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How is inflation affecting the the world of cryptocurrencies

inflation crypto

Inflation, a word so familiar to us and associated with a currency we have always known. But did you know that inflation is very often used in connotation with cryptocurrencies?

Let’s take a look at how it affects the traditional and token monetary system.

A little repetition and something extra

We know the term inflation by the definition that money loses its purchasing power and over time you can buy less for the same amount of money. It is monitored by central banks, which aim to stabilize inflation. At the same time, however, it is difficult to predict the impact of inflation and to control it.

Many people think that inflation is supported by printing larger sums of money. But that is not entirely true. In essence, a very productive economy can become unstable over time due to high indebtedness. More productive economy can be created by printing more money.

We see the same procedure in cryptocurrencies. Some cryptocurrencies need stable token growth to be productive. Regular supply of new tokens helps cryptocurrentcy to grow to its maximum value.

Tokenomics – economics in tokens

Nowadays, many people consider cryptocurrencies as protection against inflation. However, it is also very important in this world to keep the tokenomics going. We don’t have enough experience yet to be able to set the right rate. We still need to explore this important information through active use.

Of course, it is possible that for each system, this rate will be slightly different to ensure maximum impact. To set up correctly, you need to know exactly how the system works, how many new tokens are needed and how does their redistribution work.

Conclusion

Inflation can be useful, but it can also be destructive. In order for the economy not to collapse, it is necessary to have clearly set rules. In cryptocurrencies, this is true. But cryptocurrencies still have a log way to go. But we are sure they have the power to become the future monetary system.

Source: 3commas.io

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