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I don't understand how the issue you're describing is specific to bitcoin. Consider that wealth in the real world also accumulates in a non gaussian distributi

by zdkl 9y ago

I don't understand how the issue you're describing is specific to bitcoin. Consider that wealth in the real world also accumulates in a non gaussian distribution.

Nition 9y ago
I think the comment is saying that in other currencies, if your currency's total value increases, usually more money is printed to keep the value reasonable. Even with other cryptocurrencies, Ripple for instance has a large unallocated holding of coins that they're meant to siphon out into the market to keep the value per coin under control. Whereas with bitcoin you can hold onto the same amount of money and if more and more people buy in, it becomes more and more valuable. I'd add that I almost feel like there could be a bit of a paradox there in regards to Bitcoin's actual usefulness for real purchases. Let’s say Bitcoin takes off and various merchants start accepting it. Since Bitcoin is useful now, more people buy in. But since more people are always buying in and the total pool is limited, the value continues to go up. The more merchants support Bitcoin, the more people adopt Bitcoin, and the more valuable it becomes. The more the value continues to increase, the better it seems as an investment, and the more people lean towards holding instead of spending. The more useful it becomes, the better it is to not spend it.
- deleted 9y ago
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- speedplane 9y ago
  > The more the value continues to increase, the better it seems as an investment, and the more people lean towards holding instead of spending. This is called currency "deflation" (the opposite of inflation), and it's one of the key things that central banks try to control. If a currency is gaining value rapidly, then it makes more sense for people to hold onto it, no one buys anything, and the economy drives to a halt. In these cases, central banks may print money to lower the value of the currency. The effects of how it would play out with Bitcoin are probably different, as it isn't close to being universal, it travels across political borders, no single economy relies on it, and it's under no control. Sounds like an Econ PhD thesis.

by zdkl 9y ago

I don't understand how the issue you're describing is specific to bitcoin. Consider that wealth in the real world also accumulates in a non gaussian distribution.

Nition 9y ago

I think the comment is saying that in other currencies, if your currency's total value increases, usually more money is printed to keep the value reasonable. Even with other cryptocurrencies, Ripple for instance has a large unallocated holding of coins that they're meant to siphon out into the market to keep the value per coin under control. Whereas with bitcoin you can hold onto the same amount of money and if more and more people buy in, it becomes more and more valuable. I'd add that I almost feel like there could be a bit of a paradox there in regards to Bitcoin's actual usefulness for real purchases. Let’s say Bitcoin takes off and various merchants start accepting it. Since Bitcoin is useful now, more people buy in. But since more people are always buying in and the total pool is limited, the value continues to go up. The more merchants support Bitcoin, the more people adopt Bitcoin, and the more valuable it becomes. The more the value continues to increase, the better it seems as an investment, and the more people lean towards holding instead of spending. The more useful it becomes, the better it is to not spend it.

deleted 9y ago
[deleted]
speedplane 9y ago
> The more the value continues to increase, the better it seems as an investment, and the more people lean towards holding instead of spending. This is called currency "deflation" (the opposite of inflation), and it's one of the key things that central banks try to control. If a currency is gaining value rapidly, then it makes more sense for people to hold onto it, no one buys anything, and the economy drives to a halt. In these cases, central banks may print money to lower the value of the currency. The effects of how it would play out with Bitcoin are probably different, as it isn't close to being universal, it travels across political borders, no single economy relies on it, and it's under no control. Sounds like an Econ PhD thesis.