Supply Curve for Nimiq 2.0

Okay I understand what you are saying now. You mean bitcoin is deflationary when using it to purchase goods. 2 pizzas costing 10,000 bitcoins in the past, today costs .0003 bitcoins. So although the number of bitcoins is still increasing, the cost of things in relation to bitcoin is decreasing because bitcoin is in limited supply. That is definitely deflation, you are 100% correct. That brings up a question for me: Lets say you are going to buy pizza for dinner tonight and you have the choice of either spending fiat currency which will lose value over time, or spending Bitcoin, which will gain value over time, which one will you choose to spend?

I see your point. For small purchases, if I had a deflationary crypto that I use to store value and that I can use to buy things too, I would either have some FIAT at hand, previously converted from crypto for daily expenses and emergencies, or buy directly with crypto if conversion rate fees aren’t too high, but I would always avoid as much as posible to convert crypto to FIAT. I would still have to pay with crypto for most things anyway, and there is no way to avoid that, if I’m using it to store value. The right balance wold be a coin that is deflationary enough to allow for storing value, or maybe has a way to lock/stake coins with a higher saving rate than FIAT, but that has low fees for transfers and conversion rates.

I understand your argument. But unfortunately, stores of value (SoV) and mediums of exchange (MoE) have opposing needs, especially when we are talking about cryptocurrencies.
A good SoV will have no inflation at all, but will have very high transaction fees. However, this isn’t a problem for SoV since they are rarely transacted.
A good MoE requires low transaction fees, but this is only possible if there is enough inflation to subsidize the miners/validators.
This isn’t to say that it needs to be either one extreme or the other. But unfortunately any supply curve will necessarily be some trade-off between low inflation/high fees and high inflation/low fees.

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I see. Would it be posible to to have an emission rate that allows that those staking the coin can avoid the inflation rate, thus using staking as a mechanism for SoV, while still having unlocked coins for MoE?

Yes, that always happens in PoS with any supply curve. If you’re staking you don’t feel the inflation since you are receiving a portion of the emission rate.

So, as long as I’m staking I’m protected from inflation, and it doesn’t matter if the coin is inflationary or not. However, a constant emission rate will still cause the coin to lose value compared to FIAT if the demand don’t growth at the same rate. On the contrary, if there is a limited supply it will cause transaction fees to rise and the coin to be used as SoV independently of whether it’s being staked or not, and people not using it as MoE. Is there a way to to have a middle ground? For instance, assuming volume is a good mesure of the demand for the coin, if the emission rate is a function of volume inflation could be controlled to make the coin still attractive as a better SoV than FIAT when staked, but also a better MoE when not.

The idea of an uncapped coin has grown on me over time with these discussions. I think with a constant emission rate you can get cool effects even without a cap on supply. And without the cap, you never have to worry about running out of miner rewards.

As Rob suggested, a constant value for the block reward allows for an ever decreasing inflation (since supply is always increasing but block reward stays the same) while always ensuring there’s a reward for miners (and it’s the same reward people were getting months/years ago). I like this the most as it still gives the same sense of increasing scarcity as traditional curves aim to achieve, but keeps constant incentives for producing blocks.

The other idea I saw mentioned that I liked a lot, was a constant percentage emission. So picking a percent inflation (or curve) and having the protocol calculate the block reward to achieve that inflation. I think this method is a bit harder given that Albatross has no target block time, but it’s a neat idea I saw tossed around at one point.

Yes that’s pretty much the point I was getting at: if I had $50 worth of fiat AND $50 worth of crypto in my possession, I would spend the fiat first and hold onto the crypto because it would gain in value. I don’t think we’ll ever be a fiat-free society, so it makes sense to spend the currency that loses value and keep the one that gains value. And you hit the nail on the head in that the best scenario is to find a middle-ground between store of value and means of exchange. I think BTC already has already claimed the SoV throne, even if the prices are wildly volatile. The infrastructure and name recognition would be impossible to overcome, so we have to do something different.

Since your value is protected if you are staking, why do you care if the coin price decreases or not? An inflationary coin with staking has the best of both worlds, staked coins behave like a SoV while unstaked coins behave like a MoE.

Completely agree, Bitcoin has won the race when it comes to SoV. But as of now there is no coin that is widely used as a MoE and it’s unlikely that Bitcoin becomes it since they are too focused on the SoV angle. Nimiq could win the race to be a MoE.

why do you care if the coin price decreases or not […] staked coins behave like a SoV while unstaked coins behave like a MoE

Sure, mi point is that if there is a way to control emission rate, perhaps as a function of volume, so that supply keeps inflation more or lest constant (without being a stable coin), that would be something nice to have. Although, with something like that (I suppose), those staking their coins would need to vote on inflation rate, so that inflation isn’t too high or too low.

