9 ms·

I feel like the author missed the biggest problem. There is a huge dis-incentive to use bitcoin as a medium of exchange because it is inherently _deflationary_.

by pilom 9y ago

I feel like the author missed the biggest problem. There is a huge dis-incentive to use bitcoin as a medium of exchange because it is inherently _deflationary_. If I know bitcoins will continue to increase in value because math, why on earth would I ever exchange them for something that doesn't?

hudon 9y ago
Your needs don't disappear just because your assets are appreciating. Therefore, you would sell some to purchase things you need.
- etchalon 9y ago
  But an economy driven exclusively by "need" purchases is dangerous. Discretionary spending drives a massive percent of our economy overall. To whatever extent Bitcoin "works" now, it's because it is not vital to any economy.
koonsolo 9y ago
I never get this argument. A trade always has 2 parties. Maybe you want to get rid of your dollars first, but the guy selling you the pizza doesn't. He wants bitcoins. As far as I see in practice, it's the seller that decides the means of payment, not the buyer. Can you pay with dollar bills, euro bills, visa, paypal, bitcoins,..? That's not up to the buyer, but the seller. So the question (but maybe I'm missing something) is not "why would I buy something in Bitcoins?", but it seems to be "Why would I not sell my product or service for Bitoins?".
- rhino369 9y ago
  The seller and the buyer have to agree on means of payment. So your question is really, "why would I not sell my product ONLY for bitcoin." And the answer is because you'd lose almost all your sales. If Amazon offers bitcoin I just won't use it. If they only offer bitcoin I'll use Jet or Walmart.com.
  - koonsolo 9y ago
    If they want Bitcoin more than dollars, they could also offer discounts on people paying with Bitcoins. Doesn't need to be binary.
    - rhino369 9y ago
      If you want bitcoin that bad you could just buy it.
      - hndamien 9y ago
        Thats not how this works.
      - koonsolo 9y ago
        Maybe you don't have or want a bank account. Maybe you don't want to handle the cash in your register. Maybe you don't want to pay the VISA fees. Maybe you don't want to pay the exchange fees. Maybe you want to accept huge amounts of money from accros the globe (I know Boeing selling airplaines to European airlines involves perfect timing of bank business hours and multiple phonecalls with multiple banks)
        amenghra 9y ago
        Most large business transactions (eg cargo shipments from one country to another) involve intermediary banks and letters of credit (https://en.m.wikipedia.org/wiki/Letter_of_credit https://en.m.wikipedia.org/wiki/Letter_of_credit). Both parties usually don’t need overlapping business hours to move goods or money around. Boeing’s case might be unique, any idea why?
        koonsolo 9y ago
        I'm not it that business myself, so I don't know. But I do know of this one case where a 787 was bought. When the plane is ready, people from the airline (project manager, pilot, etc) go there. If all is fine, the payment is made, and the plane can be taken home with their own pilot. The airspace regulation back home also needs to approve the airplane is ok to fly. The person that I know told me the transaction looks like some James Bond movie where banks are called and laptops are used to verify. And it was timed so the bank in Europe was still open, and first transfer was to NY.
XR0CSWV3h3kZWg 9y ago
The same reason I buy electronics. If I wait a year I'll certainly get more bang for my buck, but I don't.
- cableshaft 9y ago
  If you wait for 40 years to buy a new console, instead of getting an Atari 2400 you can get an PS4! Don't get that Atari! Wait to enjoy your life when you're old or dead in the ground!
andrewla 9y ago
> "inherently deflationary" I keep hearing this, and it doesn't get any more intelligible. Saying that bitcoin is inherently deflationary is as absurd as saying that the price of bitcoin can only go up, because those two statements are exactly the same. Bitcoin, in the steady state, will go up or down as demand requires and as credit markets adjust to account for the future value of money.
- chasedehan 9y ago
  The inherent deflationary is the same relation that we had with the gold standard. The issue is that in a deflationary environment (such as recessions), the need for a central bank to prop up the currency for debtors is essential. For an example: https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ https://www.theatlantic.com/business/archive/2012/08/why-the...
  - andrewla 9y ago
    Certainly bitcoin is immune (mostly) to central bank manipulation for better or for worse - I think that’s a given. But any currency can enter deflationary regimes, as witnessed by central bankers’ desire to intervene during recessions. It’s not clear that the properties of bitcoin make it any more or less vulnerable to this. As an aside I’d say the factual evidence of the efficacy of central banking is controversial; many would put as much blame for historic and recent recessions on central banks as would credit them for the recovery. Certainly bitcoin by its philosophy and design is pretty skeptical about central bankers and their motivations.
- bennyg 9y ago
  I think what the poster is trying to say is this: Bitcoin has a finite supply. If demand remains at its current rate, inherently the value will also continue going up.
  - samsonradu 9y ago
    Silly question perhaps, but does Bitcoin have a finite supply after all? I understand that mathematically they'll run out of hashes starting with zeros or whatever, but if they fork it once every X years, is that considered finite?
rhino369 9y ago
Bitcoin isn't even inherently deflationary. Inflation and deflation (as the words are commonly used) are set by supply and demand. The whole point of central banks is to control supply to steady the price. It's only deflationary when demand rises. Demand could fall because of a shrinking bitcoin economy or because the velocity of bitcoin increases.
timthelion 9y ago
Why would you ever sell real-estate?
dxhdr 9y ago
> If I know bitcoins will continue to increase in value because math, why on earth would I ever exchange them for something that doesn't? You wouldn't, until the marginal utility of an item or service outweighs the future value of those bitcoins. That's like asking, why would anyone ever buy a new laptop? Just wait until next year, the models will be faster and cheaper. It's true, it will always be better to buy a laptop next year. However at some point it becomes more valuable to consume the laptop now than to continue waiting. In the aggregate when considering the varying time preferences of consumers, new laptops are sold all the time.

