Inflation magic
However, the magic of crypto lies in something I've heard referred to as "user inflation," where the rapid growth/decline of a network translates into drastic price changes in the underlying token.
It's the same principle that gave Facebook, Inc. and Google massive valuations well before their revenue models became clear.
The difference is that with crypto, people have the option to literally get in at the ground floor. It provides the general public with the same opportunities and risks that extremely early investors had in any of today's big tech companies.
Yes, that unfortunately means there will naturally be many failures and even outright scams, but ultimately, the benefits of making the switch from Web 2.0 to Web 3.0 are nothing short of revolutionary, at least in my mind.
Let's not forget that DeFi lending protocols are still in their diapers, and the earliest implementations are understandably ones that enable trading and marketplace building.
Paying out freshly minted tokens to encourage user growth can be very effective, especially when more users leads to things like higher trading volumes and more value locked within a protocol.
The strategy of providing free coupons has worked countless times in helping traditional businesses get the ball rolling, but protocols that do this should at least have some sort of strategy to reduce their rate of issuance once user growth begins to decline, otherwise they may have problems later.
Ultimately, the market is affected in the short-term by speculation, but in the long-term, the investors who have a diamonds hands or HODL mindset must outweigh the speculators in order to achieve sustainability.
And investors like that are generally attracted to things like real-world usage and long-term establishment in the market.
Either way, hope you have a great week ahead! | 