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Actually, the fact that Bitcoin can't inflate is the biggest tell it will never work as a currency. There are a set number of bitcoins that can be mined and no

Actually, the fact that Bitcoin can't inflate is the biggest tell it will never work as a currency. There are a set number of bitcoins that can be mined and no more after that. It's fundamentally incapable of inflating. And that's f**ing dumb for a currency. Inflation at certain levels is good and necessary. A deflationary currency makes certain low margin economic activity extremely unattractive versus just sticking your money under the mattress ('hodl' in other words). Inflation encourages spending, your money is worth more now then it is later, so if you're going to build that new building or design that new product, better to do it now. You want inflation low enough that it doesn't punish people for saving but still provides an incentive to spend now. Economists put that number at around 2 percent. Perfectly possible to save for a house or retirement but still enough to give a push. Deflationary currencies punish economic activity- if you have to take out a loan to accomplish something every day that goes by afterward the money you owe represents more and more real value without the numbers changing, representing a significant deterrent. Some of the worst economic crises in history, including the great depression, were marked by significant deflation.

cercatrova 4y ago
Indeed, the book Money by Jacob Goldstein, co-host of NPR podcast Planet Money, talks precisely about this in regards to the gold standard. One reason that it was taken off the gold standard was because monetary policy could not be fully leveraged well when every dollar was worth some amount of gold. One couldn't print new money during recessions to restart the economy, and one couldn't remove dollars from the money supply in a boom period.
- mgamache 4y ago
  That model is based in Keynesian Economics. It's just not reality in many situations.
  - Retric 4y ago
    Every model is wrong, some models are useful. Economic models, Keynesian or otherwise, are attacked and misapplied because individual players are better off with a larger slice of a smaller pie. Which doesn’t inherently invalidate these models, but few care about accuracy when billions of dollars are involved. When people talk about say ‘cap and trade’ what they really mean is give us a giant subsidy.
    - olalonde 4y ago
      > Economic models, Keynesian or otherwise, are attacked and misapplied because individual players are better off with a larger slice of a smaller pie. As if going off the gold standard reduced wealth inequality. https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/
      - Retric 4y ago
        You can make every individual better off while increasing wealth inequality. Just imagine how bad wealth inequality would get if you doubled everyone’s lifespan.
        olalonde 4y ago
        > You can make every individual better off while increasing wealth inequality. Absolutely. I guess I misread you? I thought you were blaming sound money for wealth inequality.
      - zajio1am 4y ago
        The era between 1945 and 1971 was not based on gold standard, but it was Bretton Woods system, that worked in a significantly different way from both era before (traditional gold standard) and era after (floating currencies).
      - mrep 4y ago
        Is that a joke website or are they actually trying to tie the end of Breton woods to the quadrupling of lawyers per capita since 1971? The number of people who drown in a pool strongly correlates with how many films Nicolas Cage has appeared in [0] but that doesn't make it a causation. [0]: https://www.tylervigen.com/spurious-correlations https://www.tylervigen.com/spurious-correlations
- ralph84 4y ago
  Economic inequality has massively increased since abandoning the gold standard. Of course academic economists carry water for the people at the top benefitting from the inequality.
  - jquery 4y ago
    The number of pirates has drastically decreased since abandoning the gold standard. Sure you're not carrying water for Big Pirate?
    - ewzimm 4y ago
      Has it though? If piracy is the act of invading someone’s private space where they can be isolated them from help and taking from them, is ransomware just modern piracy with less violence? Of course the sea pirates are still very active on some areas.
      - FBISurveillance 4y ago
        To rephrase: global warming becomes a bigger issue as JavaScript adoption grows.
