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The reason Bitcoin will never be a replacement for a Central Bank based currency like the USD is the fact that it is in permanent deflation.

simonsarris 9y ago
Funny thought: Imagine taking bitcoin so seriously that you signed a union contract in 2012 to pay 1 bitcoin per hour.
- AnimalMuppet 9y ago
  Imagine your employer becoming bankrupt well before today, due to that contract...
- sverhagen 9y ago
  Would it matter if your employer did all their business in Bitcoin?
  - function_seven 9y ago
    Yes, assuming they're transacting business with the outside world, where the value of a Bitcoin has risen.
- eyeinthepyramid 9y ago
  Along those lines, can you imagine getting a home loan in bitcoin?
  - anonymous5133 9y ago
    We have already figured out how to do that with crypto. You simply use a smart contract that dynamically adjusts to variables. In essence, the home loan lender is interested in getting back the initial value they lent plus interest, another form of value. The price of bitcoin per unit doesn't matter. The only thing that matters is how much value each unit represents. Thus, you can use a smart contract to dynamically adjust the mortgage payment at the time of payment. The contract could be written such that it says "borrower is to pay $3,500 in USD equivalent value in bitcoin each month". Assuming bitcoin price is increasing, your mortgage payment each month would require less bitcoins to pay and the lender would be happy too because they are still getting their $3,500 of value per month. The lender could immediately sell their bitcoins if they want physical cash. Also this is already being done with point of sale machines that accept bitcoin. The POS machine simply goes to an exchange to see how much one bitcoin is worth then tells the buyer to pay xyz amount in bitcoin that is equivalent to the value that USD represents.
    - grey-area 9y ago
      This neatly illustrates why bitcoin is a terrible currency. Thanks.
- anonymous5133 9y ago
  Read up on smart contracts. You can program the contract such that it dynamically adjusts it self to variables.
jstanley 9y ago
I hear this argument a lot, but I'm not sure it's as simple as that. Orthodox macroeconomics holds that your currency needs to be slightly inflationary, but it doesn't consider what happens in the face of credible competition with a deflationary currency. It might very well be the case that the economy runs better when everyone uses an inflationary currency. But if everyone wants to hold the deflationary currency instead of the inflationary one (which, all else being equal, they do, for obvious reasons) no amount of theorising will save it. We haven't yet seen a credible competitor to the inflationary currencies of nation states, but bitcoin is rapidly heading in that direction. And the cat is out of the bag now. If deflationary currencies do outcompete inflationary ones, then it's only a matter of time until it happens, even if it's not bitcoin. Switching to a deflationary currency might be "bad for the economy", but if it's good for individuals, they'll do it.
- raiflip 9y ago
  What you are describing is an ancient economic law known as Gresham's law: https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law . It states that bad money drives out good because people hold onto good and spend bad. Bad is really normative saying more valuable is good and less is bad. So deflationary (up in value is good) and inflationary is bad (down in value). Frankly your argument is incoherent. If something is bad for the economy its bad for individuals. If the economy goes down most people starve. You also seem to argue that people hold onto more of a currency than another that currency "wins" but the currency that "wins" is the one in circulation. If by "win" we mean the currency that survives, then the one that survives is the one in circulation. Again this is all eco 101.
  - anonymous5133 9y ago
    Crypto is being used in circulation though. There are dark net markets that sell drugs and you can buy various things with crypto. You can use certain websites to buy stuff off amazon while other websites sell gift cards which indirectly allows you to buy stuff in stores with crypto. The gift card is just pre-paid store credit. In the past, it was difficult to use 100% crypto to live on but now it is a real possibility.
anonymous5133 9y ago
The people who use currency will be the decider of that though, ultimately. Why would you want to hold something that is constantly losing value when you can use something is gaining in value? Also since we are clearly talking about state issue currencies, you also have to factor in counter party risk. Not all governments can maintain the value of their currency so for those people, they pretty much have no choice except to use crypto. We don't need to debate it because it is obvious what individuals will decide to do.
- raiflip 9y ago
  Is it obvious? That is the kind of arrogance people accuse tech people of having. The whole point is we DON'T want people to just hold onto a currency. If everyone stops spending their USD and just saves them, the economy will collapse. Think about all the businesses that will go under because no one is buying anything. I could go on but really this is economics 101.
  - anonymous5133 9y ago
    The ideals you are talking about though are socialist in nature. Based on behavioral economics, people are mostly self-interested and will do actions that maximize their benefit. If you want to use inflationary currency to benefit the economy, that's great for you but I choose to use deflationary currency instead. Also I don't buy into the economy will collapse argument. The economy will restructure itself to produce items that people want and need. That will never change. You can't eat currency or digital bits. Your arguments are primarily based on FUD.
    - raiflip 9y ago
      They are not socialist in nature. Socialism is a system in which workers own the means of production instead of capital holders. I mean this in the friendliest way possible, you are not using the word socialism correctly. If you have a currency that is increasing in value, and one decreasing, which do you choose to spend? You would not "use" deflationary currency, only hold onto it. Yes the economy will restructure. People will spend USD and keep Bitcoin in their pocket. People will want to be paid in USD because they can use it to buy stuff. Bitcoin is and will stay relegated to an interesting experiment people invest in, and only use if they need its anonymity.

simonsarris 9y ago

Funny thought: Imagine taking bitcoin so seriously that you signed a union contract in 2012 to pay 1 bitcoin per hour.

