Topic: A huge test of the majority peoples feeling about deflation (Read 2495 times)

I wouldn't say Bitcoin is currently deflationary...in fact, the _inflation_ rate (as measured by the amount of new BTC created as a % of circulating BTC) is ridiculously high -- eg, how many coins existed 1 year ago cf. today?

If you measure inflation by how much stuff costs, then every time the ticker goes up, bitcoin is deflating...but that's happening despite massive % increases in the coin supply...if governments tried to pull that of, their currency would lose tremendous % value.

Can you elaborate on this point? I don't think what follows the highlighted part explains why miners will have no incentive to mine.

What is your reasoning for thinking this is the case?

I completely agree with you that governments will have huge incentive in trying to control Bitcoin. Controlling the monetary unit of a country is a very effective way for a government to finance itself. Let's hope they're as unsuccessful doing this as they have been at deterring piracy though.

After block reward is 0, miners will process payments for tx fees. more blocks = more fees. They'll have little or no incentive to do single transaction blocks, but there will be plenty of incentive to process transactions.

As to government mandating fees in clients.... That's just silly. They tried a similar strategy with Napster... and now nobody actually uses Napster.

Your crystal ball isn't just broken, it's fuckin' with you.

Fair enough. Let's wait and see. Except, I won't be waiting doing nothing, I'll be using Bitcoin.

Sure, it could be broken. But if we accept Bitcoin is destined to be a "success" as a currency we have to accept the fact that policy-wise it'll ultimately succumb to the nature of man and his government.

That, or your crystal ball is broken...

The only thing that matters about the deflationary aspects of Bitcoin is that eventually miners will have little to no incentive to mine. Every non-miner Bitcoiner thinks fees are going to be enough but they won't be and all the smart miners know this. Think about it, imagine you're someone who is creating Bitcoin and you want to encourage people to use it, you have the problem of if you make it inflationary then no one will hoard it, so it will never get used or become valuable enough to use, and if you make it deflationary it will get hoarded, but sometimes the speculation is going to create bubbles that make it unusable and eventually just a handful of people will own large amounts of it that they are unwilling to sell.

Also, because it is deflationary, at some point you know the miners aren't going to be willing to mine anymore, yet they will, having been involved in large monetary purchases of the currency, have an immense amount of sway over politicians. We're going to get "taxed" via fees that the developers are forced by law of various governments to put into their clients and mining pools will be forced by law to ignore or not accept those blocks that contain transactions without fees. Obviously this is far future, but it's still what we have to look forward to once Bitcoin has been widely adopted.

Exactly. I like things just the way they are.

Thanks for fixing that. Yes, the exchange rate to USD is likely to continue to rise, so btc-denominated prices are likely to continue to drop. Unless they don't. There have been, and will be, ups and downs in exchange rates. It's also a matter of time scale and cherry-picking to suit one's favorite dogma.  I've got nothing more to add to this topic.

Back to the OP, I don't think we'll be actually able to tell how price deflation affects users' behavior, unless we split the user base in half and introduce one inflationary, and one deflationary coin. Any other (more realistic) aproach will be prone to ideological fallacies in interpreting data.

The thing is, people use Bitcoin. If price keeps going up, despite monetary inflation, we conclude that Bitcoin economy is growing, most likely because there are more and more people using Bitcoin - even though it's price deflationary! So it seems that there is no problem.

I see that most people answering this post are not majority of people that we can meet daily  

If everyone on this planet has a master degree in mathematics/economy, then things are more complicated, but just for common sense, don't you just want to avoid all these calculations/definitions as a normal user?

The shape of Demand/Supply curve is decided by human nature, I think the characters that people require from a currency also comes from human nature, just not sure what it is, but simplicity is definitely an important aspect

It's currently price deflationary, and that will likely only speed up.

Folks, as notme repeatedly pointed out, this is an issue of semantics.

Also, watch your tenses, it'll help you think more clearly.

Bitcoin is currently inflationary. It will become deflationary once the rate of mining drops below the rate of loss. Who cares? I don't. I simply use Bitcoin, and will continue to do so.

monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation
monetary inflation vs. price inflation

There's a reason this was created:
https://bitcointalksearch.org/topic/deflation-and-bitcoin-the-last-word-on-this-forum-11627

A common misconception is that people believe bitcoin is inflationary because more is being created each day. One must realize that that is only part of the equation. In relative terms, bitcoin is deflationary. The rate at which it is produced is a constant amount (excluding the halving occurring in a few months.) Bitcoin's value has increased greatly vs major global currencies, and that is because of another factor: demand. While it (bitcoin) is constantly being created, it is being utilized in markets and in many ventures (think bitcoin-based websites.) It is also hoarded, though I am not sure to what extent. As demand for bitcoin increases, it's relative value MUST increase, simply because the 'production' of it is finite.

Of course, when deflation occurs, there is an increase in hoarding. This is logical; who would want to get rid of something when it is continually gaining greater relative value?

It will be interesting to see what the future brings. There are so many variables involved, no one can be certain of what will happen; only what may happen.

I think the distinction is between monetary inflation/deflation, and price inflation/deflation. The former is an increase/decrease in the supply of money, while the latter is a general increase/decrease in price level.

When you hear the terms mentioned in the media and by most Keynesian economists, "inflation" and "deflation" refer to price inflation/deflation, and not monetary inflation/deflation.

He's actually using the most common definition... http://en.wikipedia.org/wiki/Deflation

What you're talking about is more commonly referred to as monetary deflation... http://en.wikipedia.org/wiki/Deflation#Money_supply_side_deflation

No, deflation is not falling prices in an economy. Sure, falling prices are sometimes associated with deflation of the currency supply but to assert the effects as the action is like saying that wet streets are rain. Perhaps you are using a bastardized definition; which has happened over the decades from the influence of mental Keynesian midgets.


Important to understand that what is currently in place is not capitalism but a form of crony capitalism or, in other words, fascism.

Stagnant wages = debt-based consumerism = unprecedented wealth consolidation (higher than 1920's)


Now is the time for Bitcoin.  If for nothing else, but to counter the current state of capitalism that is strip mining the foundation of the economy.


The people should be allowed to possess a real, immutable share of the economy by way of currency. 

The only situation where actual price of bitcoin plays a role for me is if price was so low (and total value of Bitcoin economy so tiny) that individual transactions move the market. Fortunately, we are moving away from this extreme, despite the inflation which is there by design and will gradually disappear over the next few decades.

Other than that, I don't care if it's $10 or $2000 per coin. There is plenty of room in eight decimal places. I spend and buy them according to their current value. Even if I'm speculating, I still don't care about the absolute value, but about relative change over time, and whether I can predict this trend (I can't).

The only thing that bothers me is volatility, but that'll get better with time, and even now in many cases the problem can be circumvented with real-time conversion through paysius or bit-pay.

Deflation = falling prices in an economy.  And as stated above my hunch is an increase in popularity that is out pacing the growing supply of bitcoins.