The total demand for token can easily be modeled as the product of the number of users and their average account size in USD equivalent. Over time average account size will approach a constant value, suggesting demand for the token will grow directly with the number of users on the platform.

Equilibrium and a fair token price are reached at the intersection of supply and demand for MPH token.

Morpher’s economy will undergo two different phases: The adoption phase, and the steady state phase. Each phase has their own equilibrium.

Adoption Phase
New technologies, services, and platforms typically undergo an S-shaped adoption curve.
Morpher estimates its adoption curve will start to plateau about 10 years after the protocol’s launch. During the adoption phase the demand for token from a growing user community outpaces the growth rate of the token supply creating a systematic upwards pressure on the token price.

A token inflation rate of 10% annually can still result in a higher token price if the number of protocol users increases by more than 10%.

Consequently, token inflation will likely be irrelevant during the first years after protocol introduction, and the analysis needs to focus on the steady state economy about 10 years after inception.

Steady State

The economy will reach its steady state when the market is saturated, and Morpher’s annual growth rate drops to single digit percent. For simplicity, it can be assumed that in the steady state economy everyone who wants to use Morpher is already using it, and everyone else will never become a user.

There is no significant upwards price pressure through adoption on the token anymore in the steady state. The volatility of the token price will decrease. For simplicity, we can assume a constant market capitalization of the token, i.e. the collective value of all MPH Token in existence remains constant.

Despite a constant overall market capitalization, the token supply may still change. An increasing token supply will lead to falling token prices, a decreasing supply to rising prices.

Regardless of the nominal inflation rate (i.e. the increase or decrease in supply), a trader will be profitable if they outperform the inflation rate and sustain losses if their returns are below the inflation rate. Trading better than average gives you a bigger piece of the pie, even if the size of the pie does not change.

Just like on traditional markets, traders on Morpher need to outperform inflation to increase their buying power. For example: US stock investors need to generate returns over 2% to pocket any gain against annual USD inflation.
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