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Good points. I wasn't thinking of the macroeconomic implications of deflation. You're absolutely right; there's a spectre of unpredictability that I fear will p

Good points. I wasn't thinking of the macroeconomic implications of deflation. You're absolutely right; there's a spectre of unpredictability that I fear will preclude any "real" institutional use of the Bitcoin system. I honestly wish that Nakamoto had consulted an economist before creating Bitcoin. A system with a modest rate of built-in inflation makes far more sense than Bitcoin's deflationary issue scheme.

ealloc 14y ago
It may not be too late - the parameters controlling the deflation are independent of bitcoin's cryptosystem, and can (technically very easily) be changed and improved. I think Bitcoin's creator thought a deflationary policy would help generate initial support for bitcoin by encouraging people to become invested. Arguably, without a deflationary policy bitcoin would never have caught on as it has. Probably the most practical way to actually change the policy is to create an alternate 'bitcoin-2' network with a better (inflationary) policy. You could even allow transactions from the old network into the new one thus allowing people to carry their wealth over. If everyone agreed it was better, it would happen. The challenge is more social than technical. For now though, it doesn't matter since the current bitcoin 'fiscal policy' is fairly expansionary (bitcoins are still being generated) and will be for years, and anyway the effect of 'fiscal policy' on bitcoin value is currently dwarfed by the effects of speculation and the increasing demand for bitcoins.