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In an environment where numerous stakeholders participate and various issues occur, the supply volume for each period is adjusted, and the trade-off relationship with the centralized system is established through the appropriate compensation system of SML oriented to the deflation token model through buyback, incineration, and fee incineration. minimize, we want to implement a sustainable virtuous cycle system of a decentralized ecosystem.
1. SML Coin Demand Analysis
The demand for SML coins is most affected by the number of transactions between content producers and consumers and the price level of the coin. Additionally, sponsors and investors also have a demand for coins. Therefore, the demand for all coins is affected by the demand for transactions (T), the price level (P), the speed of coin circulation (V), and the investor demand (S).
Md = Px(T/V + S)
Md : Demand for coins, P: price level, T: transaction demand, V: currency circulation speed, S: investment demand
2. Supply Analysis for SML Coin
In order to increase the economic stability of the SML coin, it is necessary to clearly define the SML coin supply mechanism. In a normal economy, the money market is in equilibrium when the real money supply (M/P) equals production (Y) and the demand for money, which is affected by the interest rate (i).
M/P = Md (Y, i)
In the SML coin economy, where there is no effect of interest rates, the money supply can be directly managed in consideration of production. If adequate inflation is generated through additional issuance of SML coins, it can be an inducement for economic entities holding SML to promote economic activity transactions and prevent deflation that destabilizes the economy.
3. Issuance system for money supply
The issuance system that supplies new currency aims to grow supply and demand at an appropriate level. In other words, it is to increase the coin supply to a level that can meet the demand for SML Token that occurs in the future. The issuance system for this goal is as follows. At a specific time t, the demand for money from the price level (Pt ), transaction demand (Tt), money circulation velocity (Vt), and investment demand (St) is as follows.
Mtd = Pt x (Tt/ Vt + St)
Here, the real demand for money without considering the value of money is Mtrd = Tt/ Vt + St. For equilibrium, the money supply at each point must be in equilibrium with the money demand Mts =Mtd
Mts = Pt X Mtrd Pt = Mts / Mtrd
Inflation can be measured as the change in price between time points.
Inflation = (Pt+1 - Pt)/Pt = Pt+1/Pt-1
Therefore, inflation = (Mt+1s / Mt+1rd) X (Mtrd /Mts) -1
= (Mt+1s /Mts)X (Mtrd / Mt+1rd) -1
i.e., (Mt+1s /Mts) = (1+Inflation rate) X (Mt+1rd/Mtrd ) money supply is Mt+1s = (1+Inflation rate) X (Mt+1rd/Mtrd ) X Mts
From here Mt+1rd/Mtrd can be defined as the rate of increase in real money demand.
Therefore, if the inflation target is fixed at a constant rate, then the money supply (Mt+1s) in the next period is determined by the current period's money supply (Mts) and the rate of increase in real money demand.