The word “deflationary” is often used to describe Ethereum. But what does it mean?
In general, deflation is when the price of goods and services goes down over time. This is the opposite of inflation, which is when prices go up.
So, if Ethereum is deflationary, that means that the price of ETH will go down over time.
But why would this happen?
There are a few reasons. First, there is a limited supply of ETH. There will only ever be 21 million ETH in existence.
As demand for ETH increases, the price will go up. But as the supply is limited, at some point there will not be enough ETH to meet demand, and the price will start to fall.
Second, Ethereum is designed to be used as a platform for decentralized applications (DApps). These DApps will likely use ETH as a currency or “token” to function.
As more and more DApps are created, demand for ETH will increase. But, as with any currency, if there is more demand than there is supply, the price will go up.
So, what does all this mean for investors?
If you believe that Ethereum will be successful in its mission to become a platform for DApps, then you may want to invest now while the price is still relatively low. The price could go up significantly as more and more DApps are built on Ethereum.
But, if you think that the price of ETH may fall in the future due to limited supply and increased competition from other cryptocurrencies, you may want to wait to invest.