Steemit Crypto Academy Contest / S9W3 - STEEM Inflation

Hi everyone hope you are doing great I am also good with the grace of Allah Almight. I am excited to participate another exciting contests organized by the Steemit Crypto Academ the topic is STEEM Inflation. I would try to explain upto my best knowledge.

Source

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Use your own words to explain the concept of inflation in general and does it affect cryptocurrencies?

The term inflation referred to increase in price which mostly occured due to decrease in purchasing goods. This decline in purchasing power resultant caused an rise in rise in products price in a certain period of time.

In more simple words it means we need more amount of money to buy productsas the purchase power is decline. Generally rate of inflation is measured in term of percentage rise in price within particular time frame.

Now the question arise why the inflation is increasing with the passage of time.

• Inflation has increased due to more demand of products in certain time period. The goods which are needed to higher quantity if may leads to increase in inflation.

• For giving sufficient supply of products more amount of currency is needed, of course when more amount of currency is required it definitely may produce a rapid inflation in certain area.

• Another factor which may be cause of increasing inflation is decline in demands of goods. It also may become the reason of increase in inflation.

What are effect of Inflation on Cryptocurrency

The rise in inflatin definitely has effect on the cryptocurrency. The most prominent effect of inflation can be observed in fiat currency.

How the increase in fiat currencies may effect the inflation in cryptocurrency, it may explained as if the ratio of fiat currency would be more, then it would be more preference to cryptocurrency because it may provide good profit as they have to pay less cost to buy it.

It would leads to rise in cryptocurrency demand and it may become the reason of inflation.

It can be seen vice versa why the adoption of cryptocurrency will decrease it may occured when there is less demand of than availability of crypto asset.

So it can be concluded that the inflation may effect the cryptocurrency but depends on demand and supply.

It can be more clear by an example at present the bitcoin inflation trend is decline and its about at 1.8% and this reduction in price may noticed due to new coin creation is reduce. This is cause of down in supply of bitcoin and increase in demand.

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Explain the difference between deflationary and inflationary cryptocurrencies? And clarify what is the strategy followed by the Steem token and show how it works?

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The term deflationary cryptocurrency means a reduction in the supply of cryptocurrency within the certain period and a definite number of crypto is produced with time when the supply started to decline. It making the crypto less available there for it needs to maintain crypto.

Then different method are used such as burning for half it these methods are very useful because they help in decline in circulation of cryptocurrencies and does the price may be controlled from further reduction.

Hence the term inflationary cryptocurrency are contrasting with deflationary cryptocurrency. In this case, there is a rise in the pool of assets with time, it may be due to an increase in the number of coins due to mining. As mining generates more coins so more availability of coins to market.

Strategy Followed By Steem Token

If we talk about the steem token, steem is lower in inflation and deflationary conditions. If we consider about steem token it takes 3 seconds when a block is created.

So overall there is no availability of steem token. Moreover, new tokens are produced which tend to increase inflationary cryptocurrency.
In the case of deflationary steem tokens, the number of steem is lowered at steemit by using the term #burnsteem25.

The use of this tag enables to decrease in the number of steem. the use of SBD is also an effective strategy for deflationary.

Similarly, through the staking of the Steem tokens in the form of the club status is also effective measure.it may helpful in reducing steem supply.

So it may concluded that steem tokens are inflationary token but few measures are helpful for maintaining the range of inflation and adoption.

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Calculate the Current Inflation Rate (the day of preparation for publication)

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With the help of this formula i will calculate the current inflation rate of steem token.

Inflation rate at time t = (978 - (header_block_number / 250,000)) / 100

In order to calculate the current inflation rate head_block_number is needed which i checked from the steemworld.org.

Inflation Rate at time t= (978-74 ,414,388/250,000)/100

Inflation Rate at time t= 978-297.658/100

Inflation Rate at time t=680.342/100

Inflation Rate at time t=6.803%

The current Inflation rate is 6.803%

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By tracking the rate of inflation for the next few years, interpret how easy or difficult it will be to earn STEEM rewards, and would that push you to build your SP right now?

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In order to check what would be future trends to earn steem token it may crucial to find hence the block reward would decline or rise in the future.

In future the steem tokens can be earned quite easy only in sense if there would be increae in block rewards. While if the block rewards may show decline trend then its hard to earn steem token in nearby future.

It can be estimated as follow what would be the block reward trends.

For calculation the inflation rate virtual_supply and Number of blocks per year are needed, For getting the virtual supply i used steemworld.org.

As 3 blocks unit produce within 3 seconds, so the number of blocks units produce per year are:

365 * 24 * 60 * 60) / 3 = 10,512,000 blocks unit

New steem = (virtual_supply * inflation_rate ) / (Number of blocks per year )

virtual_supply=481, 588, 953.158

Inflation Rate=6.803%

Number of Blocks per year= 10,512,000 blocks unit

New steem = 481, 588, 953.158*6.803/10,512,000

New steem= 32,762, 496.48/10,512,000

New steem=3.1167

As we know 1 block unit produced within 3 seconds inflation rate reduce 0.01% per 250, 000 blocks units. so our calculations will be:

3 seconds=1 block
750, 000 seconds = 250, 000 blocks
For calculating the days we have to convert seconds into days by following method:

Day = 750,000 / (606024) days

= 750,000 / 86,400 days

= 8.681 days

For calculating the 3 years inflation rate, as there is decease in 0.01% so, for 3 years calculations we have:

1 year inflation rate = (365/8.681)*0.01

1 year inflation rate = 42.0458 * 0.01

1 year inflation rate = 0.4205%

So for calculating 3 years drop in inflation rate we have to multiple annual inflation rate with 3.
0.4205*3=1.2615

For calculating the 3 years difference in inflation from now we have to subtract the inflation rate value of this year from next 3 years inflation rate value.

3 years difference = current rate - change in inflation rate in 3 years

= 6.8034 - 1.2615

= 5.5419%

So, the inflation rate in coming after 2 years would be decline from the 6.8038% to 5.9638%.

Hence, it can evident the block rewards that will be in next year would be decrease than now. So it can be concluded that it would be not easy to earn steem in future.

Should we push to Built SP Now?

Steem power is the most effective way to gathered Steem and impact Steem ecosystem in future. I am building Steem power and I hope I will become a orca in the future that I will play my role in Steem ecosystem. It can be concluded from the above mentioned inflation trend i guess its perfect time to invest steem because in future its more hard to earn steem tokens.

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Conclusions

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It can be concluded that inflation rate would be decline which will make the steem token availability very less. Its right time to invest in steem. It all about my today's post i would like to invite my dear friends @m-fdo, @shanza1 and @uzma4882 to take part in the contest.