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> A digital currency that replaces fiat currencies as a medium exchange cannot have a fixed supply. In fact, central banks, like the Federal Reserve, might even

• Sangermaine 9y ago
  >Bitcoin can became a mainstream p2p fiat replacement for the masses all while having a 21 million coin limit. Does anyone outside of the most zealous ideologues really believe this?
  • wuliwong 9y ago
    My anecdotal experience is most believers in the future of crypto believe that there will be a number of cryptocurrencies that will be used.
  • grubles 9y ago
    Why does one have to be zealous to understand bitcoins are divisible up to eight decimal places? A single bitcoin is really 100,000,000 bitcoin "satoshis" (1.00000000). "Satoshis" being the smallest unit (0.00000001). So, there really are 2,100,000,000,000,000 bitcoin units. When you purchase a single "bitcoin", you really are purchasing 100,000,000 "satoshis".
    • dunk010 9y ago
      Gold is also divisible into arbitrarily-finite (down to the atom, one would suppose, though that doesn't exactly seem practical...), but that completely misses the point of the article: that the money supply isn't large enough, so Bitcoin, like gold, becomes a store of value and is useless as a currency.
      • grubles 9y ago
        How easily can one spend an atom of gold? I can spend a handful of satoshis while sitting on the couch with my laptop. >but that completely misses the point of the article: that the money supply isn't large enough It seems you misunderstood my point, which is that bitcoin is not "21 million coins". There really are many more units, with the option of increasing the divisibility past eight decimal places in the future.
        • erebus_rex 9y ago
          > There really are many more units, with the option of increasing the divisibility past eight decimal places in the future. You are still missing the point. It is not divisibility that makes bitcoin unsuitable as a spending currency, it is the fact that its price keeps rising. Imagine if you are presented with two coins one that historically inflates and another that deflates and are asked to spend one and hold the other. Which do you pick? An inflating coin will always replace a deflating one as a medium of exchange. This is called Gresham's law. A coin with a fixed supply will never be suitable for daily transaction because the demand for currency isn't fixed (due to economic and population growth).
          • grubles 9y ago
            Bitcoin is currently inflationary. 1,800 newly generated bitcoins (about $11,700,00) are added to the supply roughly every 24 hours.
            • erebus_rex 9y ago
              NO it is not. Inflation does not mean growing money supply. It means money supply growing faster than the real economy that transacts on that money. Bitcoin money supply may be growing but not fast enough to accomodate the demand. So it is deflating.
      • QML 9y ago
        The thing you have to remember though is that the velocity of Bitcoin or any cryptocurrency is higher than that of normal fiat. We could still have a finite supply of coins that acts as a currency.
    • Retric 9y ago
      Bitcoin can be destroyed, but in theory the limit never increases. Thus, Bitcoin will fail given a long enough time-frame eventually there will be less than 1 bitcoin left in circulation. Granted, most currency's don't last all that long, but their are not enough accuracy to last say 20,000 years.
      • once_inc 9y ago
        Bitcoins (the unit, not the currency) can indeed be destroyed by using OP_RETURN. This has been done in the past, and is still being done right now. It is however highly unlikely that all 21 million bitcoins will end up in that drain. Bitcoin can also be sent to an address of which there is no known private key. Future advances/exploits of Elliptic curve cryptography should make those coins recoverable. In the end, users will probably not even know each other's public keys for everyday spending of bitcoin. They will only check the public keys for large purchases such as houses, cars, etc.
        • Retric 9y ago
          It's easy to lose private keys which is a far more common issue than you might think. > Future advances/exploits of Elliptic curve cryptography should make those coins recoverable. It's possible for that to be true without also completely destroying bitcoin. But, it's not particularly likely.
• rthomas6 9y ago
  Yeah, money velocity is important, aggregate demand is real, and currency hoarding is unavoidable with a deflationary currency. Why buy something when you can buy more somethings tomorrow?
  • kekeblom 9y ago
    Practical issues aside and from an individual’s perspective, why use an inflationary currency at all if you can use a deflationary one?
    • secondbreakfast 9y ago
      Because you can buy more with a deflationary currency tomorrow than you can today. So the tendency would be to not buy things with a deflationary currency and instead buy things with an inflationary currency.
    • Retric 9y ago
      Generally you can only pay taxes in a specific currency. Deflationary currency's lower debt risks which is a really nice feature when paying taxes, so considering taxes such a large expense deflationary currency's become far more appealing than you might think. You also reduce risks by paying taxes in the same currency you conduct business in. So, while having large savings in deflationary currency is not a great idea, for the average person deflationary currency's are surprisingly appealing. PS: Remember, many things like socks are valued in USD, but are not actually USD. Total USD supply is actually fairly low per person limiting average losses from inflation.