I’m very cautious of alterning Nimiq’s emission scheme as I feel like consistent emissions is a very important feature of building trust when it comes to cryptocurrencies like BTC. I’m open to the idea of a tail emission scheme at the end to prevent Nimiq from becoming deflationary which would work against it being a suitable MoE coin, but I’d be against a constant emission % and I’m pretty much against lowering the current emission scheme if the reasoning is to lower supply to ease the selling pressure on Nimiq price wise.


You bring up a very valid point… Is the potential loss of trust in the NIM currency (by creating a sort of monetary policy) worth the short-term loss of selling pressure? The argument for having tail emissions is something that most people can wrap their head around fairly easily. But arbitrarily changing the emission scheme, even if it creates tangible benefits, could create a lot of backlash and give people ammunition if they wanted to attack the legitimacy of the currency. Most of my reasoning for wanting to change emissions was to create fairness for people that come to the project in the future, and to encourage spending (discourage hoarding) while still allowing sensible returns for people that stake. NIM’s fiat price is also a concern as the foundation will not be able to survive for very long after ICO funds run out unless it is higher. Trust is something that hasn’t been discussed very widely in this thread, and I think it deserves more attention than it has received. Thanks for your comments!

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To give some context on the inflation, currently it is around (in terms of annual inflation):

2021: 20%
2022: 15%
2023: 12%
2024: 9%
2027: 5%


Then only by 2038 we will reach sub 1% annual inflation.

I think it would be interesting to watch how other staking coins and their rates behave.
Considering the current low marketcap of Nimiq having a high number of coins being staked early would benefit the security of the chain and the best way to incentive that is a good level of inflation.

As for the tail emission I’m personally fine with it but it still opens the same kind of precedent: messing with the supply.

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I would argue that any kind of emission rate in a staking coin that isn’t dynamically adjusted by those participating in staking, eventually would make the coin deflationary just like Bitcoin.

The reason is the ever increasing rate of growth in the global population, that very few people seem to be paying attention to, and perhaps also because a change in emission rate can always be tacked in the future when addressing scalability issues, at least until it’s too later for that when it would be avoided for fear that a coin that is already being used as a SoV could lose its value.

Maybe the gaming industry could also be a good place when searching for alternatives on how to address economic systems and incentives for participants.

The problem with changing the inflation rate and supply rate is that it’ll scare off people. How do they know for certain that once you start messing around with the inflation rate you won’t change it again in the future. Look at Ethereum the inflation rate randomly changes at the whim of the development team and that scares off people. Bitcoin’s inflation was known exactly from the start and hasn’t changed on bit since day 1. My fear is that if the inflation is changed people in the future will notice the change and suspect it was made in benefit of the early adopters and what is stopping the inflation rate from changing again. The reason why I hold Bitcoin is because I know with a degree of certainty of what exactly the inflation rate will be and that no one will most likely be ever to change it unlike almost every other form of currency.

If we allow those staking the coin to change the emission rate dynamically (thus leveraging the “wisdom of the crowds”), they would be able to maintain a price that is attractive to both early adopters and new comers, and also benefit the ecosystem. That will come naturally when having “skin in the game”.

A dynamic inflation rate would also make the blockchain “adaptable”, so that there won’t be any need for another hard fork in the future, neither to reduce inflation again, nor to augment the supply.

Also Nimiq won’t be competing with Bitcoin, since it seems that any fixed rate is, or will become eventually, a form of store of value. Which is mostly what the market says when a coin always follows the price of Bitcoin.

Would it affect the way you feel if the new emission curve takes away some of the advantage given to early adopters? The concern I have about the current scheme is that in a few years most of the NIM will be distributed, with not much left to be given as staking rewards for latecomers. Bitcoin’s (and NIM’s) emission curve heavily favours early adopters, and switching to Proof of Stake is likely going to amplify that. I understand and largely agree with what you are saying about the potential loss of trust in the short term, but perhaps in the future people could look at the history of NIM and see an emission change in a positive light if they felt it treated them more fairly? It sounds like the team is close to being ready to present their ideas and findings to the community. I’m excited to see what they propose.


Here is the recent article “Nimiq 2.0 Supply Curve Considerations

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And here is a tool for sharing suggestions for the curve :