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Dogecoin is a copy+paste of bitcoin with a few config values changed. That's why it shares the inflationary model. The reason bitcoin is often described as de

by Hjfrf 5y ago

Dogecoin is a copy+paste of bitcoin with a few config values changed. That's why it shares the inflationary model. The reason bitcoin is often described as deflationary is that many coins are lost, and the inflation is somewhat priced-in.

woodruffw 5y ago
How is Bitcoin inflationary? Even without coin lossage (a ridiculous concept in any other financial system, short of literally setting your money on fire), the network is programmed to eventually stop minting coins. Fixed supply on increased demand (if it’s the economic substitute we’ve all been promised) is the precondition for deflationary movement. No amount of “pricing in” changes that.
- paulgb 5y ago
  It’s an argument of semantics, really: if it will eventually stop printing coins, I’d consider it inflationary until that point in time and non-inflationary thereafter. In practice, current holders are being diluted to subsidize the security of the network.
  - woodruffw 5y ago
    This isn’t consistent with the “priced in” position put forward by the original commenter. An asset class that is going to be fixed in quantity for the rest of time is an obvious target for pricing-in.
    - paulgb 5y ago
      By that logic the USD has some inflation baked in too, it’s just that in Bitcoin’s case the number is exact and in USD it’s a guess. It’s really just arguing semantics, though. I get both sides’ arguments.
      - woodruffw 5y ago
        I don’t know about “baked in,” but of course the USD is inflationary: that’s been the explicit Fed policy for decades. It’s been the policy because small amounts of inflation have a measurable economic benefit. But again: this doesn’t change the fact that Bitcoin is deflationary. It’s a fixed supply of coins on a ledger that every current stakeholder has a strong deflationary interest in. The fact that there might be inflationary forces internal to Bitcoin’s economy doesn’t change that.
- lottin 5y ago
  Even if we assume a fixed global supply of bitcoins (which is a big assumption because it assumes bitcoin deposits at institutions will always be backed by full reserves), that doesn't mean that the supply of bitcoins in a particular economic area will be fixed. It most certainly won't, unless international trade stops.
  - woodruffw 5y ago
    > which is a big assumption because it assumes bitcoin deposits at institutions will always be backed by full reserves Where is this assumption coming from? I have never heard this before. > that doesn't mean that the supply of bitcoins in a particular economic area will be fixed. It most certainly won't, unless international trade stops. Putting non-competing sectors of the economy in competition against each other for a slice of a fixed monetary supply is another basic and sufficient precondition for deflation. There’s a very good reason we don’t do that currently.
    - lottin 5y ago
      > Where is this assumption coming from? I have never heard this before. The global supply of bitcoins is fixed if and only if financial institutions are not allowed to hold fractional reserves against deposits.
      - woodruffw 5y ago
        Maybe I’m missing something obvious here, but it’s not clear why (1) any bank would offer a Bitcoin denominated account, or (2) how it even makes sense to perform fractional banking against Bitcoin. You can’t change the underlying amount in the ledger and the ledger is the value source, unlike physical Federal Reserve Notes.
        lottin 5y ago
        Well, crypto-exchanges already offer deposit accounts backed with reserves. If at any point the reserve ratio falls below 1 (we don't know if this has already happened), the quantity of bitcoins in circulation will increase as a result of that.
- Hjfrf 5y ago
  I only meant that coins are still being created for now, so the proportion of coins that a specific person owns vs the total is constantly falling, like in any inflationary currency. If you measure current ownership as a percentage of final issued coins rather than current issued coins, then you've already priced in the inflation.
  - woodruffw 5y ago
    That's an internal inflation effect, one that appears to have been amply priced into the current value of Bitcoin. Which is perfectly reasonable, since everybody can see that the future quantity of Bitcoin is fixed and/or diminishing, thanks to lossage. In other words: like the US economy, Bitcoin can have both inflationary and deflationary forces internally. But the overall economic picture of Bitcoin is intrinsically deflationary.

by Hjfrf 5y ago

woodruffw 5y ago

How is Bitcoin inflationary? Even without coin lossage (a ridiculous concept in any other financial system, short of literally setting your money on fire), the network is programmed to eventually stop minting coins. Fixed supply on increased demand (if it’s the economic substitute we’ve all been promised) is the precondition for deflationary movement. No amount of “pricing in” changes that.

paulgb 5y ago
It’s an argument of semantics, really: if it will eventually stop printing coins, I’d consider it inflationary until that point in time and non-inflationary thereafter. In practice, current holders are being diluted to subsidize the security of the network.
- woodruffw 5y ago
  This isn’t consistent with the “priced in” position put forward by the original commenter. An asset class that is going to be fixed in quantity for the rest of time is an obvious target for pricing-in.
  - paulgb 5y ago
    By that logic the USD has some inflation baked in too, it’s just that in Bitcoin’s case the number is exact and in USD it’s a guess. It’s really just arguing semantics, though. I get both sides’ arguments.
    - woodruffw 5y ago
      I don’t know about “baked in,” but of course the USD is inflationary: that’s been the explicit Fed policy for decades. It’s been the policy because small amounts of inflation have a measurable economic benefit. But again: this doesn’t change the fact that Bitcoin is deflationary. It’s a fixed supply of coins on a ledger that every current stakeholder has a strong deflationary interest in. The fact that there might be inflationary forces internal to Bitcoin’s economy doesn’t change that.
lottin 5y ago
Even if we assume a fixed global supply of bitcoins (which is a big assumption because it assumes bitcoin deposits at institutions will always be backed by full reserves), that doesn't mean that the supply of bitcoins in a particular economic area will be fixed. It most certainly won't, unless international trade stops.
- woodruffw 5y ago
  > which is a big assumption because it assumes bitcoin deposits at institutions will always be backed by full reserves Where is this assumption coming from? I have never heard this before. > that doesn't mean that the supply of bitcoins in a particular economic area will be fixed. It most certainly won't, unless international trade stops. Putting non-competing sectors of the economy in competition against each other for a slice of a fixed monetary supply is another basic and sufficient precondition for deflation. There’s a very good reason we don’t do that currently.
  - lottin 5y ago
    > Where is this assumption coming from? I have never heard this before. The global supply of bitcoins is fixed if and only if financial institutions are not allowed to hold fractional reserves against deposits.
    - woodruffw 5y ago
      Maybe I’m missing something obvious here, but it’s not clear why (1) any bank would offer a Bitcoin denominated account, or (2) how it even makes sense to perform fractional banking against Bitcoin. You can’t change the underlying amount in the ledger and the ledger is the value source, unlike physical Federal Reserve Notes.
      - lottin 5y ago
        Well, crypto-exchanges already offer deposit accounts backed with reserves. If at any point the reserve ratio falls below 1 (we don't know if this has already happened), the quantity of bitcoins in circulation will increase as a result of that.
Hjfrf 5y ago
I only meant that coins are still being created for now, so the proportion of coins that a specific person owns vs the total is constantly falling, like in any inflationary currency. If you measure current ownership as a percentage of final issued coins rather than current issued coins, then you've already priced in the inflation.
- woodruffw 5y ago
  That's an internal inflation effect, one that appears to have been amply priced into the current value of Bitcoin. Which is perfectly reasonable, since everybody can see that the future quantity of Bitcoin is fixed and/or diminishing, thanks to lossage. In other words: like the US economy, Bitcoin can have both inflationary and deflationary forces internally. But the overall economic picture of Bitcoin is intrinsically deflationary.