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Monero’s (XMR) Inflation Rate Lower than Bitcoin’s

Monero
(XMR), the leading privacy-focused crypto, has recorded another milestone by
having a lower inflation rate than that of Bitcoin (BTC). Notably, Monero’s
inflation reduces at a higher rate compared to that of Bitcoin due to the
coin’s emission curve.

In the past, the fall has been moving towards converging with that of Bitcoin but, after converging, Monero’s inflation rate is now lower than Bitcoin’s.

As
noted by a Redditor:

“Monero’s inflation rate [has] dropped below that of BTC. Most altcoin “halvening” are hugely hyped, leading to volatility, pumps and crashes. Monero doesn’t get hyped like that because the emission rate drops smoothly with every block, making it less rough and disruptive for miners that otherwise suffer abrupt profitability changes. As a result, few think about how scarce it is, For example, LTC’s laving is being celebrated but it is still halving behind Bitcoin. There are fewer reminders that the scarcity is always increasing so I am writing this as a reminder.”

Bitcoin and Monero follow different paths when it comes to halving and inflation rates. Bitcoin, for example, has a hard capitalization while Monero uses tail emission. Interestingly, some crypto enthusiasts consider the difference to be the differentiating factor between BTC, XMR, and gold.

While
they consider the cryptos to be similar “in the next 15 years, later Bitcoin will part away from gold and
Monero.”

Also,
some consider the lower inflation rate to be temporary. “The Monero inflation rate will be below BTC
until May 2020, and then forever higher
,” noted Printer-Pam, a
Redditor.

Interestingly, a lower inflation rate for Monero may translate to a higher valuation. Therefore, considering the inflation metric, Monero will continue to increase against Bitcoin in the future.

All XMR Blocks Will Be Mined By Mid-2020

The difference between BTC and XMR is evident in the mining structure. Although both use the Proof-of-Work algorithm, all Monero blocks will be mined by May 2020 while Bitcoin’s last block will be mined 100 years from today.

Unlike
BTC which as a hard supply once all Bitcoins are extracted, Monero will
continue to release 0.6 XMR/minute as block reward even after the last block
has been mined.

Monero calls this phenomenon “tail emission.” To justify the small XMR block rewards, Moneropedia states:

“Miners need an incentive Because of the dynamic block size, completion between miners will cause fees to decrease. If mining is not profitable due to a high cost and low reward, miners lose their incentive and will stop mining, reducing the security of the network. Tail emission ensures that a dynamic block size and fee market can develop.”

Tail emission is
a supply system that prevents block rewards from falling to zero even after the
last block has been mined.

Over time, the correlation between BTC and XMR has been strong and positive. According to observers, as Bitcoin moves towards the start of a bull run, Monero will also appreciate in equal measure.

Surprisingly,
Monero’s inflation rate will only stay above Bitcoin’s for only a decade from
2019 to 2027/2028.

According
to a Redditor:

“In 2019, the XMR money supply will get close to Bitcoin’s money supply (gap<million coins), then the gap will grow again to nearly 2 million coins by 2027/2028 before it shrinks again. In 2040, we [will] see the intersection point of identical coin supply for Monero and Bitcoin (both nearly 21 million coins).”

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Venezuelan Petro Against US Sanctions: History and Use of the Crypto

Venezuela is leading the crypto peer-to-peer BTC trade market, despite government efforts to drive adoption of its oil-backed cryptocurrency, Petro.

For the entirety of cryptocurrency’s short history, Venezuela has been seen to be among the most striking example of the need for the utility. The South American country has hosted escalating political tension for years, as skyrocketing hyperinflation, electricity blackouts and shortages of vital food and medicine intensified popular discontent.

Venezuelan trade volume dominates P2P markets

Venezuelan peer-to-peer (P2P) markets have long been a leader in terms of volume, in part owing to widespread geo-blocking that targets Venezuelan citizens on the part of cryptocurrency exchanges. Recently, Binance announced that as of July 1, 2019, the residents of Venezuela and 28 other countries will be restricted from accessing Binance’s decentralized exchange platform.

Venezuelan trade has consistently comprised the second-largest market on P2P Bitcoin marketplace Localbitcoins, trailing only behind Russia. During the week of July 13, 2019, approximately 5,012 BTC changed hands — equating to 49,248,298,468 Venezuelan bolivar (approximately $5 million).

LocalBitcoins Volume in Venezuela

Origins of Venezuela’s economic crisis

Following former President Hugo Chavez’s death in March 2013, Venezuela’s current president, Nicolas Maduro, was elected to power in April 2013. The Democratic Unity Roundtable, an electoral coalition of Venezuelan political parties opposed to the policies of the United Socialist Party of Venezuela, claimed that the election was fraudulent. However, the Supreme Court of Venezuela ruled Maduro to be the country’s legitimate president. During 2013, Venezuela’s annual inflation reached a 16-year-high of 56.2%. Since Maduro’s election, hundreds of thousands of Venezuelans have taken to the streets to protest corruption, hyperinflation, a scarcity of basic goods and violent coercion. 

