Defi and loans will increase the inflation of Monero (good thing)

This follows the economic models that we already know, central bank’s money (fiat generated by central banks) only contributes a small amount to inflation, what makes the most of inflation is the commercial bank’s money (in other words, loans and deposits which gives the ability to the commercial banks to give more loans).

Cryptocurrencies, specifically Monero, follow this economic model. Monero has a tail emission that can be compared to central bank money (where the fiat is created), most people think that the inflation stops with the creation of xmr (0.6 xmr per block being generated for an infinite amount of time). But in reality, most of the inflation will be coming from defi and loans. Therefore, the real circulating supply (xmr mined + loaned xmr) will be much more than we already have.

Xmr will be the most favourite crypto because it will allow platforms and defi protocols to lend xmr without having xmr (what banks do with fiat), and with very low risk since the volatility will be lower compared to other cryptocurrencies.

The only thing that’s different from the banking system that we have in our countries, is that there is no one to control the interest rates at which those Monero loans are given. The Monero economy is fully decentralized and will probably be controlled by consensus and arbitrage in the future.

This is a good thing because it means that Monero will become real money and will be spent on goods and services instead of being used as an investment.

submitted by /u/pipola78
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