Why Proof-of-Work (PoW) Coins Tend to Decline in Value Over Time and How Zether Aims to Prevent This

Publication Date: October 31, 2024

The Problem with Traditional PoW Coin Emission

Proof-of-Work (PoW) cryptocurrencies reward miners with new coins for every block mined. While this mechanism powers network security, it also increases coin supply, placing downward pressure on price. Traditional PoW coins usually emit a fixed number of coins per block, with only occasional reductions, such as halvings, scheduled every few years.

To understand the impact, consider a hypothetical PoW coin with a reward of 5 coins per block and a 12-second block time. In this setup, 1 million coins are generated in the first month. If the coin’s market cap is $500,000, the price would start at $0.50. By the second month, however, another million coins have been mined, doubling the supply. If no additional capital flows in, the price would fall to $0.25, as the same market cap now covers double the supply.

This cycle continues: as supply grows, new capital must keep pace to maintain price stability. For instance, if the coin value rises to $10 with an emission rate of 36,000 coins daily, $360,000 in new daily capital would be needed to prevent price declines. Without consistent new investment, the increasing supply exerts downward pressure on the coin’s price, creating a cycle of decline.

How Zether’s Emission Model Breaks the Cycle

Zether takes a unique approach to prevent this price-decline cycle by front-loading the majority of its coin supply in the early stages and slowing issuance drastically afterward. This minimizes long-term inflation and reduces the need for constant new capital to maintain price stability.

Here’s how Zether’s emission model is different:

Why This Model Benefits Price Stability

Applying the same scenario but with Zether’s model, let’s assume a $1 million market cap with 6 billion coins in circulation at the end of the first year. The price per coin would be approximately $0.000167. With an annual emission of only 25 million coins, about $4,175 in new capital would be enough to sustain the price—significantly less than the traditional PoW model, which demands much larger inflows to maintain price stability.

Key Advantages of Zether’s Model

Why Zether’s Model Is Attractive for Investors

Zether’s front-loaded emission followed by drastically reduced inflation provides a stable ecosystem for long-term value retention. Traditional PoW coins typically struggle with prolonged inflation, requiring constant new investment to prevent price drops. In contrast, Zether’s approach allows investors to hold their assets confidently, as new supply growth slows significantly after the initial issuance period.

With Zether’s tokenomics, investors don’t have to worry about the heavy dilution often seen in PoW coins. By designing a system that prioritizes price stability and controlled supply, Zether offers better long-term value retention and lower volatility, appealing to those seeking a PoW coin model built to resist inflation.

Conclusion

Zether’s emission model represents a groundbreaking approach in PoW coin economics. By distributing most of its supply early on and reducing emissions sharply thereafter, Zether avoids the inflationary pressures that drive many PoW coins into decline. This innovative model not only offers a sustainable structure for price stability but also assures investors of a secure, long-term asset.

In essence, Zether’s controlled, front-loaded supply distribution aligns with market demand, offering a compelling PoW cryptocurrency capable of retaining value over time. This approach makes Zether a strong alternative in the PoW landscape, balancing supply with sustainability for a promising future.