Oil prices slump during 2014

From the start of 2014, the price of oil dropped roughly 60% from more than $100 per barrel. With crude oil equating to approximately 80% of Venezuelan exports, the plummeting price of oil drove the Venezuelan economy to enter a recession. 2015 saw Maduro’s United Socialist Party of Venezuela suffer defeat during parliamentary elections. However, Maduro vowed to “stop by hook or by crook the opposition coming to power, whatever the costs, in any way,” and replaced the country’s entire Supreme Court the following day. The following month, President Maduro consolidated executive control over all three branches of government amid decreeing a national “economic emergency,” effectively preventing the National Assembly from legislating.

During 2015, Venezuela experienced the highest rate of inflation in the world, with inflation exceeding 100% for the first time in the country’s history. The following year saw annual inflation reach 274%, while the price of consumer goods in Venezuela rose by 800%. A study published by Diario Las Americas approximated that more than 15% of Venezuelans were then regularly consuming food waste that had been discarded by commercial establishments.

During 2017, Venezuelan inflation was estimated to have skyrocketed to 2,000% annually. Victor Torres, a chauffeur living in the Venezuelan city of Maracaibo, articulated the ordeal of attempting to make basic purchases under conditions of extreme hyperinflation to The Telegraph, stating: “The other day I went to buy a banana. In the morning it cost 1,900 bolivares and in the afternoon, 3,000. You can’t live this way. I am disappointed with politicians.”

Petro implementation timeline

Venezuelan inflation climbs to 130,000% in 2019

Following Venezuela’s May 2018 election, Maduro claimed to have won 67.8% of the ballot. However, the result was challenged by the governments of Argentina, Chile, Colombia, Brazil, Canada, Germany, France and the United States — which described the election as failing to guarantee a free, fair and transparent democratic process, and subsequently moved to recognize Juan Guaido of the Popular Will party as the legitimate president of Venezuela. During October 2018, Venezuelan annual inflation was estimated to have reached 130,060%.

Since 2015, the United Nations estimates that 4 million Venezuelans have fled the country — roughly 12.5% of Venezuela’s current population.

Since the establishment of the Corruption Perceptions Index in 1995, Venezuela has been ranked among the world’s most corrupt regimes. In 2010, the index ranked Venezuela as the 164th-least transparent government of 178 nations, with Venezuela ranking 166th of 178 countries in 2016, and 168th of 180 nations in 2018. The World Justice Project also ranked Venezuela 99th out of 99 nations according to its 2014 Rule of Law Index, with the index currently ranking Venezuela 126th of 126 nations.

Economic sanctions

In addition to struggling to persevere the degrading economy and rampant political corruption, Venezuelan citizens also bear the brunt of sanctions imposed on the Latin American nation by the U.S. and other countries.

At the start of 2019, Alfred de Zayas, the first U.N. rapporteur to visit Venezuela for 21 years, described U.S.-imposed sanctions as comprising “economic warfare.” The special rapporteur recommended that the International Criminal Court investigate the sanctions maintained by the U.S. as potential crimes against humanity under Article 7 of the Rome Statute, arguing that the sanctions are illegal due to their lack of endorsement from the U.N. Security Council. He stated:

“Modern-day economic sanctions and blockades are comparable with medieval sieges of towns. Twenty-first-century sanctions attempt to bring not just a town, but sovereign countries to their knees.”

Zayas’ findings were based on his late-2017 mission to the country that saw the rapporteur interview government ministers, members of the country’s opposing parties, nongovernmental organizations (NGOs) operating in Venezuela, and local academics, activists and church officials. The criticisms of the economic sanctions have been echoed by numerous NGOs, with the president of Fundalatin, Eugenia Russian, stating:

“We consider that one of the fundamental causes of the economic crisis in the country is the effect that the unilateral coercive sanctions that are applied in the economy, especially by the government of the United States.”

President Donald Trump has recently threatened to intensify the sanctions currently imposed on Venezuela, stating that he will “continue to use the full weight of United States economic and diplomatic power to press for the restoration of Venezuelan democracy” while announcing support for the recognition of Guaido as the country’s legitimate leader in January.

Petro

In a bid to circumvent the economic sanctions imposed on Venezuela, Nicolas Maduro announced plans to launch a cryptocurrency backed by the nation’s oil, gasoline, gold and diamond reserves during December 2017. The president claimed that the digital currency, named Petro (PTR), would allow the country to access “new forms of international financing.”

