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Given there is an absolutely finite number of bitcoins doesn't this mean that given enough losses over time we will in fact run out of bitcoins with no mechanis
by msy 15y ago
Given there is an absolutely finite number of bitcoins doesn't this mean that given enough losses over time we will in fact run out of bitcoins with no mechanism (by design) to replace the supply, adding further deflationary pressure?
Given we're talking about bitcoins this discussion is about as practical as discussing a russian tank invasion of western europe but it's interesting none the less.
- mrvc 15y agoYes it does indeed. However, should you ask such a question on the bitcoin forum it will most likely be brushed aside with a reply of "the net effect is negligable". When in fact, I would argue it is not.
- Dove 15y agoBitcoin is deflationary by design. The people who want to use it as an alternative currency like it that way. And it supports microtransactions. The way I've heard it told, you could run an entire world-size economy off of one bitcoin. So unless you have the situation in which everyone loses their wallets at once, it's just business as usual. Nothing to be concerned about.
- mrvc 15y agoIf it is practically infinitely divisible, then doesn't that mean that it is not truly deflationary? For example, if there is only 1 bitcoin left, and it is infinitely divisible, then it is no longer deflationary...?
- Niedar 15y agoThat wouldn't be inflationary because no more money is being created. No matter how many times you divide that one bitcoin there will always only be one bitcoin when you add it up and thus would still be deflationary because it is still increasing in value.
- tptacek 15y agoI suspect the bitcoin supporters actually love this argument, because it's easily rebutted (effectively, "the market will just move the decimal places to account for that") and is not in fact the most likely reason why bitcoins will not work. That sideshow is a lot easier to deal with than the economic problem, which, to steal Tyler Cowen's words, is: "It is a privately created fiat currency, bundled together with an anonymity scheme for transactions. The anonymity scheme means there is some reason to grant one-time seigniorage to the original currency issuers. Eventually the anonymity scheme, in some form or another, will be available without the fiat currency. At that point, or more likely before then, the fiat currency will fall to near-zero in value."
- vrotaru 15y agoIt is a privately created fiat currency, bundled together with an anonymity scheme for transactions. The anonymity scheme means there is some reason to grant one-time seigniorage to the original currency issuers. Eventually the anonymity scheme, in some form or another, will be available without the fiat currency. At that point, or more likely before then, the fiat currency will fall to near-zero in value Mr. Cowen is somehow overlooking the relative scarcity factor. Speaking strictly about bitcoins and dollars, we know how much bitcoins will be there in the next 100 years, and we have no idea how many dollars will be the in 2113?
- tptacek 15y agoThe disconnect here may be that he isn't dignifying the notion that scarcity automatically connotes value, in the sense that for instance my toenails are also more scarce than dollars, and always will be, but are not more valuable than them.
- vrotaru 15y agohe isn't dignifying the notion that scarcity automatically connotes value Sure. But if we are speaking about competing mediums (media?) of exchanges, scarcity matters. Not the only factor that matters, but one of.
- 27182818284 15y agoTransactions would simply occur in smaller units like picoBTC instead of BTC