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> Every coin lost that battle. Bitcoin was also intended as currency. At the moment, the amount of speculation far outstrips any legitimate use as currency. We

by beojan 9y ago

> Every coin lost that battle. Bitcoin was also intended as currency. At the moment, the amount of speculation far outstrips any legitimate use as currency. We're seeing the reason economists consider deflation to be a bad thing.

Klathmon 9y ago
It has nothing to do with deflation (bitcoin isn't even deflationary yet, it is still inflationary currently), it has everything to do with scaling the blockchain as a technology. Bitcoin was the first to hit the point of big adoption, and it will need to solve the problem. Ethereum is starting to feel the problem now as well.
- beojan 9y ago
  The price of goods (using USD as a proxy for goods, which is fine so long as you account for inflation of USD) in bitcoin is generally speaking decreasing. This means bitcoin is deflationary (despite new bitcoin still being mined).
  - adventured 9y ago
    Currently Bitcoin is neither inflationary nor deflationary. It's a near zero swap (mostly other than fees). Nothing is created nor destroyed, which is why the primary argument for Bitcoin having much value today is as a value store. You want to sell $1 million in bitcoin. Someone else is willing to pay you $1 million USD for those bitcoins. $1 million neither left nor was added to the economy. You now have the $1m USD to spend or invest as you see fit. You swapped positions, that's it. No deflation occurred at all.
    - beojan 9y ago
      I can buy more of whatever good I want for 1 bitcoin today than I could a couple of months ago, and I could buy more then than at the beginning of last year. That means bitcoin is deflating.
  - Klathmon 9y ago
    It depends on your scale, take this weekend for example and it's absolutely not deflationary according to your definition, and there is no guarantee that it will continue in either direction.
- adventured 9y ago
  In what way is Bitcoin inflationary?
  - Klathmon 9y ago
    The current amount of bitcoin in existance is increasing at a rate of 12.5 every 10 minutes.
    - adventured 9y ago
      That's meaningless. The actual action of bitcoin against anything in the economy leads to zero net inflation. There is no wealth / money / assets being created or destroyed by Bitcoin going up or the coin count increasing. There's no scenario where Bitcoin can reach into the economy without transiting through something, in which case there is a swap and no new value is created. Want to take a loan against your bitcoins? The entity doing the loaning gets your coins if you default. Nothing new has been created, you swap positions. Want to sell your bitcoins? The buyer swaps positions with you, no new wealth has entered the economy. The buyer holds your former position, and you hold the eg USD or Euro currency. Want to direcly trade a house for bitcoins? (leaving off any taxes, fees, etc for this purposes) You swap positions with the seller. They get your bitcoins, you get the house. Nothing new has been added or removed from the economy. New wealth is created almost exclusively via productivity increases, not by two people trading objects $1 for $1 back and forth.
      - Klathmon 9y ago
        >There is no wealth / money / assets being created or destroyed by Bitcoin going up or the coin count increasing. That's false. There is electricity being spent, and the security of all transactions before the current block being further secured by each new block. you might not think it's a valuable thing, but many others do, and you can't just discount it as not existing because you don't see the value. Just like how you might not see the value in videogames, or shitty daytime TV, but that doesn't mean it's worthless, just that it's not something you value. Bitcoin is a service that allows trustless transactions, and that service costs in the form of electricity usage.
- nerdponx 9y ago
  Growing money supply != inflation. The capped lifetime supply of Bitcoin is already be priced into the market. This is a problem with every cryptocurrency except DOGE: there's no incentive to actually spend the stuff. I hope DOGE stays cheap, and I hope it starts getting more adoption among "nerd" subcultures beyond just tipping. Imagine paying for your vinyl figurines or mechanical keyboard parts with Dogecoin! Imagine Bountysource and Patreon and Flattr accepting DOGE! It would be my distributed nerd heaven.
  - Klathmon 9y ago
    But I never got this reasoning. I've never not bought something because putting my money in some investment account will give me a few percent return... I'm not buying a house because the "market is good", i'm buying a house because I need a damn house. I'm not buying food or gas because otherwise my money will be worth less soon, i'm buying it because I need it. Yes, i understand that things will be vastly different if the whole world adopted deflationary currencies, but I disagree that it would be the end of civilization as many people seem to imply when talking about how "dangerous" a deflationary currency is. There exist markets that you can put your money in and make more than inflation reliably. According to your reasoning, wouldn't the existence of those markets mean there is no incentive for me to spend my money at all right now? I'm not trying to start an argument here, I just never heard a satisfactory reason here besides "trust me i'm an economist". Does it have to do with the extra "work" required to invest in these kinds of things that prevents them from being a problem? I'd argue that there's a lot more to it than just "deflation" vs "inflation", and that bitcoin as it currently stands isn't going to cause a massive collapse of the economy where nobody spends any money at all ever.
    - JumpCrisscross 9y ago
      > There exist markets that you can put your money in and make more than inflation reliably No, there don't. Even holding U.S. Treasuries is riskier than holding cash. > bitcoin as it currently stands isn't going to cause a massive collapse of the economy Nobody is saying that. What it has done is cause a collapse of the Bitcoin economy, i.e. the markets for real goods and services denominated in Bitcoin. If you think Bitcoin will go up 50% next week, you aren't going to use it to buy a cup of coffee. You'll use U.S. dollars, which will be worth a little less (albeit, probably, imperceptibly so) by then [1]. [1] https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law

by beojan 9y ago

Klathmon 9y ago

It has nothing to do with deflation (bitcoin isn't even deflationary yet, it is still inflationary currently), it has everything to do with scaling the blockchain as a technology. Bitcoin was the first to hit the point of big adoption, and it will need to solve the problem. Ethereum is starting to feel the problem now as well.

