8 ms·

Also, bitcoin is deflationary by design. It will effectively run out at some point, if I understand the situation. I believe its proponents consider this a feat

Also, bitcoin is deflationary by design. It will effectively run out at some point, if I understand the situation. I believe its proponents consider this a feature, but I suspect it will prove to be a liability.

ekianjo 13y ago
SO what? You can have tons of fractions of bitcoins, and that covers the needs of any micro-payment even if a single bitcoin becomes worth a million of dollars.
- allochthon 13y ago
  The issue is subtle. It has to do with the need for a currency supply to expand to match overall increases in production in absolute terms. I don't understand the matter in any detail, but I trust economists in their general aversion to deflation.
  - ekianjo 13y ago
    There have been tons of economies which worked before on the Gold standard, which has been the model for the bitcoin "mining" model. I know nowadays you have lots of Keynesian economists who tell you that going in debt to the death and inflating the money supply is a good thing, but you have to look at how things worked before and why it made sense to have a limited supply currency.
    - 21echoes 13y ago
      the difference being that they kept discovering gold. bitcoin will effectively eventually run out.
      - ekianjo 13y ago
        Nope, the new discoveries of gold were usually marginal vs the actual worldwide gold reserves. Bitcoin is following the exact same model. Mining will become marginal over time.
        bicknergseng 13y ago
        >>the new discoveries of gold were usually marginal vs the actual worldwide gold reserves I think 17th century Portugal and others would have something to say about how "stable" commodity monetary systems are over long periods of time.
        ekianjo 13y ago
        Because you think fiat currencies based systems are way better? How stable is your system going to be when you expand your credit line to the infinite just because you can print/create money which has no intrinsic physical value ? Fiat currencies hurt the future generations and not just the present ones.
        21echoes 13y ago
        you think gold has "intrinsic, physical value"? you think bitcoin has "intrinsic, physical value"?! why have almost all currencies used throughout history had a significant fiduciary element? why has the world constantly cycled between bullion and fiat currencies? why do you think bullion currencies are more common during times of warfare? when are countries incentivized to "expand their credit line to the infinite"? would you rather have a currency that can modify its inflation/deflation rate based on any number of relevant factors, or a currency whose inflation/deflation rate is tied to the rate of mining of some rocks in the ground?
        ekianjo 13y ago
        Gold has physical value, yes, because it is relatively rare on Earth and has interesting chemical and physical properties that can be used in several ways. And on top of that, it's dense, can be melted, and does not corrode over time. Therefore making is a good tool to represent "money". > why do you think bullion currencies are more common during times of warfare? Because inflation runs crazy during warfare and therefore people trying to save their earnings go for gold, silver and others in order to avoid losing the face value of their fiat currencies. And by the way, the Gold standard was abandoned in History mainly to fund the war in Europe during the 1st world war, and then later in the 20th century because of the expenses of the US military policy during the Cold war. > when are countries incentivized to "expand their credit line to the infinite"? Look at the current situation in the US. Everyone