7

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

Yes, cryptocurrencies that have finite supply are bound to create deflation. This is because the same finite supply of coins will represent an increased economic output that results from technological innovations. Thus the value of a coin is worth more tomorrow than today thereby increasing its purchasing power. However, if this deflation is bad is highly ...


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

In Fiat Interest and Inflation cancel each other and promote borrowing and thats a healthy thing, but bitcoin economy a borrower has to fight against deflation and interest, if interest rate gets lower to zero then lenders will have no incentive in lending At a basic level, the person providing the loan hopes to receive a small return (interest) for ...


3

I would suspect that most Bitcoin advocates would disagree with you. The simplest counter-argument is this -- wouldn't that mean inflation discourages people from selling things? And you can't spend if nobody wants to sell to you, can you? Another way to make the same counter-argument is this: Actually, no, deflation encourages people to spend the bitcoins ...


2

The answer to this question depends on the terminology used. "To inflate" normally means "to increase the volume". "To deflate" is the opposite. In this sense, bitcoins were inflationary in 2013 (the inflation was ca 15%) and will be inflationary in 2014 as well. At the same time, bitcoins were undergoing hyperappreciation in 2013 (bitcoin appreciation ...


2

Regarding the liquidity trap concern: The common and agreed upon solution is to allow a few more decimals in a bitcoin client update when the time comes. Regarding calling it an investment: All good, for some people it's not an investment but a belief in the idea. Regarding calling it a bubble: Value is what people are willing to pay, not set. Everything ...


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

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 ...


1

This would be fantastic for everyone but the attacker. First, everyone who held bitcoin would be rich. As bitcoin became more and more scarce, the price would go up. The attacker would have to offer full value for every bitcoin it managed to acquire, so it's no different from an attack where you buy all the bitcoins. However, as the distribution becomes ...


1

First of all I don't think it needs to be so binary (bitcoin or nothing). Fiat and lending will likely co-exist along with bitcoin. Additionally, what if instead of creating a business based on debt, the business owner saved his money for a few years in the deflationary currency and thereby gains the needed funds and discipline to start a business? Debt ...


1

If one could simply "print more" Bitcoins, then it would quickly lose its value (this is the definition of inflation btw) because of increased supply. This is the main reason why, for instance, the USD has lost so much value in the last 50 years. People invest in Bitcoin because they think it will increase in value, not because there is a limited supply. ...


1

From what I gather, the deflationary aspects of Bitcoin are tied to the limited supply and lack of central regulation. I'm still learning about it but here is a collection of articles I put together on the subject: http://wayfinder.co/pathways/530d0adaa30064b367000088/an-economic-primer-on-bitcoin


1

I don't know why you're calling the first point a "liquidity trap", that has nothing to do with the words that follow. Did you mean "granularity problem"? the 21 million cap isn't a problem, not because it reduces to .03 cents in an extreme scenario, but because the code could be changed to go out to more decimal places, no math required. There is no way ...


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