Systematic Market Control of Cryptocurrency Inflations

Abstract

Most cryptocurrency systems mint new coins according to a predetermined rate, which contributes to inflation instead of solely by the actual demand. On the other hand, the blockchain, or whatever distributed consensus protocol underlying the cryptocurrency, can only process a limited number of transactions in a given time interval. To address both of these two issues, we propose a methodology that connects the coin minting with the prosperity of a cryptocurrency. Specifically, when there are fewer transactions, any cryptocurrency adopting our methodology will introduce a greater inflation to motivate transactions. Moreover, this methodology provides deflations and turns the currency towards a reserve of value when the network burden is too heavy.