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I've asked it before but: how is this a desirable characteristic for a currency? This level of deflation is as bad as too much inflation, though the problems i

by api 9y ago

I've asked it before but: how is this a desirable characteristic for a currency? This level of deflation is as bad as too much inflation, though the problems it creates are different. Why would anyone actually use Bitcoin if simply sitting on it will yield a greater return than investing it in anything? So far it seems more deflationary than gold. If this keeps happening won't this actually crowd out the currency application and lead to Bitcoin becoming nothing more than a speculative bubble? It's hard to determine but I'd love to see some data on Bitcoin use vs. its price in USD/EUR.

zby 9y ago
To be useful money needs some reasonable market cap - because it could not store or move too much value without that.
baddox 9y ago
Being a “currency,” for any definition of that term, doesn’t have to be and isn’t the only criterion for success for Bitcoin.
heelhook 9y ago
You’re thinking about this wrong; bitcoin is meant to be used more as a store of value rather than as a currency for transactions. You should think about it more as hold than dollars. Also, new assets and specially new asset classes are predictably going to have high volatility at first, until the market knows what to make out of it and finds the right value for it. In relative terms, bitcoin is still a pretty new asset, specially since new people are coming into the market every month.
rsynnott 9y ago
> If this keeps happening won't this actually crowd out the currency application and lead to Bitcoin becoming nothing more than a speculative bubble? I think it'd be reasonable to say that this has largely already happened. Beyond the volatility, it's terribly impractical to use as an actual currency due to the transaction fees these days.
- mrep 9y ago
  Yep, it's also terribly unforgiving to use. Lose your wallet password and your money is gone. Fat finger an address sending it to the wrong account and its gone. Bug in someone's code and the coins get stolen in a hack: gone.
  - sbenitoj 9y ago
    Definitely, the user experience is going to have to improve A LOT. It took a solid 20 years before email was used by grandmothers though, in another 11 years it’s likely to see grandmothers using cryptocurrencies!
  - turkeytotal 9y ago
    Addresses have a checksum so unless the wallet ignores that, a fat finger causing funds loss in that scenario is unlikely. [0] With the newly designed address format there is also error detection. [1] [0] https://bitcoin.stackexchange.com/questions/32353/how-do-i-check-the-checksum-of-a-bitcoin-address https://bitcoin.stackexchange.com/questions/32353/how-do-i-c... [1] https://github.com/bitcoin/bips/blob/master/bip-0173.mediawiki https://github.com/bitcoin/bips/blob/master/bip-0173.mediawi...
- sbenitoj 9y ago
  Great point, luckily unlike fiat currency, developers can fork the code and create a new currency if they don’t agree with the way things are being run. This happened when Bitcoin forked into Bitcoin Cash (which has a blocksize that’s roughly 8x larger than Bitcoin, and has very very low transaction fees) and its likely going to happen again around mid-November when Bitcoin forks again. Unlikely that all these forks will survive, only time will tell what the market actually values!
sbenitoj 9y ago
Central banks have (without evidence) claimed that deflation is a universally “bad thing” in order to justify inflating the currency every single year (AKA stealing from savers, and transferring wealth to the people who are the earliest recipients of the inflated currency). Gold would have become the standard around the world if governments had not used coercion to prevent it from becoming so, and instead replacing it with fiat currency (which they can control and benefit from). If Bitcoin, or another cryptocurrency, replaces fiat, it’s value will be worth several orders of magnitude of what it’s worth today, which is why many people are holding it instead of spending it at the moment. However, people will not simply “horde” Bitcoin forever in anticipation of its price going up any more than people currently spend every single fiat dollar/euro/yen they have for fear of it going down in value due to inflation. You may ask, “but why WOULDN’T they hold it instead of spend it if they anticipate the value increasing each year?” The answer is because people HAVE to live in the here and now, they have to pay for things like food, rent, entertainment, cars, fuel, etc. So they can’t get around having to spend some amount of money to live. But sound money (money with low to no inflation) does cause people to spend LESS money than fiat currency because there’s a much larger opportunity cost.
- soVeryTired 9y ago
  > Central banks have (without evidence) claimed that deflation is a universally “bad thing” in order to justify inflating the currency every single year (AKA stealing from savers, and transferring wealth to the people who are the earliest recipients of the inflated currency). TIPS. JGBis. Linkers. Come on man, this makes you sound like a crank. Gold was the standard. It didn't work out very well.
  - sbenitoj 9y ago
    TIPS and JGBIs are nothing but derivatives of un-sound money (fiat currency controlled by a small group of people, enforced by coercion), not examples of sound money people can choose as an alternative to fiat currency. The gold standard you’re talking about was far from a market gold standard, banks and governments colluded so banks could print more paper money than there was gold in storage. What specifically do you think “didn’t work out very well”?
Geee 9y ago
This isn't deflation, but convergence to a stable value. It's an S-curve.

by api 9y ago

zby 9y ago

To be useful money needs some reasonable market cap - because it could not store or move too much value without that.

baddox 9y ago

Being a “currency,” for any definition of that term, doesn’t have to be and isn’t the only criterion for success for Bitcoin.

heelhook 9y ago

You’re thinking about this wrong; bitcoin is meant to be used more as a store of value rather than as a currency for transactions. You should think about it more as hold than dollars. Also, new assets and specially new asset classes are predictably going to have high volatility at first, until the market knows what to make out of it and finds the right value for it. In relative terms, bitcoin is still a pretty new asset, specially since new people are coming into the market every month.

rsynnott 9y ago

> If this keeps happening won't this actually crowd out the currency application and lead to Bitcoin becoming nothing more than a speculative bubble? I think it'd be reasonable to say that this has largely already happened. Beyond the volatility, it's terribly impractical to use as an actual currency due to the transaction fees these days.

mrep 9y ago
Yep, it's also terribly unforgiving to use. Lose your wallet password and your money is gone. Fat finger an address sending it to the wrong account and its gone. Bug in someone's code and the coins get stolen in a hack: gone.
- sbenitoj 9y ago
  Definitely, the user experience is going to have to improve A LOT. It took a solid 20 years before email was used by grandmothers though, in another 11 years it’s likely to see grandmothers using cryptocurrencies!
- turkeytotal 9y ago
  Addresses have a checksum so unless the wallet ignores that, a fat finger causing funds loss in that scenario is unlikely. [0] With the newly designed address format there is also error detection. [1] [0] https://bitcoin.stackexchange.com/questions/32353/how-do-i-check-the-checksum-of-a-bitcoin-address https://bitcoin.stackexchange.com/questions/32353/how-do-i-c... [1] https://github.com/bitcoin/bips/blob/master/bip-0173.mediawiki https://github.com/bitcoin/bips/blob/master/bip-0173.mediawi...
sbenitoj 9y ago
Great point, luckily unlike fiat currency, developers can fork the code and create a new currency if they don’t agree with the way things are being run. This happened when Bitcoin forked into Bitcoin Cash (which has a blocksize that’s roughly 8x larger than Bitcoin, and has very very low transaction fees) and its likely going to happen again around mid-November when Bitcoin forks again. Unlikely that all these forks will survive, only time will tell what the market actually values!

sbenitoj 9y ago

Central banks have (without evidence) claimed that deflation is a universally “bad thing” in order to justify inflating the currency every single year (AKA stealing from savers, and transferring wealth to the people who are the earliest recipients of the inflated currency). Gold would have become the standard around the world if governments had not used coercion to prevent it from becoming so, and instead replacing it with fiat currency (which they can control and benefit from). If Bitcoin, or another cryptocurrency, replaces fiat, it’s value will be worth several orders of magnitude of what it’s worth today, which is why many people are holding it instead of spending it at the moment. However, people will not simply “horde” Bitcoin forever in anticipation of its price going up any more than people currently spend every single fiat dollar/euro/yen they have for fear of it going down in value due to inflation. You may ask, “but why WOULDN’T they hold it instead of spend it if they anticipate the value increasing each year?” The answer is because people HAVE to live in the here and now, they have to pay for things like food, rent, entertainment, cars, fuel, etc. So they can’t get around having to spend some amount of money to live. But sound money (money with low to no inflation) does cause people to spend LESS money than fiat currency because there’s a much larger opportunity cost.

soVeryTired 9y ago
> Central banks have (without evidence) claimed that deflation is a universally “bad thing” in order to justify inflating the currency every single year (AKA stealing from savers, and transferring wealth to the people who are the earliest recipients of the inflated currency). TIPS. JGBis. Linkers. Come on man, this makes you sound like a crank. Gold was the standard. It didn't work out very well.
- sbenitoj 9y ago
  TIPS and JGBIs are nothing but derivatives of un-sound money (fiat currency controlled by a small group of people, enforced by coercion), not examples of sound money people can choose as an alternative to fiat currency. The gold standard you’re talking about was far from a market gold standard, banks and governments colluded so banks could print more paper money than there was gold in storage. What specifically do you think “didn’t work out very well”?

Geee 9y ago

This isn't deflation, but convergence to a stable value. It's an S-curve.