        ewzimm 4y ago
        You might be on to something there! Think of all the heat generated by executing all that inefficient code! I’ll rephrase as well. Problems like inequality or robbery have a tendency to adapt to whatever circumstances we create for them.
  - mrcartmeneses 4y ago
    Tax rates for the wealthy have also declined massively.
    - refurb 4y ago
      The percent of all taxes paid for by the top 1% has only held steady or gone up over time.
- deleted 4y ago
  [deleted]
ChadNauseam 4y ago
I'm no bitcoin defender, but that's not really how inflation works. Inflation is not just an increase in the base money supply. For example, a supply chain crisis can cause inflation without the money supply changing at all. And central banks can control inflation by controlling lending without printing or destroying money. Lending creates "virtual money" that contributes to inflation, so one of the ways central banks control inflation is by increasing or decreasing interest rates. Bitcoin makes these things much more difficult, of course, and would never be a good currency compared to what we have now. But the gold standard has almost exactly the same properties as bitcoin, and gold-backed currency worked okay in the US for a long time.
- cjensen 4y ago
  The gold-backed currency did not, in fact, work okay in the US for a long time. Between 1836 and the Great Depression, the economy went 3 or more years between recessions only 4 times. By comparison, the last three gaps between recessions were 7, 10, and 6 years; and it's now been 13 years since the last one. [1] https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
  - ekianjo 4y ago
    Lol we are constantly living in recession in case you failed to notice. Its just protracted.
    - cjensen 4y ago
      To clarify, the word "recession" has a strongly defined meaning. It does not mean "things are bad" although bad times are strongly associated with recessions. Things can seem bad even without a recession. Historically speaking, each time we climb out of a recession over the last 50 years it's been a bit slower of a climb than the previous climb out. That is a worrisome trend in its own right. I believe that's the kind of bad you feel people are experiencing -- a barely perceptible improvement starting from a bad situation.
  - 4y ago
canjobear 4y ago
If I earn a dollar I want its value to be as stable as possible for as long as possible. Why would anyone want to submit to top-down technocratic social engineering projects designed to change their behavior by manipulating the value of their money?
- adgjlsfhk1 4y ago
  Because that change in behavior is what lets markets work. With an inflationary currency, people want to create more wealth which is a net benefit to a society. With a deflationary currency, investing in the real world loses money, which disincentivizes projects that make the world better.
  - ogogmad 4y ago
    The problem with these purely verbal arguments is that they can be made to sound convincing either way. E.g. Inflation is good because it encourages people to invest in things, creating jobs. However, inflation is bad because it encourages people to take unnecessary financial risks (like borrowing or lending money) when they could instead save it for a rainy day. Who knows who's right? I have no idea.
    - vkou 4y ago
      Saving the money for a rainy day is what strangles the economy. The economy's health is, to an approximation, the rate at which people spend money. Slow the rate at which money flows through the economy, and bam, welcome to a recession/depression. It's not a question of morality, as much as it's a question of mathematics. You may consider saving to be virtuous, and debt to be sinful, and sure, fine, that is your value system, but the only reason any of us have work is because we all spend, as opposed to save. You can envision a society where people mostly work for themselves, where this wouldn't be an issue. Unfortunately, modern society relies on specialization, and I can't make most of the things I need by myself.
- bryanlarsen 4y ago
  To keep the dollar stable you need to increase the supply at the same rate as GDP growth.
netheril96 4y ago
All those doom and gloom you describe only happens if Bitcoin is the only currency in the world. It doesn’t happen when Bitcoin is supplementary to USD, EUR, CNY, etc. This is similar to how the proponents of free market and central plan both think the other side is pure evil. In the real world, a functioning economy is a mixture of both.