AnimalMuppet 9y ago
Imagine your employer becoming bankrupt well before today, due to that contract...
sverhagen 9y ago
Would it matter if your employer did all their business in Bitcoin?
- function_seven 9y ago
  Yes, assuming they're transacting business with the outside world, where the value of a Bitcoin has risen.
eyeinthepyramid 9y ago
Along those lines, can you imagine getting a home loan in bitcoin?
- anonymous5133 9y ago
  We have already figured out how to do that with crypto. You simply use a smart contract that dynamically adjusts to variables. In essence, the home loan lender is interested in getting back the initial value they lent plus interest, another form of value. The price of bitcoin per unit doesn't matter. The only thing that matters is how much value each unit represents. Thus, you can use a smart contract to dynamically adjust the mortgage payment at the time of payment. The contract could be written such that it says "borrower is to pay $3,500 in USD equivalent value in bitcoin each month". Assuming bitcoin price is increasing, your mortgage payment each month would require less bitcoins to pay and the lender would be happy too because they are still getting their $3,500 of value per month. The lender could immediately sell their bitcoins if they want physical cash. Also this is already being done with point of sale machines that accept bitcoin. The POS machine simply goes to an exchange to see how much one bitcoin is worth then tells the buyer to pay xyz amount in bitcoin that is equivalent to the value that USD represents.
  - grey-area 9y ago
    This neatly illustrates why bitcoin is a terrible currency. Thanks.
anonymous5133 9y ago
Read up on smart contracts. You can program the contract such that it dynamically adjusts it self to variables.

jstanley 9y ago

I hear this argument a lot, but I'm not sure it's as simple as that. Orthodox macroeconomics holds that your currency needs to be slightly inflationary, but it doesn't consider what happens in the face of credible competition with a deflationary currency. It might very well be the case that the economy runs better when everyone uses an inflationary currency. But if everyone wants to hold the deflationary currency instead of the inflationary one (which, all else being equal, they do, for obvious reasons) no amount of theorising will save it. We haven't yet seen a credible competitor to the inflationary currencies of nation states, but bitcoin is rapidly heading in that direction. And the cat is out of the bag now. If deflationary currencies do outcompete inflationary ones, then it's only a matter of time until it happens, even if it's not bitcoin. Switching to a deflationary currency might be "bad for the economy", but if it's good for individuals, they'll do it.

raiflip 9y ago
What you are describing is an ancient economic law known as Gresham's law: https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law . It states that bad money drives out good because people hold onto good and spend bad. Bad is really normative saying more valuable is good and less is bad. So deflationary (up in value is good) and inflationary is bad (down in value). Frankly your argument is incoherent. If something is bad for the economy its bad for individuals. If the economy goes down most people starve. You also seem to argue that people hold onto more of a currency than another that currency "wins" but the currency that "wins" is the one in circulation. If by "win" we mean the currency that survives, then the one that survives is the one in circulation. Again this is all eco 101.
- anonymous5133 9y ago
  Crypto is being used in circulation though. There are dark net markets that sell drugs and you can buy various things with crypto. You can use certain websites to buy stuff off amazon while other websites sell gift cards which indirectly allows you to buy stuff in stores with crypto. The gift card is just pre-paid store credit. In the past, it was difficult to use 100% crypto to live on but now it is a real possibility.

anonymous5133 9y ago

The people who use currency will be the decider of that though, ultimately. Why would you want to hold something that is constantly losing value when you can use something is gaining in value? Also since we are clearly talking about state issue currencies, you also have to factor in counter party risk. Not all governments can maintain the value of their currency so for those people, they pretty much have no choice except to use crypto. We don't need to debate it because it is obvious what individuals will decide to do.

raiflip 9y ago
Is it obvious? That is the kind of arrogance people accuse tech people of having. The whole point is we DON'T want people to just hold onto a currency. If everyone stops spending their USD and just saves them, the economy will collapse. Think about all the businesses that will go under because no one is buying anything. I could go on but really this is economics 101.
- anonymous5133 9y ago
  The ideals you are talking about though are socialist in nature. Based on behavioral economics, people are mostly self-interested and will do actions that maximize their benefit. If you want to use inflationary currency to benefit the economy, that's great for you but I choose to use deflationary currency instead. Also I don't buy into the economy will collapse argument. The economy will restructure itself to produce items that people want and need. That will never change. You can't eat currency or digital bits. Your arguments are primarily based on FUD.
  - raiflip 9y ago
    They are not socialist in nature. Socialism is a system in which workers own the means of production instead of capital holders. I mean this in the friendliest way possible, you are not using the word socialism correctly. If you have a currency that is increasing in value, and one decreasing, which do you choose to spend? You would not "use" deflationary currency, only hold onto it. Yes the economy will restructure. People will spend USD and keep Bitcoin in their pocket. People will want to be paid in USD because they can use it to buy stuff. Bitcoin is and will stay relegated to an interesting experiment people invest in, and only use if they need its anonymity.