At the start of January 2018, President Maduro ordered the issuance of the first 100 million Petros, announcing that each Petro will be pegged to the value of one barrel of Venezuelan oil — equating the cryptocurrency’s capitalization to roughly $5.9 billion. Several days later, the opposition-run National Assembly criticized Petro, calling the digital currency “null and void.” Parliamentary Deputy Jorge Millan described Petro as fraudulent, stating: “This is not a cryptocurrency, this is a forward sale of Venezuelan oil. It is tailor-made for corruption.” He went on:

“We find ourselves before a new kind of fraud, disguised as a solution the (financial) crisis. This incompetent government wants to compensate for lack of oil production with these virtual barrels.”

At the end of January 2018, Maduro announced that cryptocurrency mining was a “perfectly legal” activity. The president also announced that citizens targeted during the prior year’s police crackdown on mining operations would have any related charges dismissed. On Jan. 30, 2018, Maduro’s administration published the white paper for the cryptocurrency.

On Feb. 8, 2018, Jose Vielma Mora, Venezuela’s minister of foreign trade and international investment, told the state-sponsored news outlet TeleSur that foreign investors would be willing to conduct trade in exchange for Petro, claiming that Poland, Denmark, Honduras, Norway, Canada and Vietnam were among the trading partners preparing to accept the controversial cryptocurrency as a means of payment.

Venezuela launched the presale for Petro on Feb. 20, 2018. 82.4 million Petros were made available in exchange for select fiat currencies and cryptocurrencies. Three days later, Venezuelan media claimed that the presale had raised $1 billion. On Feb. 24, the Venezuelan government launched a free cryptocurrency training course aimed at improving digital currency literacy for ordinary citizens.

Trump administration bans U.S. citizens from purchasing Petro

On March 19, President Trump barred American citizens from purchasing Petro by executive order. At a G-20 meeting in Buenos Aires, U.S. Treasury Secretary Steven Mnuchin, stated:

“President Maduro decimated the Venezuelan economy and spurred a humanitarian crisis. Instead of correcting course to avoid further catastrophe, the Maduro regime is attempting to circumvent sanctions through the Petro digital currency — a ploy that Venezuela’s democratically-elected National Assembly has denounced and Treasury has cautioned U.S. persons to avoid.”

The U.S. Treasury Department described Petro as comprising an “attempt to prop up the Maduro regime, while further looting the resources of the Venezuelan people.” On March 27, Bitfinex announced that it would not support Petro in light of the U.S. sanctions against the cryptocurrency.

Venezuela promotes Petro adoption

During 2018, the Venezuelan government conceived several initiatives designed to bolster the adoption and perceived utility of Petro. In May 2018, Maduro announced the launch of a Petro-funded crypto bank that would support project proposals from the country’s youth. During July 2018, The Venezuelan minister of habitat and housing, Ildemaro Villarroel, announced a plan to fund the construction of houses for homeless citizens using the cryptocurrency. The following month, the president also announced that Petro would be used as a general unit of account in Venezuela, stating:

“As of next Monday, Venezuela will have a second accounting unit based on the price, the value of the Petro. It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry.”

Despite the announcements, during August 2018, Reuters reported that there was little indication of Petro’s presence in the oil-rich Venezuelan town of Atapirire. Despite comprising the sole town located in a region that the Venezuelan government estimates is home to 5 billion barrels of oil, Atapirire resident, Igdalia Diaz, told Reuters, “There is no sign of that Petro here.”

During the same month, the country’s former oil minister, Rafael Ramirez, estimated that Venezuela’s state-owned oil company did not possess the roughly $20 billion that he believed would be required in order to tap the nation’s oil reserves. Ramirez stated, “The Petro is being set at an arbitrary value, which only exists in the government’s imagination.”

Accusations of plagiarism

Ethereum Core developer Joey Zhou published a tweet on Oct. 2, 2018, asserting that the 11th page of Petro’s white paper contained an image plagiarized from the Github repository of Dash. Petro also opted to use the same X11 proof-of-work (PoW) mining algorithm as Dash. Zhou described Petro as comprising a “blatant Dash clone.”

On Oct. 5, 2018, Venezuelan Vice President Delcy Rodriguez announced that the fees for all passport applications would be exclusively payable in the form of Petro from Oct. 8 onward. The announcement was accompanied by a hike in the cost of passport applications, with new applications incurring a fee of 2 PTR and passport extensions priced at 1 PTR.

Venezuela launches Petro offering

Venezuela’s Ministry of Economy announced that Petro had been made available for purchase on Oct. 29, 2018. In an infographic published on Twitter, the token could be purchased from the Venezuelan Treasury from either the coin’s official website or from six government-authorized cryptocurrency exchanges: Bancar, Afx Trae, Cave Blockchain, Amberes Coin, Cryptia and Criptolago. The official Twitter account of the Petro indicated that investors were able to purchase the cryptocurrency using U.S. dollars, euros and Chinese yuan, in addition to Bitcoin, Litecoin, Ether and Dash. 

During November 2018, the National Assembly of Venezuela approved a bill containing new cryptocurrency regulation. The bill sought to legitimate Petro as a unit of commercial exchange within the country. The same month saw the National Assembly pass amendments to Anti-Money Laundering (AML) laws to pave the way for Venezuelan cryptocurrency exchanges to conduct foreign exchange operations using Petro.