- nathanvanfleet 4y ago
  This is exactly like how I will go to my doctor when I feel sick. But I'll also drink my own urine to cure myself. It's important to have a little bit of a mix.
  - deleted 4y ago
    [deleted]
  - hda2 4y ago
    If you have a counterpoint then by all means make an argument for it, but don't post.. this. It's always disappointing to see what hacker news devolves into whenever cryptocurrencies are discussed. We should try to hold ourselves to a higher standard than this.
  - dsco 4y ago
    Ahh the good old Hacker news take on crypto. You must be proud of your originality.
thiht 4y ago
> You want inflation low enough that it doesn't punish people for saving but still provides an incentive to spend now. Does it work? Inflation makes me spend less, not more, because I save more, because I’ll need more later…
- jmopp 4y ago
  Saving in a period of high inflation doesn't work if your interest rate is lower than the inflation level. Irrespective of that, inflation definitely has an effect at the extreme ends. If the price of bread increases every hour, you'd better get in line at the shop first thing in the morning. If inflation is zero or negative, then you might consider skipping meals so you can save today's bread money, which will be worth more in the future.
  - letmeoknmmm 4y ago
    How is this not an inflationary spiral then? Since the Fed keeps the rate much below inflation then all cash should be spent... which further encourages higher prices! I just don't see the endgame here except hyperinflation to destroy the currency and start anew.
- letmeoknmmm 4y ago
  Indeed, does it work? Normal folk just save more, reduce spending.
throwawaymaths 4y ago
> Some of the worst economic crises in history, including the great depression, were marked by significant deflation. But literally "the worst economic crisis in history" happened on the watch of an inflationary central bank. Moreover, during the greatest worldwide deflationary period ever the united states went from literally a war ravaged country that had just decimated (lost 10%) of its population to "world power" in 50 years, while also enjoying decreasing economic inequality and increasing quality of life across the board not to mention managing to manumit a huge chunk of its population.
- satellite2 4y ago
  M2 was still growing exponentially during the gold peg era. Not sure you can call this period "deflationary"
roenxi 4y ago
> A deflationary currency makes certain low margin economic activity extremely unattractive versus just sticking your money under the mattress We can't say that is a bad thing. A lot of that marginal economic activity is probably consuming resources that could have been better saved for a rainy day. I'm all for economic activity, but the trying to incentivise people to consume everything they can is a bad outcome - someone doing something productive then putting money under a mattress is a fine outcome. If something unexpected comes up they'll have savings.
- camjw 4y ago
  Putting money under the mattress is an awful outcome. If people want to save then they should put their money in to a _bank account_ where they can earn interest and their money can be put to use productively. Not only does this mean they’ll have savings, but it’s also safer (can’t get robbed) and it leads to the positive outcomes GP described around things actually getting built, and the saver ends up with more money than before because your bank account has a positive interest rate. Where this fails is if the currency is deflationary, because then it’s extremely hard for the bank to offer a non-negative interest rate and so it really is more attractive to put money under the bed, modulo the risk of it being stolen or lost
  - jcelerier 4y ago
    > Not only does this mean they’ll have savings, but it’s also safer (can’t get robbed) https://www.bbc.com/news/world-europe-21814325 https://www.bbc.com/news/world-europe-21814325
    - camjw 4y ago
      Maybe I should say: "but it's also safer (less likely to get robbed vs everyone keeping their cash under the bed)"
  - ogogmad 4y ago
    Doesn't this money get lent out to other people? This creates debt and the risk that the money won't get paid back. Honestly, you can make a superficially convincing argument for any economic position.
deleted 4y ago
[deleted]
krelian 4y ago
