Whether you are a diehard stockbroker or a passionate crypto bro, inflation affects everyone.
The rich hate it, the poor hate it.. All jokes aside, inflation affects everyone in the world that owns any amount of money. Combating inflation has proven to be tricky. However, cryptocurrency has changed the game, well kind of. The S&P 500 index stock is a go-to hedge fund against inflation for many gurus but something like an index stock is not really stable, it can still fluctuate. If all these terms sound crazy to you, you might want to educate yourself a bit more on finances. Places like Spotcoin.com are good for the latest crypto news. For investing terms and classic stocks, you can visit places like investopedia.
Fiat inflation & circulation explained and broken down
It’s important to look at why inflation happens, though many of you might already know. Inflation happens when new money gets added into circulation. Let’s break it down even further, imagine 10 people holding 1 cookie so there are a total of 10 cookies in circulation. People value 1 cookie a lot because there are only a total of 10 cookies! So let’s say I go to the bakery and get 50 cookies and take those with me to the group of 10 people and divide all 50 new cookies equally among the group. They all have a total of 6 cookies now.
Thus, valuing one single cookie is not as much anymore because there are a total of 60 cookies now among the group. You can apply this exact metaphor in the real world too, not with cookies of course but with money. Adding money into the “system” or circulation makes the value go down.
How does the blockchain & crypto combat inflation?
We got technologies in place like pancake swap which allows us to stake and receive rewards from transaction fees on the market. There is a lot of money made daily through places like pancakeswap when the market slides sideways. Most often any crypto exchange has their own staking system in place, built into the app or the platform.
Staking is pretty much putting your coins in a locked vault for a given amount of time. Meanwhile your money gets lent out to other investors who will try to make a high profit and then return the money with an interest. These staking systems can give up to 10% interest which is right around where the inflation is right now. So you are combating inflation and keeping your money’s value high.
