2) Infinite supply, you do know what infinite is? Because i can't comprehend infinity.
There’s been a lot of misunderstanding and confusion going around dogecoin’s inflation rate recently. For some reason, people don’t understand it very well. Some people will notice that dogecoin increases by 5 billion coins every year after 2014. Forever. That is when they start to freak out. Then they panic and declare dogecoin a sinking ship and cash out all their doges. They are idiots, and here’s why:
Firstly, Monetary inflation does not mean price inflation. It is possible for a currency to increase in supply and value at the same time. For instance, bitcoin grew 10000% in price the same year when its monetary base also increased by 13%.
Secondly, consider that in the second year of dogecoin’s existence, we will have a 5% increase in total money supply. Do you know what bitcoin and litecoin had? Here’s a convenient table for you.
Of course, the difference is that dogecoin continues adding to its supply by 5 Billion coins each year, whilst bitcoin and litecoin will continue to halve to zero.
Do you want to take a guess at which year dogecoin will catch up to bitcoin in total monetary supply added?
The year 2174.
You won’t even live that long.
This is the misleading part about Dogecoin’s monetary supply. People see the scary “5 billion coins added each year!!!” statement and they start pissing their pants at vivid imagery of Weimar’s hyperinflation. They forget that Dogecoin is way ahead of the curve, because instead of halving every 4 years as bitcoin or litecoin does, it halves every 1.5 months. This gives it a lot of room to catch up, even if the total monetary supply increases by 5 Billion coins indefinitely.
Here’s the thing. Imagine you wanted to create the best, most profit-maximizing coin possible. What specifications would you want? Obviously, you’d want a coin that halves in rewards as quickly as possible. The faster it halves, the more coins you get (because you mined it since the beginning), and the less coins others get. This also makes the coin rarer, so as supply drops, demand goes up.
But on the other hand, you can’t have the coin halve too quickly. If you did that, there would be accusations of the coin being an instamine scamcoin. One halving every 2~ months sounds about right.
What happens when it stops halving? After that, you want a static, minimal, eternal block reward to support and encourage miners. Miners not only secure the network, but it makes up for lost, destroyed, or stolen coins, which leads to lower levels of volatility and a more secure infrastructure. They also help generate interest in the coin. This is paradoxically good for the value of the coin in the long run. This is where you get the profits.
Dogecoin has all of these traits. Dogecoin’s block rewards are perfectly optimized to be worth as much as possible. Not even bitcoin or litecoin accomplishes that. Why halve in four years, when you can do it in two months?
This should be obvious. And yet people on all sides of the inflation argument appear confused and needlessly agitated. It’s not just the anti-inflation sides of dogecoin that are angry and tout falsehoods. Even the dogeflation proponents on my side argue completely awfully.
For instance, there’s a popular rhetoric about “dogecoin having inflation is good because it incentivizes people to spend money, thus promoting dogecoin”.
This is wrong on so many levels.
That logic will only apply if you are only allowed to use one currency. In the case of Government mandated fiat currency, this applies, because you only have one currency to choose from. Therefore you want to spend your dollars as soon as possible. In cryptocurrency, where there are over nine thousand possible competing alternatives, if dogecoin loses value in the long run, everyone would go buy a non-dogecoin cryptocurrency instead.
This is the kind of pseudo-Keynesianism that gives Keynes a bad name. But I digress. This argument is further invalid because Dogecoin will not have inflation. Dogecoin is going to increase in value. Massively. This entire essay is dedicated to arguing that.
Dogecoin is a deflationary currency. It is NOT inflationary.
From: http://tuxedage.wordpress.com/2014/02/06/a-serious-analysis-of-dogecoin-or-why-i-am-all-in-on-dogecoin/
