Currency Token
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For a deeper understanding of the nuances between capped vs. uncapped currency token supply, a brief excursion into foundational economics is required.
The central debate regarding token supply pivots on how supply parameters affect the token's potential as a store of value. As posited in paper , citing a
The notions of inflation and deflation are not praxeological concepts. They were not created by economists, but by the mundane speech of the public and of politicians. They implied the popular fallacy that there is such a thing as neutral money or money of stable purchasing power and that sound money should be neutral and stable in purchasing power.
From this point of view the term inflation was applied to signify cash-induced changes resulting in a drop in purchasing power, and the term deflation to signify cash-induced changes resulting in a rise in purchasing power.
Deflationary (retaining holder's value) currency is sound, good money. Inflationary (losing holder's value) currency is bad money.
As people prefer to keep solid tokens and trade bad money for goods and services, free market naturally drives good money spending to a minimum while also prompting maximized spending of bad money, inevitably creating both cause and effect for monetary use of bad money and its subsequent inflation, instead of popularizing use of good money which were driven into an appreciating asset rather than a usable in daily transactions currency.
This principle suggests that individuals tend to hoard robust tokens, using the less stable ones for everyday transactions. Such behavior intensifies the inflationary spiral of the 'bad money' while relegating 'good money' to a mere appreciative asset, rarely used in daily transactions.
Not to confuse with Disinflation - the decline in rate of inflation, deflation poses an enormous threat to a solid economic system.
As money/token/currency appreciates in value, consumers or general participants of economy have to ask themselves "Should I spend currency on this? Do I need this or can I wait for my currency to appreciate more and pay less a month from now?". Entire economical motivation to purchase something then ceases to exist. As spending is disincentivized, monetary velocity falls and so do industrial profits. In our case, deflationary effect on currency would limit spending on faction boxes and therefore reduce volumes and engagement of currency holders at every step of the system we previously discussed.
To summarize, the supply of Governance tokens is capped to exploit the benefits of deflationary or static effects on a token tied to project revenue. Symbolically, the supply of the governance token is limited to 21,000,000.
By comparison, a currency token aims to promote transactions volumes and token usage rather than hoarding currency out of circulation. As such, currency token is as much vulnerable to hyperinflation as it is to deflationary impacts of limited token supply.
Our solution to this problem lies in formulating a semi-backed currency token with a defined price floor and ceiling. With the currency token supply being uncapped and initialized at zero, we've established a simple ratio of 10 USD : 100 YV Currency.
Note: 10 USD implies a stable coin of choice pegged to the fiat US dollar denominated unit of value. Given the project's cross-chain orientation, the minting price of token on any chain will remain identical, though the stable coin chosen for a mint/burn functions may vary.
To guarantee a minimum value for our token and bolster users confidence, we've chosen to retain 50% of the minted value in a currency management smart contract with no option for withdrawal. This acts as a safeguard, ensuring that half of any and all minted amount remains refundable and backed at a 5 USD : 100 YV Currency.
Our model addresses two primary economic principles:
If the demand exceeds the current circulating supply, the deficit will be addressed by minting additional tokens by users themselves, ensuring the system can adapt fluidly to demands.
Should the freely available token volume exceed demand, users will naturally gravitate towards buying from the existing pool, rather than minting new tokens at a higher price. The guaranteed refund price ensures a secure trading environment, fostering peer-to-peer exchanges while still offering benefits from interplay between supply, demand, and price stability.
This natural harmony between speculators, core buyers, and sellers, amplified by the intrinsic values of our Non-Fungible tokens, creates a vibrant ecosystem. As collections are valued and traded in native blockchain tokens (Hbar, BNB, ETH...), coupled with YV Currency, drives fungible token trading and speculation, enriching governance token holders with a portion of ecosystem profits.
Another important economical theory is principle of Good Money and Bad Money. In short, the Gresham's law boils down to a simple concept:
