8

The main issue with Bitcoin is not attracting late developers, but early developers. At its infancy, Bitcoin was an interesting curiosity - people would play around with it but not necessarily use it as money. But due to its scarcity and many benefits, Bitcoin came to be recognised as a digital currency. At that point people could either wait and see if it ...


8

Technology is helping with this. For instance, I don't know what the fair price is for a GPS device that I see for sale at Best Buy, for instance. I whip out my mobile and do Amazon price check to see what the price is elsewhere. This app could just as easily display the price in BTCs. So therefore, we already are getting in the habit of distancing from ...


7

A short term increase in the gradient on the graph can be caused by a large and fast relative increase in hashing speed of the total network. Within a short time, the difficulty adjusts and prevents it having a substantial long term impact. The steep gradient on this difficulty graph between 13GH/s and around 20GH/s is an increase of around 50% in hashpower ...


6

There are many causes for inflation, but the two most often agreed upon, according to Investopedia, are these: Demand-Pull Inflation - This theory can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase. This usually occurs in growing economies. Cost-Push ...


6

Changing something like coin generation has two major risks: a) You fork the network. If you make a change and it doesn't have universal support then those supporting the old network will see new blocks as invalid and those supporting the new network will see old blocks as invalid. To users who don't want to get caught up in a "fork war" the results will ...


6

On the deflationary death-spiral part: The bitcoin wiki has a good discussion of deflationary spiral, so that's a good place to get a counter point. I'd like to make some of my own (amateur) observations: Gold is currently not the most popular money used in the world not because gold is "bad" money, but because: a) Laws make it more difficult/expensive ...


6

There's no technical problem with making an inflationary crypto-currency. For Bitcoin, just changing the block reward schedule would do it. And there do exist crypto-currencies that have perpetual block rewards. The thing is, the set of people who believe that inflationary currencies are good doesn't significantly overlap the set of people who think that ...


5

It's technically possible to have a blockchain with any generation schedule, such as X% inflation per year or constant reward per block. The main reasons for a schedule with an upper bound is: The Austrian economics school, to which apparently Satoshi and a large part of Bitcoin's early adopters subscribe, says that the optimal situation is that the ...


5

I appreciate the enthusiasm of those who have answered this question. Everyone here clearly wants bitcoin to succeed, and so everyone is enthusiastic. I am enthusiastic, too. I am afraid, however, that this enthusiasm is coloring respondents' logic. Literally every response on this page (especially the highest ranked one) is wrong. In order for a ...


4

One has to distinguish between three different sources of deflation. Based on the famous quantity equation there are three possible scenarios how a deflation can happen. M * V = Y * P M= Money Supply; V= Money Velocity; Y= Output/Production/Real GDP; P= Price Level Deflation is commonly defined as a decrease in overall price level (e.g. P goes down). So ...


4

There is nothing technically difficult about making this change. Edit a few lines of code, upload a new version, make sure everyone installs it. However, it is extremely unlikely that any respected developer will ever try to make such a change, or that enough users will adopt it if it is offered. The reason is that people who hold bitcoins and don't get ...


4

Build in a reliable entropy function to take account of natural decrement in value over time. All value degrades in nature, and this is the fundamental problem with money in that it can be hoarded without cost. Not sure how this would be implemented, it does dig at the root of the basic theory of money and value but that is what we are attempting to achieve ...


4

Key points in bold. Hoarding doesn't need to be prevented. At least, not yet. See this answer for a solid argument: How does hoarding hurt Bitcoin? Bitcoin attracts hoarding by design. To change that would turn it into something else. As Bitcoin matures, I expect that it will remain a problem that speculative trading brings instability to the market, ...


4

"Hoarding" is a loaded term used to denigrate saving by people who like having the government give money to bankers. To "hoard" money, what do you do? You produce something, you trade it for money, and ... well, that's it. So "hoarding" is actually just producing. The idea that hoarding is bad is just a broken window fallacy. Hoarding means producing ...


4

This is my second answer, which does not cover your question directly but is rather given after the lengthy discussion. Bitcoin is the first approach to a distributed, cryptographic currency. As of now it has not been the last one however. Bitcoin layed the foundation to spawn a lot of similar currencies. This is not destructive to the idea. in fact, the ...