The real effects of a deflationary currency are unknown. The side effects of a change of this nature are, likely, so vast that they are impossible to anticipate. That's the general problem with revolutions of this nature, they sound good on paper but it's mostly first level thinking. Ok, you got your change. What next? I see things like communism and anarchism the same way. It's laser focusing on a very small number of the ills of the current system without considering any of the good things that come with it and how to, at least, maintain them.
vvillena 4y ago
Bitcoin can inflate. It's just that in order to change the current agreement on what Bitcoin is and how it works, you need a majority of mining power to agree, but the Bitcoin community has been famously conservative and unwilling to any kind of change. The reason? Probably a small amount of fear, and a huge investment in ASICs that would not be able to work if Bitcoin changes.
- gbear605 4y ago
  Also the Bitcoin community is, almost by definition, made up of people holding a lot of Bitcoin. They have a strong financial incentive to make sure that it deflates instead of inflates so that each Bitcoin becomes worth more over time instead of less.
aljarry 4y ago
Disclaimer: I may be absolutely in the wrong here, as I may be missing some fundamental economics knowledge. From my understanding, inflation is not really a property of the currency, but a property of market in which given currency is used. It's not the USD that loses value, it's the specific prices that increase, not that some products get cheaper. If some country suffered from hyper-inflation, they may start using USD instead of their original currency, and local products would end up with a different inflation in USD, than USD in US. In Bitcoin and other crypto, I doubt there is huge market which has prices set in those cryptos - they are used as a courier money for markets in specific fiat currencies, like USD. I doubt people pay 0.001 BTC for a server, they pay $100 but in BTC.
- neffy 4y ago
  It is a function of the total quantity of the currency at any given time, that currencies distribution across the economy, and the supply of the products/services it is being used for trade. Then the banking system gets involved and it gets a bit complicated, but essentially any currency that is used for fractional reserve banking will experience a slow (or fast, depends on regulatory control) expansion in its total quantity over time. Of course nobody would perform unregulated fractional reserve banking with cryptocurrencies now would they? Well actually, this is exactly what tether, luna etc are/were doing under the hood.
ulzeraj 4y ago
> Inflation encourages spending > Incentive to spend. So less crap being produced and bought in a whim and more decision making process on purchasing long lasting quality products (like it used to be). Less cheap plastic trinkets, less planed obsolescence. Please sign me up for that wonderful deflationary world!
- BobbyJo 4y ago
  > So less crap being produced and bought in a whim and more decision making process on purchasing long lasting quality products (like it used to be). Less cheap plastic trinkets, less planed obsolescence. Not really. Just more cash held instead of productive assets. The only thing a deflationary currency chang's about an economy is giving everyone a default investment strategy that wastes output.
scotty79 4y ago
> A deflationary currency makes certain low margin economic activity extremely unattractive There's absolutely nothing that prevents low margin activity from becoming high margin activity. You just need to raise the price. And if there's no consumer willing to pay the raised price, is that activity a really good idea?
birdyrooster 4y ago
To be fair its just software and they can increase the block count at any point if people agree to the upgrade.
logicchains 4y ago
>Inflation at certain levels is good and necessary. This is just flat-out misinformation! The US currency experienced deflation though much of the late 19th century yet GDP grew faster than nowadays, which clearly falsifies the notion that inflation is "necessary".
Salgat 4y ago
This is why I take dogecoin more seriously than most coins out there. Most coins have some built in deflation as a scheme to make money, such as Bitcoin's limited number of coins or Ethereum's burn mechanism. If you want people to spend money, you can't have hoarding it be the most incentivized means of using it. Dogecoin has a ~3% long term inflation, which is pretty inline with real world currencies.
husamia 4y ago
gold doesn't inflate, salt doesn't inflate unless you mine more of it but at some point it's deflationary.

