1 min read

Inflation is...

Just a tool.

It doesn't matter much to individuals. Yeah, your paycheck doesn't go quite as far, but you don't have to think about the monetary policy decisions that led to inflation. Inflation has historically been used by governments and studied by academics. It's not something most people think about beyond the direct impact to their bank account.

Video games (especially those that are persistent and multiplayer) uniquely introduce small scale economies. The game developers are in charge of the game's economy. They have full control, much like a government's central bank. Even if you play a game, you probably don't think too much about its inflation policy.

DeFi protocols and decentralized game economies introduce a new paradigm. Because blockchains are democratic, every "citizen" has direct input on the monetary policy. You can still choose to ignore the inflation rate and let other people make those decisions, but if you care, you can vote directly.

People in blockchain tend to look down on inflation because it makes their tokens less valuable over time. It means you need more tokens to do the same things you did yesterday for less. But the purpose of inflation is to encourage economic activity. You don't want to lose value, so maybe you'll participate in mining for rewards. Maybe you'll speculate on some other asset on the network. Maybe you'll fund a cool new project.

Too much inflation can be a bad thing, but a little goes a long way.


P.S. If you couldn't tell, I took two weeks off to spend time with family. Now I'm back to daily writing and weekly podcasting. Hope you enjoyed the break (but not too much)!