beojan 9y ago
The price of goods (using USD as a proxy for goods, which is fine so long as you account for inflation of USD) in bitcoin is generally speaking decreasing. This means bitcoin is deflationary (despite new bitcoin still being mined).
- adventured 9y ago
  Currently Bitcoin is neither inflationary nor deflationary. It's a near zero swap (mostly other than fees). Nothing is created nor destroyed, which is why the primary argument for Bitcoin having much value today is as a value store. You want to sell $1 million in bitcoin. Someone else is willing to pay you $1 million USD for those bitcoins. $1 million neither left nor was added to the economy. You now have the $1m USD to spend or invest as you see fit. You swapped positions, that's it. No deflation occurred at all.
  - beojan 9y ago
    I can buy more of whatever good I want for 1 bitcoin today than I could a couple of months ago, and I could buy more then than at the beginning of last year. That means bitcoin is deflating.
- Klathmon 9y ago
  It depends on your scale, take this weekend for example and it's absolutely not deflationary according to your definition, and there is no guarantee that it will continue in either direction.
adventured 9y ago
In what way is Bitcoin inflationary?
- Klathmon 9y ago
  The current amount of bitcoin in existance is increasing at a rate of 12.5 every 10 minutes.
  - adventured 9y ago
    That's meaningless. The actual action of bitcoin against anything in the economy leads to zero net inflation. There is no wealth / money / assets being created or destroyed by Bitcoin going up or the coin count increasing. There's no scenario where Bitcoin can reach into the economy without transiting through something, in which case there is a swap and no new value is created. Want to take a loan against your bitcoins? The entity doing the loaning gets your coins if you default. Nothing new has been created, you swap positions. Want to sell your bitcoins? The buyer swaps positions with you, no new wealth has entered the economy. The buyer holds your former position, and you hold the eg USD or Euro currency. Want to direcly trade a house for bitcoins? (leaving off any taxes, fees, etc for this purposes) You swap positions with the seller. They get your bitcoins, you get the house. Nothing new has been added or removed from the economy. New wealth is created almost exclusively via productivity increases, not by two people trading objects $1 for $1 back and forth.
    - Klathmon 9y ago
      >There is no wealth / money / assets being created or destroyed by Bitcoin going up or the coin count increasing. That's false. There is electricity being spent, and the security of all transactions before the current block being further secured by each new block. you might not think it's a valuable thing, but many others do, and you can't just discount it as not existing because you don't see the value. Just like how you might not see the value in videogames, or shitty daytime TV, but that doesn't mean it's worthless, just that it's not something you value. Bitcoin is a service that allows trustless transactions, and that service costs in the form of electricity usage.
nerdponx 9y ago
Growing money supply != inflation. The capped lifetime supply of Bitcoin is already be priced into the market. This is a problem with every cryptocurrency except DOGE: there's no incentive to actually spend the stuff. I hope DOGE stays cheap, and I hope it starts getting more adoption among "nerd" subcultures beyond just tipping. Imagine paying for your vinyl figurines or mechanical keyboard parts with Dogecoin! Imagine Bountysource and Patreon and Flattr accepting DOGE! It would be my distributed nerd heaven.
- Klathmon 9y ago
  But I never got this reasoning. I've never not bought something because putting my money in some investment account will give me a few percent return... I'm not buying a house because the "market is good", i'm buying a house because I need a damn house. I'm not buying food or gas because otherwise my money will be worth less soon, i'm buying it because I need it. Yes, i understand that things will be vastly different if the whole world adopted deflationary currencies, but I disagree that it would be the end of civilization as many people seem to imply when talking about how "dangerous" a deflationary currency is. There exist markets that you can put your money in and make more than inflation reliably. According to your reasoning, wouldn't the existence of those markets mean there is no incentive for me to spend my money at all right now? I'm not trying to start an argument here, I just never heard a satisfactory reason here besides "trust me i'm an economist". Does it have to do with the extra "work" required to invest in these kinds of things that prevents them from being a problem? I'd argue that there's a lot more to it than just "deflation" vs "inflation", and that bitcoin as it currently stands isn't going to cause a massive collapse of the economy where nobody spends any money at all ever.
  - JumpCrisscross 9y ago
    > There exist markets that you can put your money in and make more than inflation reliably No, there don't. Even holding U.S. Treasuries is riskier than holding cash. > bitcoin as it currently stands isn't going to cause a massive collapse of the economy Nobody is saying that. What it has done is cause a collapse of the Bitcoin economy, i.e. the markets for real goods and services denominated in Bitcoin. If you think Bitcoin will go up 50% next week, you aren't going to use it to buy a cup of coffee. You'll use U.S. dollars, which will be worth a little less (albeit, probably, imperceptibly so) by then [1]. [1] https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law