Venezuelan government official Andres Eloy Mendez described the amendments as being intended to combat the “financial and commercial blockade” being maintained by the U.S. government, adding that the cryptocurrency would allow the evasion of sanctions and facilitate new transnational business relationships.

Venezuela raises bolivar-value of Petro

On Nov. 30, 2018, President Maduro announced that the fiat-value of Petro had been raised from 3,600 bolivars to 9,000 bolivars amid extreme inflation, alongside ordering an increase in the monthly minimum wage by 150% — the sixth wage hike of that year.

During December 2018, the Venezuelan government moved to automatically convert its pensioners’ monthly bonuses into Petro. According to Caracas Chronicles, pensioners’ government payouts were withdrawn and converted into Petro after initially being deposited into fiat accounts hosted by government web portal patria.org.ve on Dec. 7, 2018. 

On Dec. 28, 2018, Venezuela filed a consultation request with the World Trade Organization (WTO) making a complaint regarding the economic sanctions imposed by the U.S., describing five examples of “coercive trade-restrictive measures” that were imposed on the Bolivarian Republic of Venezuela. 

With regard to “transactions in Venezuelan digital currency,” the complaint alleged that U.S. sanctions violated the WTO’s General Agreement on Trade in Services by subjecting Venezuelan financial service suppliers to conditions “less favourable than that accorded to like services and service suppliers of WTO Member States not subject to the measures,” as well as conditions inferior to the treatment of “like domestic financial services and service suppliers.”

In February 2019, the Venezuelan government published a decree imposing regulations on cryptocurrency remittances within the country. The document revealed that the National Superintendency of Crypto Assets and Related Activities (SUNACRIP) would be responsible for taxation pertaining to cryptocurrency transactions. 

The new regulations established a monthly limit on cryptocurrency regulations and imposed a maximum fee of 15% on cryptocurrency transfers alongside a minimum fee of roughly $0.28. Remittances in the form of Petro were capped at 10 PTR per month (equating to approximately $600), however, individuals and entities will be permitted to conduct up to 50 Petros worth of monthly trade with SUNACRIP approval.

Petro-active

During March 2019, the United States Treasury Department added Moscow-based Evrofinance Mosnarbank to its sanctions list, accusing the financial institution of comprising the “primary international financial institution willing to finance” Petro. The department stated:

“This action demonstrates that the United States will take action against foreign financial institutions that sustain the illegitimate Maduro regime and contribute to the economic collapse and humanitarian crisis plaguing the people of Venezuela.”

In May 2019, Venezuelan U.N. delegate Geneva Jorge Valero stated that Russia and Venezuela were discussing utilities for Petro amid agreements to settle trade using the Russian ruble. On July 4, 2019, President Maduro ordered the country’s leading bank, Banco de Venezuela, to open “Petro desks” and accept PTR at all of its branches.

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EOS Holders Vote to Reduce the Annual Inflation From 5% to 1%

EOS coin holders voted on whether to reduce the inflation from 5% to 1% per year.

EOS holders voted to reduce the annual inflation rate from 5% to 1% as of June 1, according to data on the voting platform maintained by EOS Block Producer (BP) EOS Authority.

According to the poll’s description, out of the current 5% of annual EOS inflation, 4% is being accumulated in the eosio.saving account while 1% is distributed among BPs in exchange for network maintenance. About 3.6 million EOS are reportedly created and sent to this on-chain account every month, and this number increases due to compound inflation mechanisms.

The original purpose of accumulating funds on the aforementioned account was allegedly to have the community vote on how to spend it or even burn it. Still, the proposal claims:

“However, 8 months have past and there is still no defined use for this large quantity of EOS tokens that continues to flow into the eosio.saving account. This large quantity of accumulated tokens has now become excessive and if we continue to allow it to keep growing, it will eventually become an attack vector for the network.”

The author of the proposal description notes that “it is therefore time to turn the tap off and reduce the level of inflation down.” Lastly, the text also notes that the implementation of the new inflation rate would have no effect on the earnings of the Block Producers:

“The 1% rate of inflation going to block producers (0.25%+0.75%) will remain unchanged.”

At press time, 100% of the 778 account that staked about 27.3 million EOS have been cast in favor of reducing the inflation.

As Cointelegraph reported on June 2, EOS parent company Block.one has announced a blockchain-based social media platform called Voice.

MakerDAO has seen a series of votes to change the so-called stability fee for its Ethereum blockchain-based decentralized stablecoin DAI, most recently lowering it by 2%.

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Coinbase-Backed Stablecoin Startup Reserve to Launch ‘Venmo Style App’ in Venezuela

Stablecoin project Reserve announced that it will launch a Venmo-like payments app in Venezuela and Angola.