cercatrova 4y ago

Indeed, the book Money by Jacob Goldstein, co-host of NPR podcast Planet Money, talks precisely about this in regards to the gold standard. One reason that it was taken off the gold standard was because monetary policy could not be fully leveraged well when every dollar was worth some amount of gold. One couldn't print new money during recessions to restart the economy, and one couldn't remove dollars from the money supply in a boom period.

mgamache 4y ago
That model is based in Keynesian Economics. It's just not reality in many situations.
- Retric 4y ago
  Every model is wrong, some models are useful. Economic models, Keynesian or otherwise, are attacked and misapplied because individual players are better off with a larger slice of a smaller pie. Which doesn’t inherently invalidate these models, but few care about accuracy when billions of dollars are involved. When people talk about say ‘cap and trade’ what they really mean is give us a giant subsidy.
  - olalonde 4y ago
    > Economic models, Keynesian or otherwise, are attacked and misapplied because individual players are better off with a larger slice of a smaller pie. As if going off the gold standard reduced wealth inequality. https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/
    - Retric 4y ago
      You can make every individual better off while increasing wealth inequality. Just imagine how bad wealth inequality would get if you doubled everyone’s lifespan.
      - olalonde 4y ago
        > You can make every individual better off while increasing wealth inequality. Absolutely. I guess I misread you? I thought you were blaming sound money for wealth inequality.
    - zajio1am 4y ago
      The era between 1945 and 1971 was not based on gold standard, but it was Bretton Woods system, that worked in a significantly different way from both era before (traditional gold standard) and era after (floating currencies).
    - mrep 4y ago
      Is that a joke website or are they actually trying to tie the end of Breton woods to the quadrupling of lawyers per capita since 1971? The number of people who drown in a pool strongly correlates with how many films Nicolas Cage has appeared in [0] but that doesn't make it a causation. [0]: https://www.tylervigen.com/spurious-correlations https://www.tylervigen.com/spurious-correlations
ralph84 4y ago
Economic inequality has massively increased since abandoning the gold standard. Of course academic economists carry water for the people at the top benefitting from the inequality.
- jquery 4y ago
  The number of pirates has drastically decreased since abandoning the gold standard. Sure you're not carrying water for Big Pirate?
  - ewzimm 4y ago
    Has it though? If piracy is the act of invading someone’s private space where they can be isolated them from help and taking from them, is ransomware just modern piracy with less violence? Of course the sea pirates are still very active on some areas.
    - FBISurveillance 4y ago
      To rephrase: global warming becomes a bigger issue as JavaScript adoption grows.
      - ewzimm 4y ago
        You might be on to something there! Think of all the heat generated by executing all that inefficient code! I’ll rephrase as well. Problems like inequality or robbery have a tendency to adapt to whatever circumstances we create for them.
- mrcartmeneses 4y ago
  Tax rates for the wealthy have also declined massively.
  - refurb 4y ago
    The percent of all taxes paid for by the top 1% has only held steady or gone up over time.
deleted 4y ago
[deleted]

ChadNauseam 4y ago

I'm no bitcoin defender, but that's not really how inflation works. Inflation is not just an increase in the base money supply. For example, a supply chain crisis can cause inflation without the money supply changing at all. And central banks can control inflation by controlling lending without printing or destroying money. Lending creates "virtual money" that contributes to inflation, so one of the ways central banks control inflation is by increasing or decreasing interest rates. Bitcoin makes these things much more difficult, of course, and would never be a good currency compared to what we have now. But the gold standard has almost exactly the same properties as bitcoin, and gold-backed currency worked okay in the US for a long time.

cjensen 4y ago
The gold-backed currency did not, in fact, work okay in the US for a long time. Between 1836 and the Great Depression, the economy went 3 or more years between recessions only 4 times. By comparison, the last three gaps between recessions were 7, 10, and 6 years; and it's now been 13 years since the last one. [1] https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
- ekianjo 4y ago
  Lol we are constantly living in recession in case you failed to notice. Its just protracted.
  - cjensen 4y ago
    To clarify, the word "recession" has a strongly defined meaning. It does not mean "things are bad" although bad times are strongly associated with recessions. Things can seem bad even without a recession. Historically speaking, each time we climb out of a recession over the last 50 years it's been a bit slower of a climb than the previous climb out. That is a worrisome trend in its own right. I believe that's the kind of bad you feel people are experiencing -- a barely perceptible improvement starting from a bad situation.
- 4y ago

canjobear 4y ago

If I earn a dollar I want its value to be as stable as possible for as long as possible. Why would anyone want to submit to top-down technocratic social engineering projects designed to change their behavior by manipulating the value of their money?

adgjlsfhk1 4y ago
Because that change in behavior is what lets markets work. With an inflationary currency, people want to create more wealth which is a net benefit to a society. With a deflationary currency, investing in the real world loses money, which disincentivizes projects that make the world better.
- ogogmad 4y ago
  The problem with these purely verbal arguments is that they can be made to sound convincing either way. E.g. Inflation is good because it encourages people to invest in things, creating jobs. However, inflation is bad because it encourages people to take unnecessary financial risks (like borrowing or lending money) when they could instead save it for a rainy day. Who knows who's right? I have no idea.
  - vkou 4y ago
    Saving the money for a rainy day is what strangles the economy. The economy's health is, to an approximation, the rate at which people spend money. Slow the rate at which money flows through the economy, and bam, welcome to a recession/depression. It's not a question of morality, as much as it's a question of mathematics. You may consider saving to be virtuous, and debt to be sinful, and sure, fine, that is your value system, but the only reason any of us have work is because we all spend, as opposed to save. You can envision a society where people mostly work for themselves, where this wouldn't be an issue. Unfortunately, modern society relies on specialization, and I can't make most of the things I need by myself.
bryanlarsen 4y ago
To keep the dollar stable you need to increase the supply at the same rate as GDP growth.