4

This is a tough question. I'd consider Bitcoin as being just deflationary. Why? Because, instead of thinking about mining as "adding new currency", you could consider that mining is just "enabling" more coins each block from the 21 million total coins. Everyone knows that ultimately there will be 21 million coins, just not all of them are spendable. ...


3

I speak from the point of view as a middle-aged (Born 1968) investor; I think the answer to the question is quite simple. You cannot simply consider the start point and end point in asking the question. Along the way the price will gradually appreciate and most people have a price at which they will start to sell their Bitcoins. Currently I hold about 630 ...


3

With every purchase at retail with a Visa/Mastercard/etc. payment card, somewhere in the range of 3% goes to the banking system in the form of fees. With Bitcoin, the fees are tiny fraction of that. If the merchant will accept payment in bitcoin, then there is room to offer a discount for customers paying with bitcoins at no cost to the merchant. So as a ...


3

Bitcoin is deflationary, in modern "economy" it is deemed to be bad. The modern economist argument is that we will be hoarding, instead of spending. Because we know that tomorrow the things will cost less. This is modern myth(=mistake), because: We always need to buy important things (food, transport fees, clothing), no matter what the price will be ...


3

As Bitcoin is a digital-specie currency, if it replaced all fiat currencies it would be the equivalent of reverting to a (digital) gold standard and can be answered in much the same way. Firstly, a gold standard is deflationary. Explaining this again and again is tedious, so I'll summarise: People provide goods or services to others and receive IOUs for ...


2

Understanding bitcoin price behavior with the Quantity theory of money M · V = P · Q Money supply times the Velocity of money equals the Price level times the Quantity of goods. Several arguments against the success of Bitcoin are doing the round: Bitcoin is a bubble, the present $1000+ price level bears no relation to the small bitcoin economy. People ...


2

Bitcoin was modeled after a non-renewable resource extraction curve similar to gold, silver, and oil. Gold and silver have be used throughout history as an effective currency. To say that it would fail due to deflation, would be to say that gold/silver would have met the same fate. Until the modern era, gold and silver was the main form of money used ...


2

Had Bitcoin be designed inflationary the first clone would have been a deflationary one. Given the choice most people would then have moved to the deflationary one for savings (keep or increase value). Thus an inflationary coin does not stand a chance.


2

It seems to me that your confusing the number of bitcoins in existence with the value of bitcoins in existence. "Because lets say you have one bitcoin that is worth 1 dollar and I sold you something that only cost one penny than your saying I would recive 0.01 Bitcoin." Say for instance that there will only ever be 21 million pounds of gold in the world....


2

So I don't see how you could have viable loans in bitcoins until the system has settled down at least 30 years from now. Err.. For a home loan, that would be paid down after 25 years or so; I think you're underestimating. Let's look at the most popular non-governmental currency, gold. According to this, the price of gold (in US dollars) quintupled between ...


2

Fiat currencies are inflationary by design, so that people don't hoard currency. The more your money loses value every year, the less likely you are to keep it sitting in a bank. This availability of money in the market encourages the growth of the economy. When money is easy to borrow, entrepreneurs and businesses can use it to hire/build/invest, and pull ...


2

"Will the energy cost and deflationary nature of Bitcoins doom the currency to obscurity?" --It really depends. As it is, you can use technology like the raspberry pi hooked up to a solar panel/windturbine/water turbine/even methane from our friends the cow. This would (in my eyes) make the initial investment for renewable energy be about the only time ...


2

Why would it? Bitcoin does not require a huge number of people to mine hard. Even the idea behind decentralised trust is more based on all people being able to check the validity of a miners generated block, not on actually expending the energy necessary for mining. Corruption is prevented even with only a few parties competing as miners. Limiting the ...


2

No, this is basically impossible. What you're saying is that we would have stable, predictable deflation that could be relied on. This is not possible because it creates a direct contradiction. Think about it -- which is worth more: One bitcoin today or one bitcoin next year? Clearly, one bitcoin today must be worth more because one of the things you can ...


Only top voted, non community-wiki answers of a minimum length are eligible