    • rhino369 9y ago
      If all else is equal, you wouldn't. But all else isn't equal. Since the deflationary one induces people to horde, you might have sudden, extreme inflation if people panic sell. Bitcoin and other crypto are only deflationary if their economies grow faster than the supply. But that isn't at all guaranteed.
      • FooHentai 9y ago
• IIAOPSW 9y ago
  Thank you so much! I'm tired of all the goddamn Philistine's that have dunning-kurger'd themselves into thinking that deflationary currency is a good idea and inflation is a central bank conspiracy. That said >It will probably need to have constant money supply growth and preferably money supply growth that matches economic needs and not some algorithm’s hard, mathematical constraint Why not have a "hard math" algorithm which looks at the trade volume in the blocks and adjusts accordingly.
  • colordrops 9y ago
    Can you explain to us idiots why a growing money supply is necessary? I've heard various reasons but none convincing.
    • jdblair 9y ago
      Deflationary money (a fixed money supply) encourages people to hold money and not spend because the same money will buy more goods and services tomorrow. This leads to a decrease in economic activity. [update: I see this argument is raised over and over in other parts of this discussion, I didn't add much]
      • etr-strike 9y ago
        Deflation isn’t guaranteed. Eventually people need to spend. A currency with fixed supply certainly encourages saving. Why is that a bad thing?
        • DontTrustOver25 9y ago
          Depends what you consider "saving". Stuffing money under your mattress is useless but if you save with a bank or in a fund that money is still being cycled back into the economy. Deflation essentially means you could stuff money under your mattress and still come out with something more valuable with none of the associated risk leaving piles of cash sitting out of the market.
        • 9y ago
• agottem 9y ago
  I believe a fixed supply of currency is beneficial when determining price. The ability of an institution to secretly change the amount of a currency used to measure price introduces yet another variable into the valuation equation. Additionally, when the dollar was fixed on the gold standard, employers needed to be upfront and honest with their employees. When they needed to cut wages, employees knew it was happening. Much of the labor movement and union formation happened because employers needed to be honest about what they were doing. I've yet to hear a convincing argument that inflation is good for me.
• coconutrandom 9y ago
  > never heard one good argument to backup the claims that Bitcoin can became a mainstream p2p fiat replacement There are many reasons Bitcoin will not be the currency for daily transactions. Some of them are even technical. But, that is ok because it will be used as a store of value filling a need similar to gold. So I guess I'm agreeing with you. But it's taking people awhile to come to understand this subtle difference.
• feriancek 9y ago
  Bitcoin are (effectively) infinitely divisible. Money supply creation on it's surface is meant to replace notes that age out of supply. Inflationary growth is a byproduct (albeit a good one). Bitcoin supply will also age out (as people lose access to private keys). This creates a natural inflationary action that pushes the value up. No new coins need to be created, just take what's in the supply and break it up into smaller values. This also removes the politics out of the money supply. Many users are already using mBTC as a base unit (0.001BTC) as it's much easier to transact with at a human level. 1mBTC currently is ~ $6.50. The current smallest unit (1 Satoshi) is worth 0.0001USD, plenty of room for further unit division. It's been confirmed on a technical level that moving that division deeper is possible, but unnecessary in the short term.
  • baron816 9y ago
    You definitely have inflation and deflation backwards here.
• wodenokoto 9y ago
  Bitcoin is the digital version of returning to the gold standard (right now I'd say it's more like digital gold, but if they can get fast micro payments, it will be like an actual currency) What might surprise you is that there are a lot of people who think that planned inflation is a way for governments to rob people who are prudent with their personal finance (and save up money) If we are 10 people who each have 100 dollars, we have a money supply of 1.000, evenly distributed. If I'm the national bank and I print another 1.000, the money supply has doubled, while the value of the total money supply has remained constant. Only now, instead of holding on to 10% of the total supply, I now own 55%! So as long as somebody have control of the money supply, it is not a free financial market. Limiting the money supply, either through the scarcity of gold, or cryptography of bitcoin ensures that the market will distribute money, and not the printers.
  • wodenokoto 9y ago
    I get that people consider this a poor argument, but parent asked what the argument for bitcoins deflationary nature, and to the best of my knowledge this is the argument for it, and it is found within groups who identify with anarchistic economics and austrian schools of thought.
• jackcosgrove 9y ago
  Given this reality, why not create a multiplicity of currencies, all convertible with each other and with different inflation rates? Currently we have a hodgepodge of assets with various interest rates that are all convertible with the fiat currency, but as with the gold and silver standards, we are mapping objects with other kinds of utility, such as houses, onto the financial asset spectrum and distorting those other uses. Interest rates should just be used to efficiently allocate resources across time, and the vehicles we have of doing so are very rough and prone to supply and demand shocks for reasons that have nothing to do with one's value of current time and future time.