Bitcoin vs inflation

2 Comments

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2267
Thanks MREES..

Anyone following your earlier advice on Ethereum has a four bagger.... do you think it has more to run.  I read that Ethereum token quantities are not (effectively) capped like Bitcoin.. is that true, and if so how can we trust Ethereum to be a deflationary form of money like Bitcoin?      

mrees999's picture
mrees999
Status: Silver Member (Offline)
Joined: Aug 16 2013
Posts: 130
The truth about Ethereum

Hi Jim, The truth about Ethereum and its max  number cap is that the answer is a qualified...'kind of.'

At some point, they will be changing the consensus method from "Proof of Work" which is what bitcoin uses - to "Proof of Stake" which will no longer require using entire mid-size country worth of electricity.  Which is both good and bad. There are good arguments that the amount of electricity being used gives bitcoin 'law of thermal dynamic' protection against attack. As in, you would have to suddenly commandeer and entire counties worth of electricity on top of bitcoin's network plus the computing power to match (currently 63,000 times more powerful than the top 500 supercomputers in the world). 

The change-over is projected to be within a year.  The current reward for issuing new ethereum is 5 about every 15 seconds to complete the transaction reconciliation for the blockchain entries.  The processors (AKA miners) also get rewarded by a fee structure or in bitcoin known as "tips" for the miners.

When they switch over happens, that will be the END of new ethereum entering the market. So in that sense, it is capped - much sooner than bitcoin. The entire incentive for the processors will be through the fee structure. 

Now for the "kind of." The plan is to release an inflation rate of .8 percent. That is (POINT Eight percent). This is intended not to be deflationary or inflationary as this is the expected rate of 'lost ether'.  People forget passwords, don't tell family members how to access them in the case of death. So this is intended to keep the supply even. So in a literal sense, there is no cap, but in a practical sense, it is very much restricted. 

The answer to your other question about Ethereum's room to grow,  

You ain't seen nothing yet.

wink

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