netheril96 4y ago

All those doom and gloom you describe only happens if Bitcoin is the only currency in the world. It doesn’t happen when Bitcoin is supplementary to USD, EUR, CNY, etc. This is similar to how the proponents of free market and central plan both think the other side is pure evil. In the real world, a functioning economy is a mixture of both.

nathanvanfleet 4y ago
This is exactly like how I will go to my doctor when I feel sick. But I'll also drink my own urine to cure myself. It's important to have a little bit of a mix.
- deleted 4y ago
  [deleted]
- hda2 4y ago
  If you have a counterpoint then by all means make an argument for it, but don't post.. this. It's always disappointing to see what hacker news devolves into whenever cryptocurrencies are discussed. We should try to hold ourselves to a higher standard than this.
- dsco 4y ago
  Ahh the good old Hacker news take on crypto. You must be proud of your originality.

thiht 4y ago

> You want inflation low enough that it doesn't punish people for saving but still provides an incentive to spend now. Does it work? Inflation makes me spend less, not more, because I save more, because I’ll need more later…

jmopp 4y ago
Saving in a period of high inflation doesn't work if your interest rate is lower than the inflation level. Irrespective of that, inflation definitely has an effect at the extreme ends. If the price of bread increases every hour, you'd better get in line at the shop first thing in the morning. If inflation is zero or negative, then you might consider skipping meals so you can save today's bread money, which will be worth more in the future.
- letmeoknmmm 4y ago
  How is this not an inflationary spiral then? Since the Fed keeps the rate much below inflation then all cash should be spent... which further encourages higher prices! I just don't see the endgame here except hyperinflation to destroy the currency and start anew.
letmeoknmmm 4y ago
Indeed, does it work? Normal folk just save more, reduce spending.

throwawaymaths 4y ago

> Some of the worst economic crises in history, including the great depression, were marked by significant deflation. But literally "the worst economic crisis in history" happened on the watch of an inflationary central bank. Moreover, during the greatest worldwide deflationary period ever the united states went from literally a war ravaged country that had just decimated (lost 10%) of its population to "world power" in 50 years, while also enjoying decreasing economic inequality and increasing quality of life across the board not to mention managing to manumit a huge chunk of its population.

satellite2 4y ago
M2 was still growing exponentially during the gold peg era. Not sure you can call this period "deflationary"

roenxi 4y ago

> A deflationary currency makes certain low margin economic activity extremely unattractive versus just sticking your money under the mattress We can't say that is a bad thing. A lot of that marginal economic activity is probably consuming resources that could have been better saved for a rainy day. I'm all for economic activity, but the trying to incentivise people to consume everything they can is a bad outcome - someone doing something productive then putting money under a mattress is a fine outcome. If something unexpected comes up they'll have savings.

camjw 4y ago
Putting money under the mattress is an awful outcome. If people want to save then they should put their money in to a _bank account_ where they can earn interest and their money can be put to use productively. Not only does this mean they’ll have savings, but it’s also safer (can’t get robbed) and it leads to the positive outcomes GP described around things actually getting built, and the saver ends up with more money than before because your bank account has a positive interest rate. Where this fails is if the currency is deflationary, because then it’s extremely hard for the bank to offer a non-negative interest rate and so it really is more attractive to put money under the bed, modulo the risk of it being stolen or lost
- jcelerier 4y ago
  > Not only does this mean they’ll have savings, but it’s also safer (can’t get robbed) https://www.bbc.com/news/world-europe-21814325 https://www.bbc.com/news/world-europe-21814325
  - camjw 4y ago
    Maybe I should say: "but it's also safer (less likely to get robbed vs everyone keeping their cash under the bed)"
- ogogmad 4y ago
  Doesn't this money get lent out to other people? This creates debt and the risk that the money won't get paid back. Honestly, you can make a superficially convincing argument for any economic position.

