Economic Theory

The Theory behind Inflation

Inflation causes prices to rise over time, reducing the purchasing power of currency, measured by the rate at which the cost of goods and services increases. Conversely, deflation involves falling prices and increasing money value. Palantium is engineered to avoid inflation, thereby preserving its purchasing power, unlike traditional currencies.

Mining Rewards

A cornerstone of Palantium’s economic model is the absence of mining rewards, which traditionally create new coins. The theory posits that no mining rewards eliminate the primary inflationary pressure, leading to a stable value of the currency. Without new coins being introduced through mining, the supply remains fixed, mitigating traditional inflationary tendencies.

Mining Rewards and Market Effects

Typically, cryptocurrencies with mining rewards exert a stronger inflationary force because miners are compelled to sell their rewards to cover operational costs, such as electricity bills. This consistent selling pressure adds to the currency’s inflation, as the market needs to absorb the newly mined coins, often leading to a decrease in value.

The sell-off by miners can cause disproportionate inflation. Since mining rewards are continuous, the market may struggle to absorb the influx of coins, especially during downturns, exacerbating inflation beyond the rate of new coin production.

Holder Behavior and Long-Term Value Preservation

Investors in Palantium are perceived to be particularly interested in the long-term value preservation of their holdings. The theory suggests that such holders are less likely to engage in speculative trading or sell their coins for short-term gains, which further contributes to the currency’s price stability.

Price Stability and Reduced Volatility

Combining these factors — the absence of mining rewards, the non-inflationary policy, and the long-term outlook of its holders — Palantium aims to achieve a stable price with minimal volatility. The economic theory suggests that these elements work in synergy to create a stable ecosystem for the currency, distinguishing it from more volatile counterparts.