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 ...


6

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 ...


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 ...


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. ...


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 ...


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 ...


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

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

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 ...


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

"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

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 ...


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 ...


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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