "Deflationary" has different meanings in different contexts. Conventional economists use "deflation" to mean "price deflation" -- that is, the price of goods, on average, decreases over time, as denominated in the currency in question. Austrian (heterodox) economists often use the term "deflation" and "inflation" to refer to changes in the money supply, rather than prices. In the crypto space, people often use the term "deflationary" to refer to currencies that do not increase exponentially in supply; or more specifically whether the marginal change in supply is decreasing. For 1, no -- saying "Ethereum is deflationary" is equivalent to saying "the value of Ethereum will always go up", which is clearly nonsensical, because it's saying that Ethereum is a risk-free investment. For 2, no, Ethereum is not deflationary, the supply increases linearly, so the supply is always increasing. For 3, yes, Ethereum is deflationary, because the supply increases linearly, which means the marginal change in supply tends to zero. Your question about investments seems to be following the implication that if 3 is true, then 1 must be true, since they both use the word "deflationary". That may be the case, but I would hesitate to think that a mechanical system can guarantee an increase in value.

tromp 6y ago
> people often use the term "deflationary" to refer to currencies that do not increase exponentially in supply People use "deflationary" for hard-capped supplies, "disinflationary" for uncapped supplies that have yearly inflation rate going down toward 0 (such as with a pure linear emission), and "inflationary" for emissions whose yearly inflation rate stay above some constant greater than 0.
imtringued 6y ago
>For 1, no -- saying "Ethereum is deflationary" is equivalent to saying "the value of Ethereum will always go up", which is clearly nonsensical, because it's saying that Ethereum is a risk-free investment. It does make sense if you compare a less inflationary currencly to more inflationary currencies. It's risk free in the sense that the USD exchange rate will keep up with inflation of the USD in the long term.
- 6y ago