What's this ZetaCoin thing

Unless you've been living under a rock, you've no doubt heard about this thing called ZetaCoin. According to the websites http://getzetacoin.com

"Zetacoin is an open source crypto currency based on the Bitcoin protocol. It features fast transaction times and fast difficulty adjustments. Initial coin mining is 160 million coins, thereafter a yearly inflation of 1 million coins."

ZetaCoin Logo

About ZetaCoin

ZetaCoin was created in August 2013. The first block was mined on 8/30/2013. The minting phase has already ended and ZetaCoin has been distributed amongst it's early adopters. It has now entered it's second phase; inflation.

Inflation is necessary to maintain a balance between supply and demand. Problems arise when there is either too much supply or too much demand. For example, the USD has a high inflation rate meaning there is too much supply. On the other hand Bitcoin has a very low inflation (to the point of being deflation) where the demand is high but the supply is low. This is why you see a single Bitcoin worth over $400 when exchanged for USD. USD being highly inflated and Bitcoin being deflated is quite an interesting phenomenon, but that's another topic.

Usefulness

The ZetaCoin parameters were designed by (what I think is) a genius. Bitcoin has an absolute limit of 21 million coins while ZetaCoin has an initial distribution of 160 million coins with an additional 1 million created each year. Bitcoin has a transaction time of 10 minutes and ZetaCoin is only 30 seconds.

ZetaCoin is clearly more useful as a currency due to those key parameters:

1) The inflation rate is steady.
2) That will ensure price stability.
3) Transaction times are fast.

You won't see massive swings in price with Zetacoin. Where as with Bitcoin you may buy a cup of coffee for 0.008 BTC today, and then a week later that same cup of coffee will cost either 0.004 BTC or 0.13 BTC.

However, at the moment ZetaCoin's price is unstable due to it's infancy, but that's only temporary. The price will continue to stabilize as the existing 160 million coins continue to be distributed amongst the population. Until that time expect some major booms and busts along with some pump and dump schemes. A perfect example of this behavior is the crash of May 2014, where rumors and misinformation prompted several crypto currency users to start panic buying ZetaCoins. When these investors learned about the misinformation they began to panic sell and the market went through a correction.

ZetaCoin Crash 2014 Chart

The event in addition to being very amusing, demonstrated ZetaCoin's stability. Shortly after the madness the price quickly returned to it's pre-crash level and has remained stable. Events like these will be rare and are best explained with the following cartoon:

Madness

Fast Transaction

Another one of ZetaCoin's advantages is it's 30 second transaction time that makes real world use not only possible but sensible. The average time a person spends at a PoS terminal is about 1 to 2 minutes, whether you are taking out cash or swiping your plastic card and entering a pin number. The decentralized and mobile capabilities of the ZetaCoin system make the transition from fiat to ZET almost seamless.

Current State and Future of ZetaCoin

There is no doubt ZetaCoin will initially benefit the early adopters. Zetacoin has several bag holders with at least 500,000 to 1 million coins. The top 100 richest addresses hold near 70% of the total money supply. Bitcoin on the other hand has less 30%.

This is indeed a problem but not a major issue. ZetaCoin is designed for real world use and this disturbing factor will auto-correct itself in time. Currently, as of the writing of this article ZetaCoin has a $3,259,773 market capitalization. That's about 2 cents per coin.

In a few months a single ZetaCoin will be worth as much 90+ cents. You can expect the early adopters to start taking profits and you'll see the price drop pretty quickly to less than 10 cents a coin. The market will correct itself and the price will recover back to 50 cents per coin. This is when (what we call "weak hands") will sell their collection of coins, causing the price to drop once again, but not as much.

Essentially what has happened is that the "bag holders" have almost entirely disappeared. The 70% has now dropped to about 10% (maybe even less) and the 160 million initially minted ZetaCoins have been evenly disbursed among the population.

This is where things start getting real interesting. By this time ZetaCoin is as well known as Bitcoin and possibly more. Also remember that there are only 160 million ZET to go around (initially). The Earth's population at this moment is 7.161 billion, that's about 0.02 ZET per person on average.

For the sake of simplicity, lets focus on the United States. It's current population is 313 million, about 4.3% of the world. It's GDP is about 1/4 of the global GDP. Lets assume for the moment that ZetaCoin is only being used in the U.S. (obviously not the case, but for simplicities sake).

Minus the 10% that still hold bags, each person in the U.S. would have about 0.46 ZET. Currently the US GDP per capita is $49,965.27. If ZetaCoin were to replace about (lets say...) 0.01% of that ($5), then 1 ZET would equal $10.86. Now, fast forward a few more years as ZetaCoin becomes more widely accepted, useful, and people start using more than just $5 worth of ZET. And that's only 25% of the global economy!

ZetaCoin's Stability

The price will remain extremely stable due to it's built in low inflation rate. ZetaCoin produces 1 new coin every 30 seconds. In order to maintain it's current price of 2 cents, ZetaCoin needs to constantly add about $70 USD a day to it's market capitalization. Compare this to Bitcoin where it's market capitalization is $5.3 billion and needs to add $2,022,979 USD per day to maintain it's current value. In other words, ZetaCoin has to grow by 0.002% each day while Bitcoin must sustain a 0.03% growth rate, that's a 1500% difference!

Obviously the Bitcoin numbers will change drastically as time progresses and the block reward continues to half from 25 to 13.5, and so on. It's unclear at the moment what exactly will happen with Bitcoin's price without the inflation. Many predict that it will undergo a major deflationary spiral, something that has never been witnessed before. But this is an article about ZetaCoin so lets just leave it at that.

The ZetaCoin numbers will be constant with a very low fluctuation due to lost coins, more distribution, GDP growth, etc. The point being, you can expect that same cup of coffee to cost you about 0.35 ZET every week.


By editor on 07 May 2014

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