Stablecoin project Reserve announced that it will launch a crypto-fiat payments app in Venezuela and Angola in a press release shared with Cointelegraph on May 12. In the same announcement, the firm revealed that it is listing its separate utility token, Reserve Rights (RSR), on major exchange Huobi Global’s token sale platform, Houbi Prime.

Per the press release, the project’s stablecoin app — to be launched for Android users via Google Play “in the coming weeks” — will enable people and businesses to switch back and forth from their local fiat currency to the firm’s stablecoin, the Reserve Dollar (RSD). According to the announcement, RSD is a decentralized, United States dollar-pegged cryptocurrency.

Nevin Freeman, co-founder and CEO of Reserve, told Cointelegraph that the reason the app is launching in Venezuela in particular is linked to the extreme level of inflation in the country, noting:

“A lot of people, including some of our investors, discouraged us from starting in Venezuela. [..] The hyperinflation there is the exact problem that Reserve is built to fix, and Venezuela is suffering the most inflation of anywhere in the world right now, so we felt that it had to be done.”

The press release claims that there are currently 16 countries with annual inflation greater than 20%, but that the situation in Venezuela is particularly troubling, with the Venezuelan bolivar losing nearly 10% of its value every day.

As Cointelegraph reported in February, the deepening of the country’s currency crisis has seen increased use of bitcoin (BTC) and other cryptocurrencies in the region. Near the end of December, dash (DASH) celebrated the 2,500th merchant in Venezuela to accept the coin as payment. Back in August 2018, it could boast of only 1,000 merchants that accepted the crypto.

Reserve also reported that it has landed a partnership in Angola with 7Mobile Africa — reportedly the largest mobile importer in the country — to pre-load the app on all its shipped smartphones.

As Cointelegraph reported in June last year, in addition to Coinbase, the project has received backing from major venture capital names, such as Peter Thiel, Sam Altman, Digital Currency Group, Arrington XRP Capital, Distributed Global and GSR.IO, among others.

Huobi is currently the world’s 9th largest crypto exchange by adjusted daily trade volumes, seeing over $2 billion in trades on the day to press time.

In February news broke that the Venezuelan government had introduced regulations for crypto remittances within the country. According to the new requirements, the state has set out monthly limits and commissions, payable to the National Superintendency of Crypto Assets and Related Activities, on cryptocurrency remittances.

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Universal Protocol Alliance to Launch Euro-Pegged Stablecoin in April

Universal Protocol’s stablecoin Universal Euro will be pegged to the euro on a 1:1 basis and will allow holders to earn interest.

The Universal Protocol (UP) Alliance, a coalition of blockchain firms including crypto exchange Bittrex and decentralized browser Brave, will launch its own euro-pegged stablecoin in April, according to a press release on March 28.

The UP’s stablecoin, dubbed the Universal Euro (UPEUR) will be pegged to the euro on a 1:1 basis and will reportedly allow customers to earn up to 8 percent interest.

The Universal Euro will purportedly be available directly on digital money platform Uphold and participating exchanges, as will be accepted by crypto custodian and device providers such as BitGo and Ledger.

The new stablecoin targets residents in countries with high inflation or limited access to traditional banking, according to the press release. By using UPEUR, users will be able to lend their euro-pegged assets and earn interest.

Founded in 2018, The Universal Protocol Alliance represents an association of six industry organizations such as crypto exchange Bittrex, open-source pay-to-surf browser Brave, university-based eco-system for blockchain Blockchain at Berkeley, events firm Cred, blockchain startup CertiK, and Uphold.

CertiK was founded by academics at Columbia University to develop a formal verification framework that aims to mathematically prove that smart contracts and blockchain ecosystems are free from breaches and security-resistant.

The new stablecoin initiative comes amidst increasing popularity of stablecoins. Recently, Star Xu — founder of exchange services provider OKCoin and crypto exchange OKEx announced OK Group’s partnership with blockchain-focused trust company Prime Trust, purportedly allowing the firm to launch its own compliant stablecoin.

Previously, head of blockchain solutions at tech giant IBM hinted that bank-targeted stablecoins will be a major forthcoming development for the company’s blockchain cross-border payments solution.

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How Supply Affects Crypto’s Value, Explained

Debate has been raging on whether cryptocurrencies with a fixed supply are good or bad. Do they increase prices and demand, or stymy spending?

So is crypto actually a currency?

This is open to interpretation.

While some crypto startups have sought to ensure that their tokens can be used to buy something specific — whether its collectible cats or stocks — others are creating assets with a deliberately limited supply to help crypto users store value and see it appreciate over time.

One example is Bitcoin Rhodium. Its commodity, XRC, has a total supply of 2.1 million tokens coded in the blockchain. Named after a rare precious metal, the new crypto asset argues that other solutions were not a tempting proposition for investors seeking a long-term investment in crypto securities. It describes itself as the final part of the “Crypto Trinity” — along with Bitcoin and Litecoin — which is designed to appeal to a broad spectrum of investors, many of whom have different needs and interests.