deleted 4y ago

[deleted]

krelian 4y ago

The real effects of a deflationary currency are unknown. The side effects of a change of this nature are, likely, so vast that they are impossible to anticipate. That's the general problem with revolutions of this nature, they sound good on paper but it's mostly first level thinking. Ok, you got your change. What next? I see things like communism and anarchism the same way. It's laser focusing on a very small number of the ills of the current system without considering any of the good things that come with it and how to, at least, maintain them.

vvillena 4y ago

Bitcoin can inflate. It's just that in order to change the current agreement on what Bitcoin is and how it works, you need a majority of mining power to agree, but the Bitcoin community has been famously conservative and unwilling to any kind of change. The reason? Probably a small amount of fear, and a huge investment in ASICs that would not be able to work if Bitcoin changes.

gbear605 4y ago
Also the Bitcoin community is, almost by definition, made up of people holding a lot of Bitcoin. They have a strong financial incentive to make sure that it deflates instead of inflates so that each Bitcoin becomes worth more over time instead of less.

aljarry 4y ago

Disclaimer: I may be absolutely in the wrong here, as I may be missing some fundamental economics knowledge. From my understanding, inflation is not really a property of the currency, but a property of market in which given currency is used. It's not the USD that loses value, it's the specific prices that increase, not that some products get cheaper. If some country suffered from hyper-inflation, they may start using USD instead of their original currency, and local products would end up with a different inflation in USD, than USD in US. In Bitcoin and other crypto, I doubt there is huge market which has prices set in those cryptos - they are used as a courier money for markets in specific fiat currencies, like USD. I doubt people pay 0.001 BTC for a server, they pay $100 but in BTC.

neffy 4y ago
It is a function of the total quantity of the currency at any given time, that currencies distribution across the economy, and the supply of the products/services it is being used for trade. Then the banking system gets involved and it gets a bit complicated, but essentially any currency that is used for fractional reserve banking will experience a slow (or fast, depends on regulatory control) expansion in its total quantity over time. Of course nobody would perform unregulated fractional reserve banking with cryptocurrencies now would they? Well actually, this is exactly what tether, luna etc are/were doing under the hood.

ulzeraj 4y ago

> Inflation encourages spending > Incentive to spend. So less crap being produced and bought in a whim and more decision making process on purchasing long lasting quality products (like it used to be). Less cheap plastic trinkets, less planed obsolescence. Please sign me up for that wonderful deflationary world!

BobbyJo 4y ago
> So less crap being produced and bought in a whim and more decision making process on purchasing long lasting quality products (like it used to be). Less cheap plastic trinkets, less planed obsolescence. Not really. Just more cash held instead of productive assets. The only thing a deflationary currency chang's about an economy is giving everyone a default investment strategy that wastes output.

scotty79 4y ago

> A deflationary currency makes certain low margin economic activity extremely unattractive There's absolutely nothing that prevents low margin activity from becoming high margin activity. You just need to raise the price. And if there's no consumer willing to pay the raised price, is that activity a really good idea?

birdyrooster 4y ago

To be fair its just software and they can increase the block count at any point if people agree to the upgrade.

logicchains 4y ago

>Inflation at certain levels is good and necessary. This is just flat-out misinformation! The US currency experienced deflation though much of the late 19th century yet GDP grew faster than nowadays, which clearly falsifies the notion that inflation is "necessary".

Salgat 4y ago

This is why I take dogecoin more seriously than most coins out there. Most coins have some built in deflation as a scheme to make money, such as Bitcoin's limited number of coins or Ethereum's burn mechanism. If you want people to spend money, you can't have hoarding it be the most incentivized means of using it. Dogecoin has a ~3% long term inflation, which is pretty inline with real world currencies.

husamia 4y ago

gold doesn't inflate, salt doesn't inflate unless you mine more of it but at some point it's deflationary.