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You have to waste energy to create ETH because ‘inflation baaad‘ but destroying ETH is possible by accident. Crypto bros should really take some macroeconomics courses.


Why are those related?

The purpose of requiring energy to operate the network is to have something at stake when enforcing rules of the system. You could have unlimited or even arbitrary inflation of the currency while still requiring proof of work.

Hence, the rule that is being enforced by PoW here is that sending to a "wrong" address is not reversible.


If inflation was bad, would destroying ETH not be a good thing since it leads to what's effectively an instant deflation of supply?


Deflation of actual currency is worse as it promotes hoarding. If something becomes cheaper tomorrow than today (deflation) then I am incentivized to not spend my currency. This grinds the gears of economic activity. Of course this only matters if you expect cryptocurrency to act like a currency.


Destroying ETH is indeed widely considered a good thing. Since the middle of last year, a portion of the fees for every transaction is burned and most ethereum people seem very pleased by this. I've lost track but for a long time last year, ETH was indeed deflationary. The sense is that the value of burned ETH is distributed to everyone on the network in proportion to how much ETH they have.

I don't think it seems so great though...


Eth is currently still inflationary overall, more is minted than burned in the majority of blocks.


The parent might be conflating inflation with the price of Ethereum going up? It's a common perception. But at least in the crypto world, inflation is understood as the value of the currency going down.


I recommend they start with microeconomics, though. More relatable and it would tell them about human nature, first.




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