As I've been reading up on BitShares to find out what happens to fees, I realized that I implicitly wanted to find out whether BitShares is actually inflating, deflating, or whether it has constant supply. I also caught myself hoping that BitShares would deflate, as this would mean that my coins would potentially increase in value even if I just HODL them.

Next, I wondered, how much of a de-facto difference does it make whether a token actually deflates? Which good examples are there for inflating or deflating tokens? What are pros & cons?

Constant (max) supply

I consider all coins that have an upper bound for their total supply "constant supply tokens" if they don't have built-in deflation. Obviously, if someone else building a business on top of the coin decided to burn some, this doesn't count as built-in deflation.

By this definition, we have heaps of constant-supply tokens:

• BitShares
• Nem
• Bitcoin (based on the total max supply of 21 million BTC)
• Litecoin
• NEO
  etc.

CoinMarketCap can give you a good hint whether or not there is a capped total supply when there is a "Max supply" number.

I put Bitcoin under this category because we can make economic observations based on the max total supply instead of the current supply and you know they will turn true at some point ;-)

Inflating / unlimited supply tokens

I know you know a bunch of inflating tokens as you're using Steem. Obviously, there's a lot of tokens that don't have a limited total supply, the most prominent examples being:

• Ethereum
• Ethereum Classic
• Steem
• SBD
• EOS
• Stellar
• USDT
  etc.

Unlimited total supply doesn't necessarily mean they are in fact inflating - this could be the case with SBD, where it's all but sure that there will be more and more SBD minted over time. The same goes for all kinds of stable coins like Tether or Dai, where the number of tokens in existence depends on other factors than mining, e.g. market demand.

For the reason mentioned above, it makes sense to distinguish between simply "unlimited total supply" and "predictable inflation". The latter is the case for Ethereum, Steem and Stellar, where the inflation rate is built into the protocol and independent of user behavior.

Deflating tokens

Here we go with bunch of tokens which "automatically" increase in value because the total supply decreases over time. Obviously, there is a certain appeal with deflation, as theoretically you can just HODL the tokens and they will constantly appreciate - given that the demand remains at least constant (to be precise, it would be sufficient if demand would decrease slower than supply, but whatever). We have some really interesting tokens, but they are generally harder to find in the Top 100:

• XRP
• Binance
• A large number of ICO'ed tokens with deflation mechanisms
  ...

Please let me know of your favorite deflating tokens, or in general good and bad examples for these, as I'd be really interested in how that plays out in the long run. Deflation has become increasingly popular with ICOs because of the easy argumentation that its price will appreciate. However, deflation isn't a silver bullet.

I'd be super curious to hear your preferences as, obviously, we're all using an inflationary token.