As well as bridging the gap between crypto and traditional investments by offering a  time-bound dividend, Bitcoin Rhodium also says it offers a decentralized peer-to-peer exchange between precious metal investors and users of XRC, BTC and LTC — efficiently matching supply and demand without the need for intermediaries.

What happens when there are no Bitcoins left to mine?

Firstly, it might not be something you need to worry about — it’s unlikely many of us will be around in 120 years.

As this Cointelegraph feature explains, miners will particularly feel an impact. They are currently rewarded when they mine a block, but these rewards are going to tumble over time and eventually disappear altogether when supplies are exhausted. Satoshi Nakamoto himself predicted that the onus would change from block rewards to transaction fees once this plateau is reached — after all, transactions will still need to be validated on the blockchain. This could mean consumers end up paying higher fees in order to ensure their transactions are processed quickly.

As the number of Bitcoins remains stagnant and prices fall, divisibility is going to prove to be a vital factor in keeping supply levels strong. This cryptocurrency has eight decimal places — and Nakamoto reasoned that this would ensure that small purchases could still continue to be made. Without this, you’d end up in a situation akin to paying for a $1.50 can of cola with a $5 note, and not getting any change.

Ethereum tokens are divisible to 18 decimal places — and as this article explains, this is important because it ensures that they can easily be exchanged for different crypto assets or fiat currencies with differentiating value.

Over time, divisibility could prove to be more important than you may think. By 2017 — more than a year ago — a report had suggested that 3.8 million Bitcoins have already been lost. That’s 18 percent of the overall supply. Loss, theft and destruction were all likely factors, and you can bet your bottom dollar this figure is higher now.

What are the downsides of deflation?

One of the main downsides is a concept known as a “deflation death spiral.”

Like with hyperinflation, this is where things go to extremes the other way. Demand decreases because fewer people are spending money — yet, at the same time, prices are tumbling. Because the number of consumers buying goods or services has reduced, wages are vulnerable to falling, and economic productivity tumbles with it. This can lead to companies going out of business altogether.

It’s almost like a staring contest, where companies and consumers are waiting to see who blinks first. Businesses keep cutting their prices in an attempt to woo customers, but the public is holding out because they expect prices to fall. Ultimately, there’s a risk it could all become a race to the bottom.

This goes back to the Austrian School of Economics’ perspective that people would still need to spend money for essentials. It also believes that, as long as a currency or economy isn’t built on foundations of debt, the levels of deflation would stabilize to prevent such a death spiral.

In a way, this leaves cryptocurrencies at an impasse. How can it be transacted in order to gain momentum and attract mainstream adoption without missing out on the fact that their assets could be worth more in the future? Some advocates, like this Medium blogger, argue that the best way to remedy this is to make purchases using crypto — and then instantly buy more of it using fiat. If small things like coffee and lunch are bought using crypto, it can help demonstrate its utility and boost demand, with more merchants accepting it as a method of payment.

How do deflationary, fixed-supply assets affect consumer behavior?

When done right, it can reduce consumption — in a good way.

Many economies around the world are driven by the principle that it’s better to spend money now before it devalues in the future because of inflation. Debts — in the form of loans and credit cards — are rampant, and this applies at a government level too.

Deflationary assets encourage consumers to spend their money wisely so they can see their remaining funds appreciate in the future. But as Jorg Guido Hulsmann from the Austrian School of Economics points out, this doesn’t necessarily mean that crypto holders wouldn’t end up spending anything at all. Consumers would still spend money on essentials — food, fuel and mortgage payments — fully acknowledging that it could be cheaper in the coming years, as urgency is a factor.

Also, in an economy with a deflationary currency, there would still be times where you want to treat yourself — going to a bar, having a nice meal out or going to the cinema. Hulsmann argues that such crypto assets don’t have to be the death knell for consumer spending altogether, but it would make someone think twice before buying something they don’t really need.

It could also change the public’s relationship with debt — and make them more reluctant to borrow money for flashy cars and big televisions when they know that their payments would be increasing in value with every monthly repayment that passes.

So, Bitcoin may be deflationary. Isn’t deflation a bad word?

Not necessarily — this can help the cryptocurrency remain valuable.

Deflation relates to a decrease in the price you pay for goods and services. It’s the opposite of inflation — a term you’ve probably heard of if you’ve ever wondered why prices keep rising in supermarkets. Although it is considered a bad thing in the traditional economy, it isn’t necessarily a bad thing in the crypto world.

Inflation is a problem because that $1,000 you store in a safe for a decade could end up buying you a lot less. Just look at the United States Inflation Calculator, which shows that a $1 item in 1913 would cost $25.43 today.