by pilom 9y ago

hudon 9y ago

Your needs don't disappear just because your assets are appreciating. Therefore, you would sell some to purchase things you need.

etchalon 9y ago
But an economy driven exclusively by "need" purchases is dangerous. Discretionary spending drives a massive percent of our economy overall. To whatever extent Bitcoin "works" now, it's because it is not vital to any economy.

koonsolo 9y ago

I never get this argument. A trade always has 2 parties. Maybe you want to get rid of your dollars first, but the guy selling you the pizza doesn't. He wants bitcoins. As far as I see in practice, it's the seller that decides the means of payment, not the buyer. Can you pay with dollar bills, euro bills, visa, paypal, bitcoins,..? That's not up to the buyer, but the seller. So the question (but maybe I'm missing something) is not "why would I buy something in Bitcoins?", but it seems to be "Why would I not sell my product or service for Bitoins?".

rhino369 9y ago
The seller and the buyer have to agree on means of payment. So your question is really, "why would I not sell my product ONLY for bitcoin." And the answer is because you'd lose almost all your sales. If Amazon offers bitcoin I just won't use it. If they only offer bitcoin I'll use Jet or Walmart.com.
- koonsolo 9y ago
  If they want Bitcoin more than dollars, they could also offer discounts on people paying with Bitcoins. Doesn't need to be binary.
  - rhino369 9y ago
    If you want bitcoin that bad you could just buy it.
    - hndamien 9y ago
      Thats not how this works.
    - koonsolo 9y ago
      Maybe you don't have or want a bank account. Maybe you don't want to handle the cash in your register. Maybe you don't want to pay the VISA fees. Maybe you don't want to pay the exchange fees. Maybe you want to accept huge amounts of money from accros the globe (I know Boeing selling airplaines to European airlines involves perfect timing of bank business hours and multiple phonecalls with multiple banks)
      - amenghra 9y ago
        Most large business transactions (eg cargo shipments from one country to another) involve intermediary banks and letters of credit (https://en.m.wikipedia.org/wiki/Letter_of_credit https://en.m.wikipedia.org/wiki/Letter_of_credit). Both parties usually don’t need overlapping business hours to move goods or money around. Boeing’s case might be unique, any idea why?
        koonsolo 9y ago
        I'm not it that business myself, so I don't know. But I do know of this one case where a 787 was bought. When the plane is ready, people from the airline (project manager, pilot, etc) go there. If all is fine, the payment is made, and the plane can be taken home with their own pilot. The airspace regulation back home also needs to approve the airplane is ok to fly. The person that I know told me the transaction looks like some James Bond movie where banks are called and laptops are used to verify. And it was timed so the bank in Europe was still open, and first transfer was to NY.

XR0CSWV3h3kZWg 9y ago

The same reason I buy electronics. If I wait a year I'll certainly get more bang for my buck, but I don't.

cableshaft 9y ago
If you wait for 40 years to buy a new console, instead of getting an Atari 2400 you can get an PS4! Don't get that Atari! Wait to enjoy your life when you're old or dead in the ground!

andrewla 9y ago

> "inherently deflationary" I keep hearing this, and it doesn't get any more intelligible. Saying that bitcoin is inherently deflationary is as absurd as saying that the price of bitcoin can only go up, because those two statements are exactly the same. Bitcoin, in the steady state, will go up or down as demand requires and as credit markets adjust to account for the future value of money.

chasedehan 9y ago
The inherent deflationary is the same relation that we had with the gold standard. The issue is that in a deflationary environment (such as recessions), the need for a central bank to prop up the currency for debtors is essential. For an example: https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ https://www.theatlantic.com/business/archive/2012/08/why-the...
- andrewla 9y ago
  Certainly bitcoin is immune (mostly) to central bank manipulation for better or for worse - I think that’s a given. But any currency can enter deflationary regimes, as witnessed by central bankers’ desire to intervene during recessions. It’s not clear that the properties of bitcoin make it any more or less vulnerable to this. As an aside I’d say the factual evidence of the efficacy of central banking is controversial; many would put as much blame for historic and recent recessions on central banks as would credit them for the recovery. Certainly bitcoin by its philosophy and design is pretty skeptical about central bankers and their motivations.
bennyg 9y ago
I think what the poster is trying to say is this: Bitcoin has a finite supply. If demand remains at its current rate, inherently the value will also continue going up.
- samsonradu 9y ago
  Silly question perhaps, but does Bitcoin have a finite supply after all? I understand that mathematically they'll run out of hashes starting with zeros or whatever, but if they fork it once every X years, is that considered finite?

rhino369 9y ago

Bitcoin isn't even inherently deflationary. Inflation and deflation (as the words are commonly used) are set by supply and demand. The whole point of central banks is to control supply to steady the price. It's only deflationary when demand rises. Demand could fall because of a shrinking bitcoin economy or because the velocity of bitcoin increases.

timthelion 9y ago

Why would you ever sell real-estate?

dxhdr 9y ago

> If I know bitcoins will continue to increase in value because math, why on earth would I ever exchange them for something that doesn't? You wouldn't, until the marginal utility of an item or service outweighs the future value of those bitcoins. That's like asking, why would anyone ever buy a new laptop? Just wait until next year, the models will be faster and cheaper. It's true, it will always be better to buy a laptop next year. However at some point it becomes more valuable to consume the laptop now than to continue waiting. In the aggregate when considering the varying time preferences of consumers, new laptops are sold all the time.