Paradox: why cryptocurrencies do not blow as traditional currencies
In recent years, cryptocurrencies have gained popularity as an alternative to traditional FIAT names. One of the most frequently cited cryptocurrency benefits is its ability to prevent inflation. In the end, it is said that governments cannot push more money and continue to keep their purchasing power. But how does it work? What about other cryptocurrencies?
At first glance, it may seem that a decentralized system without central authority or physical medium cannot avoid inflation. However, the nature of cryptomena transactions is fundamentally different from actions in traditional fiduat currencies. In particular, a permanent offer of 21 million Bitcoin units was offered as a key inflation prevention factor.
Delivery restriction
One of the reasons why a solid Bitcoin offer is unlikely is that the total amount of bitcoins that may exist (21 million) will never increase as a result of a new mining. Although there may be a taoretical possibility of future discoveries or reclamation, this has already been included in the current block of block remuneration.
In other words, consider the traditional Fiat menu, such as the American dollar. The government can simply print more dollars, releasing new banknotes, which can then introduce circulation and increase the supply of currencies. On the contrary, 21 million bitcoins have been designed to prevent it – printing too much money.
Restriction on the demand side
Another reason why cryptocurrencies do not blow, because traditional currencies result from the basic demand for them. Unlike the FIAT names, which are widely used and used as a means of exchange, the reception of cryptocurrency was limited in many countries. This lack of universal acceptance means that there are simply not enough people who are ready to store these digital assets.
Decentralized offer and demand
The decentralized nature of blockchain technology plays a role in preventing inflation. Unlike traditional financial systems, in which central banks or governments can manipulate more money, cryptocurrency transactions are recorded in a public book (blockchain). This transparency makes it difficult to inflate the value of a specific currency.
In addition, cryptocurrencies are often based on decentralized exchanges (DEX) and peer-to-peer markets, which additionally limit the ability of central banks or government to manipulate. In these networks, traders and investors can buy, sell and trade free of charge because they consider it to be used, without the need for intermediaries.
Inne kryptowaluty: nie ma problemu?
Chociaż stałe podaż bitcoinów jest ważną zaletą w zapobieganiu inflacji, nie jest to jedyna kryptomenka, która unika tego problemu. Other decentralized digital currencies, such as Ethereum, Monero and Dogecoin, have been designed with similar restrictions.
For example, Ethereum has a token system built, which ensures that its 21 million consumables will never increase. In addition, most other cryptocurrencies are based on similar mechanisms to prevent inflation, such as the use of limited supply tokens or inflation models based on deficiency.
Application
To sum up, while the established supply of Bitcoins 21 million is often cited as a key inflation prevention factor, it is only one part of the complex image surrounding the acceptance of cryptocurrency. The decentralized nature of blockchain technology in combination with a lack of universal demand and limiting the abilities of central banks to manipulate delivery, all contribute to cryptocurrencies, which avoid problems related to the traditional names of Fiat currencies.