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Eh, not really. Economists would call a currency deflationary if it causes deflation, that is, if it inflates slower than demand does. Bitcoin is massively defl

Eh, not really. Economists would call a currency deflationary if it causes deflation, that is, if it inflates slower than demand does. Bitcoin is massively deflationary, and only inflating in a very pedantic sense. I think assuming that Bitcoin will be (for practical purposes) eternally deflationary is the safest bet that could be made today. The world economy has been growing by triple digits every century. Not even now we're nowhere near a global Star Trek post-scarcity future. So it's misleading to say that Bitcoin is deflationary "based only on a presumption". Somewhat like saying that physics is just "based on the presumption of Newton's laws".

codeulike 13y ago
Does the divisibility of bitcoin make any difference? If they changed the protocol now and then so that the number of decimal places (currently 8) increased to 9, then 10, etc, would that be viewed as increasing the supply of bitcoins?
- cecilpl 13y ago
  If the US government started minting 0.1 cent coins and 0.01 cent coins, would that be viewed as increasing the supply of dollars?
  - codeulike 13y ago
    If the USD was deflationary, then maybe it would?
  - jontaylor 13y ago
    In Bitcoin the supply and availability of currency are decoupled. By funging or splitting a unit of Bitcoin currency into pieces you increase the availability for use while preserving the value of everyones holdings. Based on the supply and demand the price will fluctuate independently of supply levels. My understanding is that regardless of how inflationary or deflationary Bitcoin is, there will be no effect on the availability for anyone to buy and sell.
- jellicle 13y ago
  If Zimbabwe adding extra zeros before the decimal point to its money doesn't cure inflation, then Bitcoin adding extra zeros after the decimal point won't cure deflation.
  - codeulike 13y ago
    Zimbabwe was very different: the amount of money people had was devalued by new notes being printed that had extra zeroes before the decimal point. Adding extra zeroes after the decimal point for money already in circulation leaves the total supply the 'same' but could also be viewed as increasing supply 10-fold, without disadvantaging anyone currently holding the currency. Its never happened before, so I'm not sure many economists have thought about it
    - chipsy 13y ago
      Changing denominators has an effect on the liquidity of small transactions, but it's not going to change inflation. What inflation does in an economic sense is much bigger - it changes who has relatively more or less wealth or debt over time. If you take out a loan for $10,000 and inflation makes both your prices and wages go up 2x, then you now have half as much debt. Deflation does the opposite and makes debt more and more expensive. This is why most economists are against it - debts that grow more expensive will trap people. Historically, debts were forgiven by decree (a jubilee) because the system kept breaking.
      - jontaylor 13y ago
        To me this is one of the most interesting things about Bitcoin. It is an asset based currency. In a debt based fractional reserve dollar economy you or someone else owes that currency back with interest. The economy is like a game of musical chairs. If a society was based on something like Bitcoin everyone could have assets, there wouldn't be as a strong need to borrow as there is today. If Bitcoin was a predominant part of an economy borrowing a loan in it could be very bad. In a predominantly Bitcoin based economy everyone could have abundant wealth and there would be no need to be a debt slave.
  - 13y ago

codeulike 13y ago

Does the divisibility of bitcoin make any difference? If they changed the protocol now and then so that the number of decimal places (currently 8) increased to 9, then 10, etc, would that be viewed as increasing the supply of bitcoins?

cecilpl 13y ago
If the US government started minting 0.1 cent coins and 0.01 cent coins, would that be viewed as increasing the supply of dollars?
- codeulike 13y ago
  If the USD was deflationary, then maybe it would?
- jontaylor 13y ago
  In Bitcoin the supply and availability of currency are decoupled. By funging or splitting a unit of Bitcoin currency into pieces you increase the availability for use while preserving the value of everyones holdings. Based on the supply and demand the price will fluctuate independently of supply levels. My understanding is that regardless of how inflationary or deflationary Bitcoin is, there will be no effect on the availability for anyone to buy and sell.
jellicle 13y ago
If Zimbabwe adding extra zeros before the decimal point to its money doesn't cure inflation, then Bitcoin adding extra zeros after the decimal point won't cure deflation.
- codeulike 13y ago
  Zimbabwe was very different: the amount of money people had was devalued by new notes being printed that had extra zeroes before the decimal point. Adding extra zeroes after the decimal point for money already in circulation leaves the total supply the 'same' but could also be viewed as increasing supply 10-fold, without disadvantaging anyone currently holding the currency. Its never happened before, so I'm not sure many economists have thought about it
  - chipsy 13y ago
    Changing denominators has an effect on the liquidity of small transactions, but it's not going to change inflation. What inflation does in an economic sense is much bigger - it changes who has relatively more or less wealth or debt over time. If you take out a loan for $10,000 and inflation makes both your prices and wages go up 2x, then you now have half as much debt. Deflation does the opposite and makes debt more and more expensive. This is why most economists are against it - debts that grow more expensive will trap people. Historically, debts were forgiven by decree (a jubilee) because the system kept breaking.
    - jontaylor 13y ago
      To me this is one of the most interesting things about Bitcoin. It is an asset based currency. In a debt based fractional reserve dollar economy you or someone else owes that currency back with interest. The economy is like a game of musical chairs. If a society was based on something like Bitcoin everyone could have assets, there wouldn't be as a strong need to borrow as there is today. If Bitcoin was a predominant part of an economy borrowing a loan in it could be very bad. In a predominantly Bitcoin based economy everyone could have abundant wealth and there would be no need to be a debt slave.
- 13y ago