[CHART] Bitcoin Inflation vs. Time - page 50.

bitfreak!

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This chart shows the instantaneous rate of inflation, annualized.

Ok so if I'm understanding this correctly, it is essentially the inverse or what ever you want to call it, I'm not a math genius as I said... except that it is plotted as a percentage of change in discrete yearly steps?

whitslack

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Quote from: bitfreak! on December 13, 2012, 01:29:41 PM

Quote from: TangibleCryptography on December 13, 2012, 01:25:01 PM

Inflation in this case is the increase in the supply of money (sometimes called money supply inflation).

Well that was my first guess, but then I thought the blue line was plotting the increase in the money supply or "monetary base" (same thing right?) and so then I figured they should just be the inverse of each other? Huh

If the inflation rate were the inverse of the monetary base, then it would have units of BTC^-1. But inflation rate is actually a unitless quantity. It expresses the fraction by which the monetary base grows in one year. This chart shows the instantaneous rate of inflation, annualized.

"Money supply" and "monetary base" are the same thing in the absence of fractional reserve banking.

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Quote from: TangibleCryptography on December 13, 2012, 12:59:49 PM

Can you make a version with logarithmic scales? Given the exponential decay it would provide more detail for later years.

Done.

bitfreak!

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Quote from: TangibleCryptography on December 13, 2012, 01:25:01 PM

Inflation in this case is the increase in the supply of money (sometimes called money supply inflation).

Well that was my first guess, but then I thought the blue line was plotting the increase in the money supply or "monetary base" (same thing right?) and so then I figured they should just be the inverse of each other? Huh

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Quote from: bitfreak! on December 13, 2012, 01:22:29 PM

Forgive my ignorance here, but I'm not sure I understand this graph. I'm not a math genius or economics genius, but I thought inflation was a rise in prices due to an increase in the money, which is obviously not what we see graphed here. How is inflation defined in this graph?

Inflation in this case is the increase in the supply of money (sometimes called money supply inflation).
At the point where the graph indicates 10% it means the money supply is growing at 10% annualized rate at that point in time.

It is sometimes useful for people to be specific (price inflation vs money supply inflation). Obviously both "sides" believe their definition of inflation is the right one but it always leads to confusion and/or fights. If everyone simply used the terms price inflation or money supply inflation it would always be clear.

bitfreak!

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Forgive my ignorance here, but I'm not sure I understand this graph. I'm not a math genius or economics genius, but I thought inflation was a rise in prices due to an increase in the money supply, which is obviously not what we see graphed here. How is inflation defined in this graph?

TangibleCryptography

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Can you make a version with logarithmic scales? Given the exponential decay it would provide more detail for later years.

jl2035

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We are looking forward to 2030+ for "no inflation"... Grin

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Quote from: whitslack on December 13, 2012, 11:40:58 AM

Quote from: Fjordbit on December 13, 2012, 11:33:46 AM

The first curve should have met at 25%, but it looks more like 29%.

How do you figure?

I know where you got 25% from. That's the inflation that occurred in the last year prior to the reward halving. That's not the same as the annualized instantaneous inflation rate.

whitslack

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Quote from: Fjordbit on December 13, 2012, 11:33:46 AM

The first curve should have met at 25%, but it looks more like 29%.

How do you figure? Before block 209,999, there were 10,499,950 BTC in existence. Then block 209,999 added 50 more, bringing the total up to 10,500,000 BTC. That was an increase of 0.000476193%. To calculate the annualized inflation rate, you take the natural log of 1.00000476193, multiply by the number of blocks in a year (52,595.9856), and exponentiate the product, base e, which yields 1.28461321188. So the annualized inflation rate at block 209,999 was 28.46%.

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The first curve should have met at 25%, but it looks more like 29%.

whitslack

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Quote from: knight22 on December 13, 2012, 11:22:49 AM

Pictures not working...

Maybe because they were on Facebook's CDN. I've moved them over to my own web space now.

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Pictures not working...

evoorhees

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Very nice

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A clarifying note: These charts show the monetary (supply) inflation of Bitcoin. They bear no relation to price inflation, which is an entirely distinct phenomenon. When Austrian economists say "inflation," they're typically referring to monetary inflation, whereas Keynesian economists are typically referring to price inflation.

Also, please note that the top axis ("Year") on these charts is approximate, based on the scheduled block generation rate of one block per 10 minutes. The actual block generation rate has averaged a bit faster than this, due to the perpetually increasing hash rate, so we're already a little bit further progressed than the labels along the top axis would suggest. This doesn't mean there will be any more than 21M bitcoins; it only means that we'll reach the end of supply generation a little bit sooner than we would have if the hash rate had always held constant.

Bitcoin Inflation 4x3.pdf (8"×6") | Bitcoin Inflation.pdf (8½"×11")

Bitcoin Inflation logarithmic.pdf (8"×6")

Permission given to use and reproduce freely.

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