As Blockonomi’s Brian Curran explains, inflationary markets also lead to “rampant debt levels” and push economies to live beyond their means. It can also end up going to extremes — and in Zimbabwe, inflation rates soared from 59 percent in 2000 to 80,000,000,000 percent (yes, 80 billion) in 2008. This is hyperinflation, and it renders currencies unusable. Venezuela, a country suffering from extensive political instability, has become one of the world’s biggest crypto markets because of hyperinflation, with one trader saying: “Even though Bitcoin is volatile, it’s still safer than the national currency.”

Cryptocurrencies such as Bitcoin are finite — with some economists comparing them to “digital gold” as a result. As output rises, the prices of goods are going to fall, but crypto as a store of value could rise simultaneously. Advocates of deflation argue that this is far more stable than what we see in the global economy today.

Ethereum doesn’t have an overall cap, and instead, new crypto is injected into its ecosystem every year. Although this makes it inflationary, inflation rates are decreasing as more ETH enters circulation.

Are cryptocurrencies with fixed supplies a good thing or a bad thing?

This is a hot topic for debate, and crypto companies have taken different approaches when creating their own assets.

The world’s biggest cryptocurrency, Bitcoin, has a fixed supply of 21 million — and last April, it was confirmed that 80 percent of this total had already been mined. Although newly minted Bitcoins aren’t going to be around forever, as the number available is going to decrease over time, there’s still a long way to go before they will all enter circulation. In fact, as things stand, the supply of new coins won’t be fully exhausted until 2140.

Those in favor of fixed supplies, as seen in Bitcoin, say that this creates digital scarcity. Lower supply can mean higher demand, thereby increasing prices. They also say that this sets crypto aside from the global financial system, in which central banks can effectively print more money through a strategy known as quantitative easing, which can lead to inflation and mean the dollar in your pocket isn’t worth as much as it used to be.

But in terms of cryptocurrencies achieving mainstream adoption, some opponents argue that fixed supplies actually stop people from spending, meaning that digital assets are speculative investments that people hoard. As this Bloomberg article argues, depreciation is impossible when an asset is finite, and this creates the risk of crypto owners waiting to get their goods cheaper. When it comes to conventional currencies, inflation is something that disincentivizes consumers from holding onto their cash — the longer it’s in their wallet, the less purchasing power it has.

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Report: Venezuela Converts Pension Bonuses into State-Issued Crypto Petro

Venezuela has reportedly automatically converted pensioners’ most recent monthly bonus into its national oil-backed cryptocurrency, the Petro.

Venezuela has automatically converted pensioners’ most recent monthly bonus into its national oil-backed cryptocurrency, the Petro (PTR), according to a report from English-language politics blog Caracas Chronicles Dec. 12.

First launched as a pre-sale in February, the controversial Petro has been in circulation as one of Venezuela’s two official currencies as of August 20: the second being a rebranded fiat currency, the Bolívar Soberano (Sovereign Bolivar, or Bs.S.), which is indexed to the Petro.

According to Caracas Chronicles, pensioners’ recent government payouts Dec. 7 arrived initially in Bs.S. to pensioners’ web fiat wallets, but were automatically withdrawn and converted into Petro, with the new balance reportedly accompanied by a laconic description, “savings in petro.” The blog reproduces the alleged messages sent to pensioners as follows:

“MOTHERLAND WALLET: CREDIT for an amount of Bs.S. 1,800.00 for the concept of Elderly Love Pensions (Third month Christmas bonus 2018) on 12/07/2018.

MOTHERLAND WALLET: DEBIT for an amount of Bs.S. 1,800.00 for the concept of Savings in Petro on 12/07/2018”

As of January 2017, pensioners in Venezuela have received their bonus payouts via the government’s “motherland card” (carnet de la patria) scheme, which has been linked to a mobile wallet (Billetera Móvil) as of January 2018, accessed through the government web portal patria.org.ve.

When payments were made in Bs.S. without subsequent PTR conversion, pensioners would reportedly receive a notification of credited funds, transfer their credit to a bank account, and then –– in Caracas Chronicles’ description –– queue “all day” at a branch to withdraw their funds.

The blog alleges that dependency on the carnet de la patria system to access much-needed pension bonuses and other social benefits has enabled the government to pressure citizens to “ditch their official banking system,” and that adding payment functionality –– as well as integrating the Petro and Patria wallets, without needing recourse to a bank –– would complete the government’s desired short-circuit.

Chronicles Caracas claims both the Patria and Petro initiatives are a bid to secure “full control over citizens’ finances,” and impel them to save Petros as “protection” from the hyperinflation the government itself “provokes.”

The official sale of Petro in Venezuela started this November, with several top officials — including Maduro — purchasing it via the official website. As of press time, the currency is not yet available on any of the top-100 crypto exchanges on CoinMarketCap.

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Managing Savings In Zero Interest or Inflationary Economy

The most recent potential nominee to the Federal ReserveMarvin Goodfriend, is in favor of negative interest rates. In simple terms, if a retiree kept cash in a savings account, that money would slowly dwindle as negative interest rates ate into the principle.

