Intro to the Economics of the HIVE Token

How HIVE Tokens Are Generated

New tokens are created every time a block is produced on the Hive blockchain. This is a concept the works for many blockchains, like Hive and Bitcoin.

There’s a difference here though.

On Bitcoin, all the tokens go to block producers, the miners, because this is PoW (Proof of Work).

On Hive, only 10% of new tokens go to the witnesses because Hive is a DPoS (Delegated Proof of Stake) blockchain.

The remaining 90% of tokens created on Hive are allocated into a "reward pool”. This pool rewards users who participate in the ecosystem based on the value they add.

What determines the price of HIVE?

The price of HIVE is determined by simple supply and demand dynamics; like in all other free markets out there. It’s very similar to what happens every day for the prices of stocks or commodities like gold and rice.

Thus, when a lot of people purchase HIVE, the price goes up. On the other hand, when people start selling HIVE the price go down.

You can buy HIVE from exchanges such as BlockTrades, Binance, BitShares. I’ll try to make a video about this in the future.

The Distribution of Hive Tokens in the Ecosystem

The new tokens created on the Hive blockchain are distributed this way:

• 65% is allocated into the reward pool, which goes to authors and curators: This is a 50/50% split between the author of the content and the curators who discover, upvote the share the content.
• 15% is awarded to Hive Power holders in the form of an APR (Annual Percentage Rate) of ~3% at the moment. This APR may vary from time to time.
• 10% is allocated to award proposals in the Hive Proposal System.
• 10% is allocated to the witnesses to power the blockchain.

How Many New Tokens Are Generated by the Hive Blockchain?

Hive began generating new tokens at a yearly inflation rate of 9.5% with the blockchain’s 16th hard fork on Dec 2016.

The inflation rate decreases by 0.01% every 250,000 blocks, or about 0.5% per year. The inflation will decrease at this pace until the rate reaches 0.95%. And this will take roughly 20.5 years starting from the blockchain’s 16th hard fork on Dec 2016.

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