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My prejudice is that because monero has utility on the dark-web for transactions it's not suitable as a store of value. That's my pre-conceived perception, at least. In trying to understand the economics and governance relating to Monero I came across:

Then if you made Bitcoin transactions, actually everybody making transactions, they're responsible for paying the miners doing their job. In Monero, it will be much like this, it will be continued. First of all, it's not the halvening cycle where you have this disruption from the second ago to now, you suddenly get only half the reward than you got before for the next four years. But in Monero, this is greatly decreasing and it stops at, I think, 0.3 Monero per minute delivered forever.

The popular selling-point for Bitcoin is that as the supply is finite and fixed the value per coin will increase. To my understanding, that makes Bitcoin a deflationary asset. This also fits in with considering Bitcoin as analogous to gold as an investment. At least, Alexa tells me that Bitcoin is a deflationary asset when she is asked.

From my reading of the above Motley Fool article, the rewards will approach a finite and fixed number of 0.3 from which I would infer that mining would become less and less lucrative as time progresses. Perhaps mining should be expected to drop to almost zero, or at least some small number, at some point? If so, that would place Monero right along Bitcoin, to my thinking, thus making Monero a deflationary asset much like gold.

Is Monero an inflationary asset?

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Is Monero an inflationary asset?

No, it's disinflationary.

Seth wrote a blog post recently and answered this point in more detail (quoted below):

Monero has an infinite supply

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This one is very common from the Bitcoin crowd, and is techically true.

However, there is a lot of thought and intentional design that has gone into the supply dynamics of Monero. Monero implements a “defined supply” of 18.4m coins, and has a tail emission of 0.6XMR per block after the defined supply has been mined. That tail emission starts ~May, 2022.

This means that Monero has extremely low inflation that approaches 0% forever, and is technically “disinflationary” or “asymptotatically approaching 0% inflation”. The inflation rate is currently lower than Bitcoin and gold, and will continue to decrease. It’s also important to realize that a low inflation rate like that of Monero is a way to replace lost coins over time in circulation, but is likely even too little inflation to account for lost coins (rough estimates are ~1.5% of coins lost in circulation each year, compared to Monero’s current inflation rate of 1.12% as of writing). This would mean that Monero is in fact deflationary, even with the low perpetual issuance.

It’s also extremely important to make it clear that Monero’s supply is pre-defined, verified and enforced via consensus, and entirely predictable, just like Bitcoin’s – you can know the inflation rate and totaly supply at any point in the future without doubts.

This tail emission enables two key features in Monero

  • A lower bound of network security forever (miners will always be able to rely on 0.6XMR per block, no matter the fee market)
  • A dynamic block size (Monero’s blocks can grow/shrink to adapt to short-term increases in usage, with a penalty to mining rewards during these times).

For more on both of these, see the resources below.

Resources

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