i’m attending the Blockchain & Bitcoin 101 course.
In the Mining PoW & Incentives chapter, Ivan talks about Inflation + Fee, as a block reward for succesfully solved the “Cryptographic Puzzle”.
I can’t figure out the inflation concept, i know Bitcoin has a maximum number of blocks and it is issued every 10 minutes, but i can’t connect to the inflaction concept.
I’m not very good in finance, if someone could explain me inflaction in easy words, it would be really appreciated.
Thanks and best regards
Inflation = print more money and flood the market
I dont know if you ve seen the episodes with Mike Maloney?
Thanks a lot BittMark, i haven’t seen the Mike Maloney video yet but i’ll watch it really soon. I continued a couple of lessons and now it seems clearer.
Good course, really interesting.
Thanks again and enjoy
Inflation can occur in 2 ways. Either way, we tend to blame inflation for the cost of goods rising.
The first form is simply due to an event, like a large oil refinery becoming non-operational. The result of this is a lower supply of oil which causes oil prices to go up and trickles down to most other goods causing their prices to increase(inflate).
This is not real inflation though, just a lower supply which increases the price. Monetary expansion is what I would consider ‘real’ inflation. This can occur by literal money printing or more complex mechanisms like banks creating loans for more dollars than they have in reserve. For example, a bank has $1000 cash but gives out $10,000 in credit. This would mean there is now $9,000 extra in the markets. More dollars dilute the existing supply (makes current dollars worth less). Inflation is just that, dollars are now worth less. If dollars are worth less, then goods have to cost more dollars.
I hope this makes sense. Centralized inflation is one of the big things that Bitcoin solves. In simple terms, when the central bank prints, they expand the money supply so that they can pay for whatever it is the treasury is trying to allocate funds to. In the process, they are making your dollars worth less. I classify this as robbery. If the government wants my money they should have to tax me with my consent.
many thanks for taking time and for this useful ang super-clear expalnation.
Inflation seems to be an easy concept to learn but, thinking better, it has a lot of aspects…
Now it’s clear
Many thanks again and have a good day!!