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That much has always been obvious to anyone paying attention. It's not a currency. Currencies can either be deflationary or inflationary. Cryptocurrencies are i

That much has always been obvious to anyone paying attention. It's not a currency. Currencies can either be deflationary or inflationary. Cryptocurrencies are inherently deflationary* which makes them bad currencies but perfect for speculative investment. That's the core of every cryptocurrency out there today. The utility as a currency is at best secondary, or even tertiary. It's only a matter of time until those bubbles burst. Edit: fine, amend what I said to be "the vast majority of current cryptocurrencies with high market caps are deflationary". Most usage of cryptocurrencies today is in "investment", not monetary exchange.

carlmr 9y ago
Might also be one of those PT Barnum things. There's a sucker born every minute, and the internet is big to reach all of them.
blueprint 9y ago
> Cryptocurrencies are inherently deflationary How so?
- tpxl 9y ago
  There's a limited amount of bitcoin to go around.
  - boobsbr 9y ago
    Wouldn't that make the value of a token rise, as there is demand but no supply?
    - tpxl 9y ago
      Yes, that is what deflation is, is it not? More goods for the same amount of currency?
      - boobsbr 9y ago
        You're right, my bad.
  - blueprint 9y ago
    There are other cryptocurrencies aside from Bitcoin, even if Bitcoin is not able to be a true currency (e.g. fungibility issue). See Monero. It has a tail emission.
    - tpxl 9y ago
      Every cryptocurrency based on Bitcoin mechanics has the same problems as Bitcoin. That, as you rightly pointed out, does not discount other cryptocurrencies without these issues. I was aiming solely at Bitcoin (and similar cryptocurrencies).
- girvo 9y ago
  Most of the so-far released ones have a specific cap on how many tokens will be mined. Bitcoin does, for example. But it's not a hard requirement of cryptocurrencies, I think.
  - mavhc 9y ago
    Bitcoin is also designed to make future coins harder to mine, thus more expensive. The only incentive to sell bitcoin is if you think the entire thing is about to fail.
    - sanswork 9y ago
      Bitcoin isn't really designed to do that. It is designed to increase difficulty with competition. If no one was interested in mining bitcoin it would be exactly the same difficulty to mine today as it was one day one.
      - mavhc 9y ago
        Doesn't the reward halve every 210000 blocks?
        sanswork 9y ago
        The size of the reward doesn't actually change the difficulty though.
  - deleted 9y ago
    [deleted]
- simonh 9y ago
  Eventually all the BTC will have been mined and no new BTC will ever be created again, unlike regular currencies in which the money supply can always rise alongside the expansion of the economy. BTC will eventually become a fiscal straight jacket. It may take quite a while to take effect, but is inevitable and the more BTC become integrated into the economy, the more eventual pain it will cause down the line.
  - blueprint 9y ago
    All cryptocurrencies are inherently deflationary because one example of an attempt at a cryptocurrency (BTC) is inherently deflationary?
    - simonh 9y ago
      All current attempts at cryptocurrencies, of which there are very, very many have been inherently deflationary. Can you point me to a single one either current or even planned that isn't? We are discussing the real world.
      - sanswork 9y ago
        Both Ether and Monero are uncapped and deflationary. So 2 out of the top 10 at the moment. I didn't bother checking beyond that.
    - erispoe 9y ago
      If you have a limited supply of currency in a growing economy, it's inherently deflationary. So far I haven't seen proposals for cryptocurrencies that can grow as a function of the underlying economy. Maybe there are some.
  - alexasmyths 9y ago
    The 'main reason' BTC is deflationary is because it's not used as a currency, and as prices rise, people want to 'hold' thereby creating less liquidity etc. It's a funny thing to watch.
  - 9y ago
darawk 9y ago
That's true for pure currencies (e.g. Bitcoin), however most of the newer ones have various functionalities. You may or may not like Ethereum, but its use as a currency is a small part of what it has on offer. And technically at the moment it is inflationary, as well.
lui8906 9y ago
Though this has been a feature of the vast majority of cryptocurrencies, it is not inherent. For example Monero has an inbuilt tail emission once the initial supply is exhausted that will continue indefinitely. See more here: https://getmonero.org/resources/moneropedia/tail-emission.html https://getmonero.org/resources/moneropedia/tail-emission.ht...
dnautics 9y ago
> Cryptocurrencies are inherently deflationary* which makes them bad currencies but perfect for speculative investment. It's so funny that people think that deflationary makes something a bad currency. On the other hand an inflationary currency inherently steals from the poor and gives to the rich. I'd call that a "bad" currency. Inflationary currencies are also perfect for speculative investment. Imagine starting up a 3x leveraged ETF with the underlying debt instrument denominated in bitcoin. Of course with an inflationary currency, the real value of that underlying debt will go down, (and usually, the interest rates stay low), which makes institutionalized risky plays possible.
- Nursie 9y ago
  > On the other hand an inflationary currency inherently steals from the poor and gives to the rich. How so? The poor have nothing, in fact what they usually have is debt. Inflation makes that shrink over time. And yes, inflationary currencies encourage investment, as you can#'t make gains just by sitting on the medium of exchange. Failing to see why these are bad.
  - richardknop 9y ago
    I'd rephrase the parent comment to say "inflationary currency steals from savers". Imagine someone like me, without debt but trying to save money for something (larger deposit so I don't have to take 30 years mortgage for example). I am not rich by any stretch but I am not poor either. Probably I would fall into middle class (if middle class still exists as it's been disappearing). Inflation is really harming me and people like me. Basically what inflationary currency does is it forces frugal people who would otherwise not go into debt to take loans anyways as they realize that saving is a lose lose idea right now. Better to take a mortgage or two and let inflation slowly erase value of your debt.
    - Nursie 9y ago
      Saving's a poor idea at the moment because the interest rates on offer are so tiny. Looking at the last 25(ish) years of UK data the base rates have tended to be above inflation, until the 2008 crisis. But yes, inflation will slowly devalue your debt if the debt is a static amount, borrowing can be a good driver of growth, when managed well. And sitting on piles of currency is not good either - the currency is a medium of exchange, not a store of value, it's better to encourage the economy by encouraging investment over hoarding. Further, deflationary currency values work yesterday over work today, helping people lock in value and higher wealth purely by being older entrants into the market.
alexasmyths 9y ago
"The utility as a currency is at best secondary, or even tertiary. It's only a matter of time until those bubbles burst." The value as a currency is what would give them existential staying power. The USD is not hugely valuable because it's backed by US treasuries - it's valuable because it's extremely liquid and can be used ubiquitously. BTC etc. bubbles may not 'pop' like tulips, because there are a) institutional holders of major blocks that can do things to keep the price up, b) speculative holders have no need to liquidate and I think will want to 'hold' so as to avoid losses and c) there is a small 'actual' area wherein BTC is a currency, which is the black market. There is, globally enough of a 'general black market' to create some demand for BTC as a currency. I think those 3 things combined means that it's possible BTC can hold it's 'paper value' for quite a long time. Two other existential factors: 1) The BTC mania has yet to truly hit mainstream, and it's making it's way globally. 2) The press is still piling on the hyper. A lot of bloggers have positions in BTC they do not disclose. But it's all ridiculous and fake speculation. Jaimie Dimon is technically correct, this BTC 'makes no sense' - but if enough people believe in it enough, then it will exist.
- vasilipupkin 9y ago
  yeah. Why do people buy gold for their portfolios? for the same reason BTC will exist.
  - Nursie 9y ago
    As a backup, so that if the shit hits the fan they have something that's held value and fascination for thousands of years?
    - vasilipupkin 9y ago
      right. So why does it hold value when shit hits the fan? you can't eat it, you can't treat a disease with it. Will it hold value in the future? My point is, it's really just convention. So, the same logic applies to bitcoin.
      - 9y ago
specialist 9y ago
I think of crypocurrencies as an escrow. Given the bubble, I kinda wish I was brave enough to speculate. But I can't even bring myself to buy a lottery ticket. My loss.

carlmr 9y ago

Might also be one of those PT Barnum things. There's a sucker born every minute, and the internet is big to reach all of them.

blueprint 9y ago

> Cryptocurrencies are inherently deflationary How so?

tpxl 9y ago
There's a limited amount of bitcoin to go around.
- boobsbr 9y ago
  Wouldn't that make the value of a token rise, as there is demand but no supply?
  - tpxl 9y ago
    Yes, that is what deflation is, is it not? More goods for the same amount of currency?
    - boobsbr 9y ago
      You're right, my bad.
- blueprint 9y ago
  There are other cryptocurrencies aside from Bitcoin, even if Bitcoin is not able to be a true currency (e.g. fungibility issue). See Monero. It has a tail emission.
  - tpxl 9y ago
    Every cryptocurrency based on Bitcoin mechanics has the same problems as Bitcoin. That, as you rightly pointed out, does not discount other cryptocurrencies without these issues. I was aiming solely at Bitcoin (and similar cryptocurrencies).
girvo 9y ago
Most of the so-far released ones have a specific cap on how many tokens will be mined. Bitcoin does, for example. But it's not a hard requirement of cryptocurrencies, I think.
- mavhc 9y ago
  Bitcoin is also designed to make future coins harder to mine, thus more expensive. The only incentive to sell bitcoin is if you think the entire thing is about to fail.
  - sanswork 9y ago
    Bitcoin isn't really designed to do that. It is designed to increase difficulty with competition. If no one was interested in mining bitcoin it would be exactly the same difficulty to mine today as it was one day one.
    - mavhc 9y ago
      Doesn't the reward halve every 210000 blocks?
      - sanswork 9y ago
        The size of the reward doesn't actually change the difficulty though.
- deleted 9y ago
  [deleted]
simonh 9y ago
Eventually all the BTC will have been mined and no new BTC will ever be created again, unlike regular currencies in which the money supply can always rise alongside the expansion of the economy. BTC will eventually become a fiscal straight jacket. It may take quite a while to take effect, but is inevitable and the more BTC become integrated into the economy, the more eventual pain it will cause down the line.
- blueprint 9y ago
  All cryptocurrencies are inherently deflationary because one example of an attempt at a cryptocurrency (BTC) is inherently deflationary?
  - simonh 9y ago
    All current attempts at cryptocurrencies, of which there are very, very many have been inherently deflationary. Can you point me to a single one either current or even planned that isn't? We are discussing the real world.
    - sanswork 9y ago
      Both Ether and Monero are uncapped and deflationary. So 2 out of the top 10 at the moment. I didn't bother checking beyond that.
  - erispoe 9y ago
    If you have a limited supply of currency in a growing economy, it's inherently deflationary. So far I haven't seen proposals for cryptocurrencies that can grow as a function of the underlying economy. Maybe there are some.
- alexasmyths 9y ago
  The 'main reason' BTC is deflationary is because it's not used as a currency, and as prices rise, people want to 'hold' thereby creating less liquidity etc. It's a funny thing to watch.
- 9y ago

darawk 9y ago

That's true for pure currencies (e.g. Bitcoin), however most of the newer ones have various functionalities. You may or may not like Ethereum, but its use as a currency is a small part of what it has on offer. And technically at the moment it is inflationary, as well.

lui8906 9y ago

Though this has been a feature of the vast majority of cryptocurrencies, it is not inherent. For example Monero has an inbuilt tail emission once the initial supply is exhausted that will continue indefinitely. See more here: https://getmonero.org/resources/moneropedia/tail-emission.html https://getmonero.org/resources/moneropedia/tail-emission.ht...

dnautics 9y ago

> Cryptocurrencies are inherently deflationary* which makes them bad currencies but perfect for speculative investment. It's so funny that people think that deflationary makes something a bad currency. On the other hand an inflationary currency inherently steals from the poor and gives to the rich. I'd call that a "bad" currency. Inflationary currencies are also perfect for speculative investment. Imagine starting up a 3x leveraged ETF with the underlying debt instrument denominated in bitcoin. Of course with an inflationary currency, the real value of that underlying debt will go down, (and usually, the interest rates stay low), which makes institutionalized risky plays possible.

Nursie 9y ago
> On the other hand an inflationary currency inherently steals from the poor and gives to the rich. How so? The poor have nothing, in fact what they usually have is debt. Inflation makes that shrink over time. And yes, inflationary currencies encourage investment, as you can#'t make gains just by sitting on the medium of exchange. Failing to see why these are bad.
- richardknop 9y ago
  I'd rephrase the parent comment to say "inflationary currency steals from savers". Imagine someone like me, without debt but trying to save money for something (larger deposit so I don't have to take 30 years mortgage for example). I am not rich by any stretch but I am not poor either. Probably I would fall into middle class (if middle class still exists as it's been disappearing). Inflation is really harming me and people like me. Basically what inflationary currency does is it forces frugal people who would otherwise not go into debt to take loans anyways as they realize that saving is a lose lose idea right now. Better to take a mortgage or two and let inflation slowly erase value of your debt.
  - Nursie 9y ago
    Saving's a poor idea at the moment because the interest rates on offer are so tiny. Looking at the last 25(ish) years of UK data the base rates have tended to be above inflation, until the 2008 crisis. But yes, inflation will slowly devalue your debt if the debt is a static amount, borrowing can be a good driver of growth, when managed well. And sitting on piles of currency is not good either - the currency is a medium of exchange, not a store of value, it's better to encourage the economy by encouraging investment over hoarding. Further, deflationary currency values work yesterday over work today, helping people lock in value and higher wealth purely by being older entrants into the market.

alexasmyths 9y ago

"The utility as a currency is at best secondary, or even tertiary. It's only a matter of time until those bubbles burst." The value as a currency is what would give them existential staying power. The USD is not hugely valuable because it's backed by US treasuries - it's valuable because it's extremely liquid and can be used ubiquitously. BTC etc. bubbles may not 'pop' like tulips, because there are a) institutional holders of major blocks that can do things to keep the price up, b) speculative holders have no need to liquidate and I think will want to 'hold' so as to avoid losses and c) there is a small 'actual' area wherein BTC is a currency, which is the black market. There is, globally enough of a 'general black market' to create some demand for BTC as a currency. I think those 3 things combined means that it's possible BTC can hold it's 'paper value' for quite a long time. Two other existential factors: 1) The BTC mania has yet to truly hit mainstream, and it's making it's way globally. 2) The press is still piling on the hyper. A lot of bloggers have positions in BTC they do not disclose. But it's all ridiculous and fake speculation. Jaimie Dimon is technically correct, this BTC 'makes no sense' - but if enough people believe in it enough, then it will exist.

vasilipupkin 9y ago
yeah. Why do people buy gold for their portfolios? for the same reason BTC will exist.
- Nursie 9y ago
  As a backup, so that if the shit hits the fan they have something that's held value and fascination for thousands of years?
  - vasilipupkin 9y ago
    right. So why does it hold value when shit hits the fan? you can't eat it, you can't treat a disease with it. Will it hold value in the future? My point is, it's really just convention. So, the same logic applies to bitcoin.
    - 9y ago

specialist 9y ago

I think of crypocurrencies as an escrow. Given the bubble, I kinda wish I was brave enough to speculate. But I can't even bring myself to buy a lottery ticket. My loss.