Deflationary Mining

While the mining approach has worked very well for Bitcoin so far, it has a major problem in the long run. There is a growing imbalance between the reward given to miners and the value possessed by holders.

When the Bitcoin blockchain started, each reward for a block gave miners a tangible share of the circulating supply, but today there are nearly 20 million BTCs in circulation, and the remaining 1 million+ will be mined over the next 125 years.

As a result, miners get a smaller and smaller share of the circulating supply, and since they are rewarded by issuing BTCs that gain value by taking it away from existing holders, their share of Bitcoin's capitalization shrinks over time.

This could be compared to the finances of a real-world company and how income is divided between salaries for employees and dividends for shareholders. If the simplified mining mechanism implemented in Bitcoin is applied to such a company, the dividends as a percentage of total income will grow steadily over time until they reach 100%.

Not only does this seem unfair, but it is also dangerous for the system, as workers will eventually not earn enough.

Bitcoin assumes that miners will only earn from transaction fees once BTCs are no longer issued in 2140, but this is a very different economic model and no one knows in advance whether it will work or not.

Deflation can solve this problem, as burning tokens reduces the supply in circulation, thus increasing the miners' share. But for a deflationary model to work, the system should give something in return for burned tokens.

In Questfall, users can burn QFT tokens to purchase off-chain Gold at a fixed price of $0.01, which can then be used on the platform for various benefits.

Burning QFTs is the only way to obtain Gold, which in turn will be burned when it is paid out for the system bonuses.

In this way, QFT tokens are issued each week to reward miners, while at the same time they are burned for Gold. This dialectic has several advantages.

Firstly, it solves the inherent problem of Bitcoin's approach to mining, as the miners' share of the system's capitalization tends to be stable over the long term. In other words, the portion of QFT's capitalization that is used to reward miners will not decrease despite the decline in token issuance.

The deflationary nature of QFT also implies that the number of tokens in circulation will initially increase as there are no tokens to begin with, but as the market saturates, the number of QFTs in circulation will slowly decrease over time.

As a result, the price of QFT will rise in the long run, even if the number of active Questfall users remains constant, because the reduction in circulating supply is caused by user activity that stimulates token burning.

This makes QFT tokenomics very different from any non-deflationary approach, which is essentially a Ponzi scheme where existing holders can only cash out at the expense of many newcomers.

If we look at the price of a token as the capitalization of the project divided by the number of tokens, we can see the difference more clearly. In the conventional approach, the price goes up as the numerator (capitalization) goes up, whereas in deflation, the price goes up as the denominator (number of tokens) goes down.

As the price of Gold is fixed in dollars, the QFT price change will not affect teams wishing to promote their projects to the Questfall audience. If someone spends stablecoins on a promotion, he will receive the same amount of Gold regardless of the price of QFT.

Furthermore, at times when the price of QFT falls, the number of tokens burned by third-party projects will increase, as more QFTs must be burned to obtain the same amount of Gold. This leads to a rapid trend reversal as the shrinking of the circulating supply accelerates.

The QFT price changes will only affect miners and holders, who will receive a different amount of Gold for their QFTs. And since the price of QFT tends to increase over the long term, the amount of Gold for a QFT token will also increase over time.

This is exactly how deflation works - the longer a consumer waits, the more value he will receive for the same amount of money.

Although Warren Buffett said that "the stock market is a device for transferring money from the impatient to the patient", in reality this does not work. Deflationary tokenomics is the only way to implement a system in which those who wait earn.

Furthermore, this approach emphasizes the core advantage of mining - the increase in the price of QFT due to the influx of new money from investors will make mining more profitable, attract new users and increase the burning rate of QFT, thus making QFT more attractive to investors, creating a positive feedback loop.