This type of scenario is not as far fetched as it may seem. Such a policy is possible among major government powers because central banks allow for arbitrary interest rate manipulation.

What’s more, with central bank interest rates at zero or just above zero, the risk of inflation has risen to an all time high. Such inflation would further erode savings and devalue most major fiat currencies in the world.

Additionally, transactions with fiat currencies are riddled with high fees, middlemen, long wait times and slow processing. The problem is real.

Currency solutions

While the current cryptocurrency market provides some solutions, such as increased liquidity and the potential for inflation control and fee reduction, consumers are not wholly convinced. For a solution to truly be viable, it must incorporate fiat currency as well.

The X8currency platform has created a currency solution that will truly solve all of these issues in a single system. After 10 years of platform development, the X8 team has released the X8C ERC-20 token.

The scientific basis for the token is founded on the concept of diversification, making it possible for contributors to the X8currency to diversify their investment into a wide array of fiat currency (USD, JPY, GBP, EUR, CAD, AUD, CHF, NZD) and monetary gold holdings. When an investor initiates a purchase, those funds are included as part of the large reserves held by the X8currency platform.

By diversifying into a number of currencies and gold, X8currency creates an automatic hedge against fluctuations in any single currency or precious metal.

This diversification process is optimized by the Automatic Reserve Management AI technology – a proprietary artificial intelligence system – which chooses the best possible array of fiat and gold in order to provide liquidity and stability for investor funds.

Internal functionality

To protect users from risky legal concerns regarding securities laws, the X8currency team has created a dual token structure. The X8C token is linked directly to the reserves deposits within the platform. This makes it the central token within the marketplace, as it is created any time an investor moves funds into the X8currency platform.

The parallel token, X8X, is a utility token, designed as a gatekeeper token that requires users to pass through customary KYC (know your customer) verification before accessing the X8C tokens. Investors must hold X8X tokens in order to be eligible to purchase X8C tokens.

The system is designed to bridge between the crypto and fiat worlds, and is engineered to Swiss financial standards. For more information, check out the X8currency blog, or read their carefully crafted whitepaper.

By building a unique link between the crypto and fiat worlds, and providing controlled hedge diversification structure, X8currency has created a method for protecting the cash assets of more than 3.5 bln people within the scope of the world’s top eight currencies. The impacts of inflation, interest rate manipulation and arbitrary central bank control can be mitigated or eliminated through the X8currency platform.

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

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Adoption of Bitcoin Picking Up Speed in Venezuela, Called “Lifesaving” Currency

Bitcoin is now becoming a constant part of many Venezuelans’ everyday life.

Whether they’re buying food, plane tickets, or even paying employees, Bitcoin is now a common mode of payment for Venezuelans. Frankly, many people in the country rely on cryptocurrencies for survival.

Survival of fittest

Venezuela’s hyperinflation has rendered the national currency, the Bolivar, nearly worthless. Thousands of ordinary people have begun turning to the world of cryptocurrency to salvage what little value remains in their savings..

One Venezuelan, John Villar, knows the struggle of having a his national currency become worthless, so he sticks with Bitcoin for all of his transactions. He said that his situation, choosing digital currency is not a matter of politics but of survival. Bitcoin transactions are relatively swift for anyone with a smartphone: Websites like LocalBitcoin and Colibit function as exchanges where Venezuelans can buy and sell bitcoins using a local bank account.

Government’s move

Cryptocurrencies have become so fashionable that even President Nicolas Maduro has proposed a government-backed version called the Petro. Members of his administration have met with Venezuelan Bitcoin entrepreneurs to determine how such a currency might work. Though few details have been released, many in the Bitcoin world have responded skeptically to the idea. It seems unlikely that Venezuelans will trust a digital currency issued by a government they have little faith in.

In Venezuela, the so-called “crisis currency” is allowing desperate Venezuelans to make potentially life-saving purchases.

Villar had been unable to find several of the medications needed to treat his wife’s multiple sclerosis in Venezuela for the last two years, a story not uncommon in a country whose public health system has been crippled by shortages. Instead, he purchased them abroad with Bitcoin and used courier services to deliver them to Venezuela.

Authorities have largely permitted trading of Bitcoin in Venezuela, though they have heavily fined and detained people who attempt to mine the digital currency. For Villar, the stakes are especially high, and not just for his business. An engineer who once ran a biometrics enterprise, he is staking his financial future on the development of a game involving an alternative cryptocurrency called PepeCash.

A dozen employees operate from a small office filled with computers in an industrial community east of the capital. All receive part of their salary in Bitcoin. His wife, also an engineer, is now largely bound to a wheelchair.

“At this moment, I don’t have a single bolivar.”

Ambassadors from other digital currency projects, such as Dash, have been trying to familiarize Venezuelans with an array of cryptocurrencies. Earlier this fall, Dash sponsored 12 free conferences in the country in order to raise awareness.