knows they will never pay their debt, yet it keeps growing. You can expect things to crash hard down the road. > would you rather have a currency that can modify its inflation/deflation rate based on any number of relevant factors, or a currency whose inflation/deflation rate is tied to the rate of mining of some rocks in the ground? The later, obviously, because Gold is neutral and does not belong to any government. The US Dollar, the Euro and other fiat currencies are all controlled by different central banks with different agendas. I have no control over what they can do in the future. But Gold is tangible, and there's not much Gold being extracted nowadays to change the face value of it. Why do you think China is building a huge Gold reserve currently, and buying Gold as much as they can from all over the world? Do you think they are just plain stupid ?
  - unclebucknasty 13y ago
    You nailed it actually. Yeah, you can delve deeper, but the bottom line is one of basic supply and demand. As the world continues to output more (i.e. increased production), the same Bitcoin will be competing for more goods (or, it can be said that more goods are competing for the same Bitcoin). So Bitcoin's value can be said to increase accordingly. In other words, deflation. Now, whether this is a bad thing is subject to debate. Here's an article that discusses this, specifically WRT deflation not being a bad thing with Bitcoin: http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-deflation/ http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-d...
  - jacoblyles 13y ago
    The more you learn about economics, the less you will trust economists. They have trouble predicting economic growth one quarter ahead[1] and there are tons of competing schools and models on the macro level that endlessly bicker without coming to agreement (not one of which is very good at predicting the future). They have like, degrees and shit, so the world considers them experts. But take them with a grain of salt. [1] http://www.zerohedge.com/news/2013-10-10/not-world-youre-hoping http://www.zerohedge.com/news/2013-10-10/not-world-youre-hop...
- dllthomas 13y ago
  Divisibility helps to be sure, but there are other issues. Expectation of deflation discourages spending and investment, because the currency I would spend will itself be worth more tomorrow.
  - ekianjo 13y ago
    No, the currency would not appreciate much more if you keep it down the road, since bitcoin's value curve becomes almost flat when you reach that point, so there's no real value in hoarding your bitcoins when you reach that stage.
    - gnaritas 13y ago
      > since bitcoin's value curve becomes almost flat when you reach that point What? The value of a currency is not only determined by how much of it there is, but by how much the economy needs to function. If the economy grows bitcoins will have to depreciate to allow smaller and smaller pieces to be traded. That's deflation, and it's bad. Divisibility isn't a feature, it's a bug that'll kill the currency in the long run because prices are sticky (people raise prices faster than they drop them) and the economy handles inflation far better than it handles deflation.
      - ekianjo 13y ago
        Hahah. Funny argument. Inflation is killing your economy, rather, because it encourages spending and frenetic consumption, this depleting the banks of the well needed savings that will be used for investment by private companies. Yeah, inflation works "so well", right.
        dllthomas 13y ago
        Inflation encourages investment. If I can get a return sticking my money under a (literal or metaphorical) matress why would I take a risk with investing it? Funding your startup would be more expensive and more difficult in a deflationary world.

