A store of value refers to an asset that maintains its purchasing power over time. It is a fundamental characteristic sought after by individuals and institutions; traditional examples include gold, real estate, and government-issued currencies. The best stores of value are hard moneys, which exhibit certain characteristics, including [[Supply#Bitcoin Supply Cap and Scarcity|scarcity]], [[Durability|durability]], [[Portability|portability]], [[Supply#Satoshis and Bitcoin Divisibility|divisibility]], and [[Fungibility|fungibility]]. These attributes contribute to their ability to maintain value *over extended periods*. Blockchain technology enables the creation and implementation of unique monetary policies for digital assets. These policies govern factors such as inflation rates, supply dynamics, and mechanisms for maintaining or increasing value over time. To engineer a store of value in monetary policy, two common designs ideologies may be used: 1. Disinflationary designs, which aim to gradually reduce the rate at which new units are introduced into circulation while still allowing for some level of inflation. - Fixed Supply: Some digital assets have predetermined maximum supplies that cannot be exceeded (e.g., [[Supply#Bitcoin Supply Cap and Scarcity|Bitcoin's supply cap]]). As demand increases over time, scarcity drives up their value, ceteris paribus. - Halving Events: Certain blockchains incorporate halving events where mining rewards decrease by half at regular intervals (e.g., the [[Bitcoin Halving]] every four years). This reduction slows down the rate at which new coins enter circulation. 2. Deflationary designs, which seek to create scarcity by reducing the total supply over time. This is implemented by: - [[Token Burn]]: In this approach, tokens are intentionally destroyed or permanently removed from circulation through verifiable means (e.g., burning tokens sent to specific addresses). - Fee burns as in Ethereum Proposal [[Ethereum Proposals#EIP-1559|EIP-1559]] - Buybacks/Token Sinks: Projects may allocate funds from transaction fees or profits towards buying back tokens from circulating supply periodically.