Tron (TNX) has achieved an important milestone this year. The ninth biggest cryptocurrency in the world has gotten deflationary status. This achievement is especially important as most other cryptocurrencies have been inflationary in the last couple of months.
In this article, we’ll explain what the status means for TNX, how it’s achieved, and what it means for investors looking to buy Tron. The terms and mathematics behind the status may seem somewhat complicated, but the economy behind it is actually simple enough.
In the past year, Tron’s circulating supply has dropped by 2.41 bn tokens. At the current prices found on Tron exchanges, that’s the difference of $381.2 mn. The total supply of Tron coins stands at 86.56 bn coins, down from 88.97 bn. This marks a deflation rate of 2.93% for TRX.
When using the Tron network, the users must burn TNX to cover the transaction costs. This elimination of Tron coins has led to a decrease in available coins. The process is somewhat similar to what was used for Ethereum’s EIP 1559. This system makes sure that the coins aren’t misused.
What are Inflationary Cryptocurrencies?
Some cryptocurrencies are made inflationary by design. This means that the number of coins that are in circulation always keeps rising and, therefore, decreases in value. In this case, mining can create new cryptos. That’s how Bitcoin works, for instance.
Some inflationary currencies have a fixed supply of coins, and others don’t, meaning that the number of crypto coins can, in fact, be limitless, at least in theory. Tron has a limited supply of coins set by its design. It’s about 100 bn tokens, out of which almost 72 bn coins are in existence.
What are Deflationary Cryptocurrencies?
With some cryptocurrencies, the supply deflates over time, meaning that the price of each individual coin will rise as long as the demand for it remains constant. These currencies usually destroy a set amount of coins at a predetermined time so that the supply is kept in check.
Binance (BNB) is a coin that uses this method, for instance, and it’s a deflationary coin. Once the supply of BNB coins hits 100 mn, the coins over that number are destroyed. This is done via a technical process that makes sure that the coins can’t be recovered again.
Mixing and Matching Different Options
There are cryptocurrencies that have had both approaches over time. In a way, their approach is similar to that of a central bank, which uses both deflationary and inflationary measures to balance the value of its fiat currency. The most well-known such currency is Ethereum.
Ethereum burned tokens instead of handing them over to miners in 2021 in order to keep the value of the coin in check. XRP also uses similar tactics, which burn tokens to pay transactions. Measures put in place by Tron are similar to this, and they’ve proven to work, partly because of this change in status from inflationary to deflationary.
What Does it Mean for Users and Investors?
The change is the best news for crypto investors looking to buy Tron coins. There are three main reasons why this is the case, according to experts in the field.
The value potential of Tron coins has now increased. As long as there’s demand for this coin, the reduced availability will make the coins more valuable over time. It’s known as the scarcity effect.
It also means that TNX can be used as a hedge against inflation. This is very important now when fiat money is losing its value.
Thirdly, it also means that the simple “hold and wait for profit” approach to buying TNX is now a valid and lucrative proposition.
Inflation
The decision to change how Tron handles its transactions comes at a time when fiat currency inflation is very high. Many claim that inflation and the cost of living crisis it has caused have been one of the biggest reasons behind the poor performance of the Democratic Party in the 2024 election.
Experts have predicted that with high inflation troubling the investors and day-to-day commerce, more investors would turn towards crypto as a hedge. Tron is, therefore, positioning itself for the future, as inflation will continue to rise for fiat currencies.
Tron has achieved the status of a deflationary cryptocurrency. This means that the supply of its coins deflates over time. This is accomplished by users burning coins in order to achieve transactions using Tron. It’s an important milestone for the altcoin, and it will change how users perceive it.
Simply put, that means that the value of the coin will keep going up if there’s a demand for it, as it won’t create a surplus of coins. It’s a very important achievement now when investors are looking for ways to use crypto as a hedge against inflation.
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