The economic model on which a crypto currency is built is as important to its sustainability, as economic models are to the sustainability of the societies in which we live.
Consider Bitcoin, whose supply is fixed; i.e. there will never be more than 21 million Bitcoins. In this way, Bitcoin is a deflationary economy, and a draw-back of a deflationary economy is the disincentive to spend, which can restrain economic growth.
Other crypto currencies are inflationary, i.e. their total monetary supply is continually increasing. The downside of an inflationary economy is that if the inflation exceeds growth, the value of each saver will be eroded, as their representation in the overall money supply shrinks.
PIVX is built on a unique model that includes both inflationary and deflationary mechanisms, that encourage spending, support growth, fund the continued development of the project, while at the same time protect the value of savers.
Here’s how it works:
Inflation — Each time a block of transactions on the PIVX network is processed, 5 PIVs are awarded to the computers involved in securing the network. (This is how PIVX users earn interest, as their “wallets” participate in this processing.) And if there are PIVX projects requiring funding, an additional 1 PIV is created for the “PIVX Treasury”. In this way, PIVX is inflationary.
Deflation — Each time a PIVX transaction is made, a small fee is charged to the sender—just like in any other crypto currency. What’s unique to PIVX, however, is that these fees are destroyed by the network. As this reduces the overall PIVX monetary supply, this fee-burning mechanism is deflationary.
Depending on the total volume of transactions on the network, and the number of participants securing the network, the overall monetary system can oscillate between inflationary and deflationary.
The PIVX economy in this regard is unique, innovative and sustainable!