This is a debate that I really haven't written about.  I did make a video about it a few days ago digging into some of the basics of the discussion.


Anyone who reads these [articles](https://inleo.io/@leoglossary/leoglossary-article) knows my view is that [AI](https://inleo.io/@leoglossary/leoglossary-artificial-intelligence) and [cryptocurrency](https://inleo.io/@leoglossary/cryptocurrency) are going to be linked.  The future of crypto is AI.  It will be both the [currency](https://inleo.io/@leoglossary/leoglossary-currency) used as [medium of exchange](https://inleo.io/@leoglossary/leoglossary-medium-of-exchange) along with capturing value.


The existing financial system will still have its place for a while.  We are going to see the [US dollar](https://inleo.io/@leoglossary/leoglossary-u-s-dollar) as well as [stocks](https://inleo.io/@leoglossary/leoglossary-stocks) still the standard.  However, as AI agents expand and start to take over, the shift towards crypto will be underway.


Which brings us to the topic of this article.  


Some believe we are dealing with two opposiing forces when dealing with AI and crypto.  The former is moving us toward abundance whereas the latter is based upon scarcity.  So how will this reconcile?


<center> https://img.inleo.io/DQmXvMEz7A3Y9EfdKSh3NFX5d5TacFRgbuREZAqneB7kSmi/image.png 
Image generated by Ideogram </center>




# Crypto and AI: Scarcity vs Abundance


There is no doubt that AI leads to abundance.  We are already seeing it with the generative AI that is being used by the masses.  The number of [images](https://inleo.io/@leoglossary/leoglossary-image) being generated is exploding.  Prompts on [chatbots](https://inleo.io/@leoglossary/leoglossary-chatbot) are generating reams of information in a matter of seconds.  The video age is moving closer, with more [applications](https://inleo.io/@leoglossary/leoglossary-application) emerging, improvements over the previous versions.


Here is the vital point: in this realm, **we are only limited by compute and bandwidth**, two areas expanding rapidly.  It means we effectively has no limitation.


For the past 7 years, I termed this the Age of Abundance.


So where does cryptocurrency fit into this?


This is the point where problems arise.  We have a vast misunderstanding of [money](https://inleo.io/@leoglossary/leoglossary-money) that bleeds into these conversations.  It is something I discussed for a number of years so we will not revisit that.


What I will state is that cryptocurrency is misnamed.  We are really dealing with crypto [assets](https://inleo.io/@leoglossary/leoglossary-asset).  Most [tokens](https://inleo.io/@leoglossary/leoglossary-token) or [coins](https://inleo.io/@leoglossary/leoglossary-coins) do not operate as mediums of exchange.  They are awful at it.  Instead, this will be handled by stable coins.


If something like [Ethereum](https://inleo.io/@leoglossary/leoglossary-ethereum-blockchain) is not a medium of exchange, what is it?  


The answer lies in the relationship it has to the network.  Basically, the Ethereum coin is representative of the value of the [network](https://inleo.io/@leoglossary/leoglossary-network), priced via [market](https://inleo.io/@leoglossary/leoglossary-market) conditions.  Therefore, the more value the network has, the more Ethereum is worth (in value).  Pricing, of course, is a completely different matter.


What this means is there is no conflict.  


## Growth rates


One of the issues with the entire cryptocurrency realm is the lack of [business](https://inleo.io/@leoglossary/leoglossary-business) terms.  Instead, we see people talking about [bulls](https://inleo.io/@leoglossary/leoglossary-bull) and [bears](https://inleo.io/@leoglossary/leoglossary-bear).  These are for market discussions.  


Business [owners](https://inleo.io/@leoglossary/leoglossary-owner-insurance) are focused upon things such as growth.  That is where value generation comes from.  Whether it is customers, users, revenues, or [profits](https://inleo.io/@leoglossary/leoglossary-profit), growth is crucial.


In the crypto world, people look to negative growth.  They believe that scarcity is the path.  This is absurd.  I will not go into it since it is in the video linked above, but [companies](https://inleo.io/@leoglossary/leoglossary-company-business) that do reverse [stock splits](https://inleo.io/@leoglossary/leoglossary-stock-split) tend to be those heading towards [bankruptcy](https://inleo.io/@leoglossary/leoglossary-bankruptcy).


Here is the video if interested:


https://3speak.tv/watch?v=taskmaster4450/psiledei


Companies that are expanding and growing tend to do stock splits.  They increase the number of [shares](https://inleo.io/@leoglossary/leoglossary-share-stock).  At the same [time](https://inleo.io/@leoglossary/leoglossary-time), there are options and other "ownership" packages paid to [employees](https://inleo.io/@leoglossary/leoglossary-employee) and [executive](https://inleo.io/@leoglossary/leoglossary-executive), increasing this even more.


Why do [shareholders](https://inleo.io/@leoglossary/leoglossary-shareholder) allow this?  It boils down to growth.  If a company is growing, the number of shares and compenation packages become noise.


This also applies to crypto networks.


People look at the [inflation](https://inleo.io/@leoglossary/leoglossary-inflation) rate not realizing what it means.  I do not care if the inflation rate is 25%, if the growth of the network exceeds that, value is increasing.


Let us use the Hive [blockchain](https://inleo.io/@leoglossary/blockchain) as an example.


This is a network that is a decentralized repository for text storage.  It also allows for [social media](https://inleo.io/@leoglossary/leoglossary-social-media) applications, a necessity for generating [data](https://inleo.io/@leoglossary/leoglossary-data), to be built on top.  There is [blogging](https://inleo.io/@leoglossary/leoglossary-blogging), video, [microblogging](https://inleo.io/@leoglossary/leoglossary-microblogging), and image uploading available.  


Like most social [media](https://inleo.io/@leoglossary/leoglossary-media) platforms, value for the applications comes from activity.  How many people are active and what are they doing?  The goal is to not only to increase the number of users but also expand the activities that each person is undertaking.  It is why there are more [features](https://inleo.io/@leoglossary/leoglossary-feature) continually added.


Obviously, there are many different metrics that is followed.  Total number of users is one that is monitored.  Others such as time on site and pageviews is also important.  Companies that operate these platforms look for growth in these areas.


Getting back to Hive, what would happen to Hive if there were many aspects to growth.  Let us lay out a few ideas;


- number of applications grew by 50% each year
- application usage grew an average of 125% per year
- daily [transactions](https://inleo.io/@leoglossary/leoglossary-transaction) grew by 350% yearly
- APIs saw a 50% annual increase


If growth rates like this were seen, the inflation rate of the coin would not matter.  The damand, simply to interact, would drive things higher.   Here is where the scarcity idea is completely flawed.


[Liquidity](https://inleo.io/@leoglossary/leoglossary-liquidity) is another factor that is rarely considered.  For [economic](https://inleo.io/@leoglossary/leoglossary-economic) systems to grow, money is required.  This appears in a number of ways.  It is moving to another level many blockchains requiring the native token for engagement.  In this scenario, they become access coins, bringing another level of utility.


So what happens as activity increase?  More coins need to be available to meet the growing demand.  Of course, if there is no demand this is pointless.


Which brings us back to the crux of the discussion.  If there is no demand, things are dying.  A publically traded company will reverse split in an effort to increase the demand for the stock.  Dead networks will do this with the coin for similar reasons.


___


<center> [What Is Hive](https://inleo.io/@leoglossary/leoglossary-what-is-hive) </center>




Posted Using [InLeo Alpha](https://inleo.io/@taskmaster4450/crypto-and-ai-scarcity-vs-abundance-2uq)