There is a common misconception in the cryptosphere that investors want lower inflation. This misconception was formed via the dynamic of the Federal Reserve (and fiat in general) vs Bitcoin.

The logic plays out like so:

• The FED prints inflation.
• That inflation devalues my dollar.
• Therefore: inflation is bad.
• Bitcoin has low inflation (logarithmic hardcap)
• My investment is not being devalued (and even doubling every year).
• Less inflation is good.
• Steem crashed 99% in two years.
• Inflation is bad.

False.

The root of this logical fallacy lies in the fact of WHO controls the inflation. If YOU control the inflation, inflation is amazing. If you run the Federal Reserve, inflation is amazing. If you are a Bitcoin miner, inflation is amazing (until the halving event slaps you).

That's the funny part about Bitcoin.

Inflation is given to miners for securing the network, but the miners don't actually control inflation. Bitcoin has never changed their inflation schedule (unlike Steem/Hive) so the inflation is actually determined by network consensus all the way back to the genesis block. Pretty amazing when you think about it, that the original Bitcoin never made any big changes and continues to be the top dog by a huge margin to this day. Let's be honest, that's probably why they are top-dog, because their network is extremely reliable/predictable with first-to-market advantage and branding.

Bitcoin has checks and balances just like a real government; miners are awarded inflation to secure the network but they can't subvert consensus to mint more money for themselves.

What's the point?

My point is that there is a huge group on Hive/Steem that mistakenly thinks that our high interest rate devalues everyone's funds and scares away investors. Nothing could be farther from the truth. The opposite is true!

As I have made quite clear, when inflation gets printed, the people who control that inflation aren't the ones who have their bags devalued. It's the people who DON'T control the inflation that get screwed over!

Yes, I am right.

So for everyone saying we need to reduce inflation so investors want to come here... they are completely misunderstanding the entire economy. If investors are what you want, you make the inflation higher, because investors on DPOS are the ones who control inflation, thus leeching value from the non-investors.

Who are the non-investors?

• gamblers
• currency enthusiasts
• anyone holding liquid coins

On DPOS you are an investor if you stake your coins.

Therefore, anyone who's not staking coins is the one getting devalued by inflation. There are currently 137.5M coins powered up and 360M coins total. Any investor on Hive is seeing a huge return from inflation because they get to control 260% more inflation than their own coins generate.

Liquid coins create inflation but they don't control inflation.

Hopefully we can all see now why inflation is good for anyone controlling it.

• 10% to the witnesses.
• 10% to the Decentralized Hive Fund.
• 15% to anyone with vests (need to change)
• 65% to the reward pool (curator/author)

Therefore, if you are a witness in the top 20, and you have an active proposal, and you have powered up stake that you use to curate, and you create author content that generates rewards... that is the perfect storm of inflation for you. That person should want as much inflation as they can possibly get, because they are leeching value from everyone else that doesn't have those privileges.

Who does inflation leech the most value from?

Traders and bots on the exchanges. Anyone holding money on the exchanges is theoretically getting wrecked by inflation. Are these the people complaining about inflation? Nope! It's the ones who should want it that are complaining about it! It's completely backwards.

Do we need more speculators? Do we need more people gambling on exchanges? No, we don't. No one has ever made that argument. Everyone wants more investors. If that's the case then you want higher inflation so the people actually using the currency as a currency get devalued.

And when I say we should want higher inflation, what I mean is that we shouldn't want to keep changing stuff up and letting the world constantly know that we are completely unreliable network that just changes the rules on a whim.

Often times the correct action is no action. Bitcoin knows this all too well. Why don't we?

HBD holders also get devalued.

USD is losing value every year. HBD is the bridge between USD and Hive. Therefore, anyone who holds HBD is also giving the investors free money in the long run, because when someone goes to trade HBD for $1 worth of Hive ten years from now, that HBD has been devalued just as hard as the dollar has. Free money.

Conclusion

I'm tired of people saying it's our inflation that devalues the network and scares away investors. Nothing could be further from the truth. This concept started with Bitcoin, let it die with Bitcoin. Inflation is good if you control it.

I say again, the people who inflation hurts are not complaining about inflation, so why is it even an issue? 8% inflation a year is nothing compared to the exponential gains of crypto over time. The problem with those exponential gains is that they have high volatility. It is that volatility that makes people think crazy thoughts like it's our inflation devaluing the network.

Do the math: we lost 99% of our value in two years and our inflation was only 8%. Obviously inflation had literally nothing to do with that drop in the grand scheme of things. Inflation is a drop in the bucket compared to liquid volatility.

I was going to include it in this post, but this post is now too long:

My next post will be revisiting the idea of bank accounts doubling as CDP and being given good passive returns (something investors highly desire).

Return from Investors want higher inflation! to edicted's Web3 Blog