ekianjo 13y ago

SO what? You can have tons of fractions of bitcoins, and that covers the needs of any micro-payment even if a single bitcoin becomes worth a million of dollars.

allochthon 13y ago
The issue is subtle. It has to do with the need for a currency supply to expand to match overall increases in production in absolute terms. I don't understand the matter in any detail, but I trust economists in their general aversion to deflation.
- ekianjo 13y ago
  There have been tons of economies which worked before on the Gold standard, which has been the model for the bitcoin "mining" model. I know nowadays you have lots of Keynesian economists who tell you that going in debt to the death and inflating the money supply is a good thing, but you have to look at how things worked before and why it made sense to have a limited supply currency.
  - 21echoes 13y ago
    the difference being that they kept discovering gold. bitcoin will effectively eventually run out.
    - ekianjo 13y ago
      Nope, the new discoveries of gold were usually marginal vs the actual worldwide gold reserves. Bitcoin is following the exact same model. Mining will become marginal over time.
      - bicknergseng 13y ago
        >>the new discoveries of gold were usually marginal vs the actual worldwide gold reserves I think 17th century Portugal and others would have something to say about how "stable" commodity monetary systems are over long periods of time.
        ekianjo 13y ago
        Because you think fiat currencies based systems are way better? How stable is your system going to be when you expand your credit line to the infinite just because you can print/create money which has no intrinsic physical value ? Fiat currencies hurt the future generations and not just the present ones.
        21echoes 13y ago
        you think gold has "intrinsic, physical value"? you think bitcoin has "intrinsic, physical value"?! why have almost all currencies used throughout history had a significant fiduciary element? why has the world constantly cycled between bullion and fiat currencies? why do you think bullion currencies are more common during times of warfare? when are countries incentivized to "expand their credit line to the infinite"? would you rather have a currency that can modify its inflation/deflation rate based on any number of relevant factors, or a currency whose inflation/deflation rate is tied to the rate of mining of some rocks in the ground?
        ekianjo 13y ago
        Gold has physical value, yes, because it is relatively rare on Earth and has interesting chemical and physical properties that can be used in several ways. And on top of that, it's dense, can be melted, and does not corrode over time. Therefore making is a good tool to represent "money". > why do you think bullion currencies are more common during times of warfare? Because inflation runs crazy during warfare and therefore people trying to save their earnings go for gold, silver and others in order to avoid losing the face value of their fiat currencies. And by the way, the Gold standard was abandoned in History mainly to fund the war in Europe during the 1st world war, and then later in the 20th century because of the expenses of the US military policy during the Cold war. > when are countries incentivized to "expand their credit line to the infinite"? Look at the current situation in the US. Everyone knows they will never pay their debt, yet it keeps growing. You can expect things to crash hard down the road. > would you rather have a currency that can modify its inflation/deflation rate based on any number of relevant factors, or a currency whose inflation/deflation rate is tied to the rate of mining of some rocks in the ground? The later, obviously, because Gold is neutral and does not belong to any government. The US Dollar, the Euro and other fiat currencies are all controlled by different central banks with different agendas. I have no control over what they can do in the future. But Gold is tangible, and there's not much Gold being extracted nowadays to change the face value of it. Why do you think China is building a huge Gold reserve currently, and buying Gold as much as they can from all over the world? Do you think they are just plain stupid ?
- unclebucknasty 13y ago
  You nailed it actually. Yeah, you can delve deeper, but the bottom line is one of basic supply and demand. As the world continues to output more (i.e. increased production), the same Bitcoin will be competing for more goods (or, it can be said that more goods are competing for the same Bitcoin). So Bitcoin's value can be said to increase accordingly. In other words, deflation. Now, whether this is a bad thing is subject to debate. Here's an article that discusses this, specifically WRT deflation not being a bad thing with Bitcoin: http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-deflation/ http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-d...
- jacoblyles 13y ago
  The more you learn about economics, the less you will trust economists. They have trouble predicting economic growth one quarter ahead[1] and there are tons of competing schools and models on the macro level that endlessly bicker without coming to agreement (not one of which is very good at predicting the future). They have like, degrees and shit, so the world considers them experts. But take them with a grain of salt. [1] http://www.zerohedge.com/news/2013-10-10/not-world-youre-hoping http://www.zerohedge.com/news/2013-10-10/not-world-youre-hop...
dllthomas 13y ago
Divisibility helps to be sure, but there are other issues. Expectation of deflation discourages spending and investment, because the currency I would spend will itself be worth more tomorrow.
- ekianjo 13y ago
  No, the currency would not appreciate much more if you keep it down the road, since bitcoin's value curve becomes almost flat when you reach that point, so there's no real value in hoarding your bitcoins when you reach that stage.
  - gnaritas 13y ago
    > since bitcoin's value curve becomes almost flat when you reach that point What? The value of a currency is not only determined by how much of it there is, but by how much the economy needs to function. If the economy grows bitcoins will have to depreciate to allow smaller and smaller pieces to be traded. That's deflation, and it's bad. Divisibility isn't a feature, it's a bug that'll kill the currency in the long run because prices are sticky (people raise prices faster than they drop them) and the economy handles inflation far better than it handles deflation.
    - ekianjo 13y ago
      Hahah. Funny argument. Inflation is killing your economy, rather, because it encourages spending and frenetic consumption, this depleting the banks of the well needed savings that will be used for investment by private companies. Yeah, inflation works "so well", right.
      - dllthomas 13y ago
        Inflation encourages investment. If I can get a return sticking my money under a (literal or metaphorical) matress why would I take a risk with investing it? Funding your startup would be more expensive and more difficult in a deflationary world.