Cryptocurrency Deflation Explained in Simple Terms

Cryptocurrency deflation is the process by which the total number of coins or tokens in circulation decreases over time.

This can happen for various reasons and has its consequences for the value and economy of the cryptocurrency.

Main Causes of Cryptocurrency Deflation:

🔵 Token Burn Mechanism: This is a process where part of the cryptocurrency is intentionally destroyed to reduce the total supply. The creators of the cryptocurrency send coins to a so-called "dead address," from which they cannot be retrieved.

🔵 Limited Supply: Some cryptocurrencies have a pre-set maximum limit of coins that will never be exceeded. For example, Bitcoin (BTC) has a limit of 21 million coins. Once this amount is reached, no new bitcoins will be created.

🔵 Loss of Access to Cryptocurrency: Users can lose access to their crypto wallets due to loss of passwords or private keys. When access is lost, the coins in these wallets can no longer be used.

Consequences o…