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Bitcoin is a commodity backed by Mathematics with the convenience of transfer of ownership through electronic rather than physical means. When the last coin is
by kruhft 14y ago
Bitcoin is a commodity backed by Mathematics with the convenience of transfer of ownership through electronic rather than physical means. When the last coin is mined in 2140 the point of deflation might hold if it was a currency, but it's not. It is a faith based value store based on supply and demand, just like gold, which has next to no useful properties other than being shiny, non-tarnishing, conductive AND PEOPLE THINK IT'S VALUABLE.
With the FED and Monetary Easing the total amount of dollars in the economy is increasing, but the actual value (purchasing power) of every dollar is decreasing. But since the number of dollars (numerically) that people are holding is increasing there is no speak of deflation because prices aren't going down due to the inflation of the amount of dollars. The actual purchasing power is deflating but due to economic slieght of hand everyone has more dollars. Win win!
The value of money is not the number of dollars but the distribution of the dollars throughout society. Double everyone's bank account and nothing would change after the initial emotional frenzy - prices would settle at twice the original values.
Deflation may be an 'economic carcinogen' but what name is given to the systematic reduction of value and spending power in an economy where there is almost no saving and for what saving there is there's no interest?
The price of gold has been increasing to greater and greater highs for the past decade due to the monitary policies during that time. Bitcoin is reaching a point where it can stand along side with it in some people's minds because it has a strong Mathematical backing rather than a flimsy backing by governments. Gold was taken over as a currency by paper; maybe BTC will end up the same way some day.
- Sambdala 14y agoBitcoin isn't backed by anything. "Backing" is also grossly misunderstood in general. Any "Backing" a currency has can generally be thought of as an put option on something fungible. For example, gold will never drop below $10-$20 per Oz because of the industrial/jewelry/etc uses people find for it. However, that "backing" only makes up a small percent of the price of gold.
- kruhft 14y agoBacked in the structural sense not the monetary sense. I should have written 'Bitcoin is a commodity with a solid foundation of Mathematics.'
- dragonwriter 14y ago> Bitcoin isn't backed by anything. True; in a sense, its a formalized potlatch system in which the publicly-demonstrated destruction of wealth (energy and wear-and-tear on hardware, demonstrated via computation proofs) is rewarded instead of with informal social regard, with concrete exchangeable tokens.
- zik 14y ago> Bitcoin isn't backed by anything. It's unusual in that it does have a cost of creation - the expense of the machinery and power required to mine a bitcoin. So it does have a "base value" of a sort, you just can't redeem it.
- kaonashi 14y ago>With the FED and Monetary Easing the total amount of dollars in the economy is increasing Not true. QE is a swap. Take away a bond, replace with reserves. No net change. If anything it's deflationary, as the bond yields more interest than reserves. Even if the amount of net financial assets in the private sector does increase, it doesn't necessarily follow that the purchasing power of the dollar decreases. It all depends on the capacity of the economy to absorb the extra spending. If there is excess capacity that is mobilized by the extra spending, you get more dollars chasing after more goods. If there is no excess capacity, you get more dollars chasing after the same amount of goods.