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I still think the fact that there's hard cap on the eventual total number of bitcoins will make them long run deflationary, create a strong incentive to horde,
by armored_mammal 14y ago
I still think the fact that there's hard cap on the eventual total number of bitcoins will make them long run deflationary, create a strong incentive to horde, and eventually act as a restraint on their use in commerce - after all inflation is a prime motivator when it comes to spending what you have now.
- lukesandberg 14y agoI disagree. inflation is _a_ motivator for exchanging currency for other assets/services. But i don't think it is a primary motivator. Inflation/deflation is only a strong motivator in abnormal circumstances. With 2-3% inflation my primary motivation for buying things is way more about the transaction itself (do i want this thing) than any concerns about finding a durable store of value.
- meric 14y agoBitcoin has much higher than 2-3% deflation. It's value is increasing at a very fast rate relative to the increase of the price of goods.
- kiba 14y agoSo, you wanna buy food or do you want to keep hording bitcoin?
- tptacek 14y agoThe world in which dollars have no value is unlikely to be a world in which Bitcoins have any value either.
- wwwtyro 14y agoCould you explain the reasoning behind this statement?
- tptacek 14y agoThe collapse of the most important currency in the world is likely to be accompanied by an economic upheaval that would destroy the value of toy projects like Bitcoin.
- kiba 14y agoI never actually implies that the dollars collapse, just that there are something causing ongoing gigantic bitcoin deflation.
- tptacek 14y agoWhy would someone keep all their funds in Bitcoin if the dollar is still functioning?
- deleted 14y ago[deleted]
- kiba 14y agoThe price of bitcoin is rising. (Of course, it would be a different matter if the dollars' price is rising and bitcoin is not)
- tptacek 14y agoAt any one moment, the price of lots of things might be rising. Sometimes corn, sometimes orange juice, sometimes gold, others palladium. How am I to know when I should put all my money in a commodity or tradable instrument? There are reasons we don't use soybean oils as our currency, and one of them is "unpredictable drastic spikes in the value of a currency aren't a good thing".
- kiba 14y agoShort term: I am not a commodity trader. Long term: If you believe bitcoin have a higher probability of being a widespread currency than the probability of bitcoin losing total confidence, than it would make sense to move some of your wealth into it. Otherwise, if you think bitcoin is never going to become a big player and end up going all the way down to zero, you don't put your wealth in it. Maybe you could even bet someone that bitcoin is going to become a bunch of useless binary code.
- YokoZar 14y agoThe effective supply of bitcoins can increase if we invent ways to trade existing bitcoins faster (such as convenient apps or exchanges). This is why the Federal Reserve needs to know the "velocity of money" when determining how many dollars to put out there -- half the dollars moving around twice as fast is effectively the same availability of money. A similar thing happens if people end up issuing bitcoin-denominated debt instruments and then trading those rather than bitcoins directly. A good example is if you and I both have 100 bitcoins in our accounts at a bitcoin bank and I send my coins to you -- the bank could do that transaction without having the 100 bitcoins in reserve.
- astrodust 14y agoCreating a strong incentive to horde worked for diamonds, sustaining demand for an artificially rare product for decades. Diamonds, after all, are just carbon much as Bitcoins are just binary strings.
- DrStalker 14y agoIf Bitcoin had a marketing campaign that was as successful as what De Beers pulled off with diamonds we'd have a new universal currency within a decade.