Topic: Deflation based currency such as Bitcoin to counter promote economy. (Read 12597 times)

That is definitely not. A normal economy will have inflation and deflation only happens when the central bank changes its money supply plan.
But I think the crypto market was born as a blessing for the world. This is a deflationary market and the financial market out there is inflation. so both should be reconciled and should be recognized in all the world.
Bitcoin will solve the economic problem when the recession begins. it is considered a support tool and people do not have to worry about how to spend it properly.

with limited supply it does allow bitcoin to avoid disinflation, but not all are profitable. with its anonymity, more and more crimes will not be revealed in the world of cryptocurrency

A deflationary currency would imply that the supply is shrinking, which is simply not true.

The term you're looking for is disinflationary, which means that the supply is growing at a rate that is slowing down. And from a technical perspective, you will never see negative inflation with bitcoin (discounting lost coins).

Bitcoin has already proven that it will work as a decentralised currency, so I don't really get where you are coming from, if we take into consideration the sheer amount that has been settled over the network. I don't think that a disinflationary system is a disadvantage at all, in fact it's probably the polar opposite.

As long as there are speculators and exchanges that speculate on prices, I can say that no economy will work effectively.And it's not about inflation or deflation at all.

yes bitcoin is very volatile and bitcoin totaly not a way to fight deflation cause the value is not stable and not good for daily transactions, and i do think bitcoin is more like an asset rather than currency.

It really doesn't work as well as what people think. Inflation is required to motivate people to work harder, deflation should also occur when the economy is in recession. Of course, we should balance it and a stable economy is always what financial planners dream of.
Therefore, the world needs two types of market exist. 1 is the crypto market, 2 is the other types of financial markets.

Fiat currencies that receive support from the government are familiar to the public. and also this currency that is declared valid by the government for daily transactions. I think bitcoin is allowed to be an alternative payment besides Fiat, it has become a very good achievement

Even gold doesn't have that much of an impact on the global economy, and that while we're talking about an asset with a market cap of $8 trillion. I don't think Bitcoin will go further than gold in terms of usability.

People in well developed countries are mostly pretty keen on their local fiat currencies because they work exceptionally well. It's close to impossible to dent fiat's supremacy with how its offering more and more convenience.

Bitcoin offers less and less convenience because it just isn't useful as daily form of money, and it's getting more expensive to use year after year due to the increase in adoption.

Could you please explain in a few words how everything fits into place?

The point is, do you understand yourself how the deflationary currency works? If you do, then it won't take you much to explain how. On the other hand, if you don't, then how can you direct us to something which you basically don't have an idea about and thus don't know yourself whether it works or not? Deflationary currency can in fact work long term but only if its negative effects are offset by technological advances and progress. In any case, such an economy would be lagging behind a more robust, small inflation based one

Maybe it is true theoretically, but on practice Bitcoin is ridiculously far from affecting the global economy, and we'd need a high level of Bitcoin adoption to start observing such affects, probably something like 20% and more. Right now maybe 1-2% of global population uses Bitcoin, and they just use it from time to time, since it's nearly impossible to go 100% crypto right now. Right now there's no reason to worry about it, and there are other more important problems that need to be solved - removing supply is theoretically possible and can be done if enough people will support it.

Laissez Faire literally means allow to act, or, in other words, Let (people) do (as they choose) regarding market.



This is a very attractive theory, and I was its supporter for some time several years ago. The problem with it, though, is that it is incompatible with real life. Most people living in the cozy Western world, are unable to objectively assess the threat that comes from enemies of this (Western) world, and thus they don't want to pay taxes, big part of which, indeed, goes "on war". But the truth is that without the most modern weapons the Western world would not be able to fight its enemies effectively, and consequently would lose to some system no one would be happy about. ( By "no one" I mean people who love freedom and democracy. Of course dictators and their servants would be happy.) Same goes for deadly diseases, local gangs etc., we need taxation to fight all that. I think that market should be as free as possible, but we can not avoid taxation completely.

Yes, I understand that most part of our taxes is illegally distributed among the ruling elite, and something has to be done about that. But at the same time I realize that in the world we are living currently, no state would survive without taxation in the long run.

Regarding how deflationary currency can work, I posted earlier, that I don't think that inflation indeed encourages money spending, and think that deflationary currency can work perfectly in some economic model. So I agree with the Austrians in this regard.

Contrary to popular belief deflation is not really a sign of a good economy in fact its still has the same economic impact as big inflations have. Why? Deflation is a sign that demand is decreasing in that country yes you might be increasing the value of your money but its a sign of economic imbalance that leads to that. A sign of a good economy shows inflation typically around to bearable numbers like 3-6% which shows signs of a healthy economy. BTC as a main currency of a country won't show signs of deflation nor inflation at all since its price isn't even based on that country's economy in that first place.

The economy of any state will not be able to work on the basis of cryptocurrency at all. Cryptocurrency and the economy of any state are in no way connected with each other. Cryptocurrency exists by itself, and the state's economy works on the basis of its national money. Cryptocurrency is not able to become the main types of money in the state. She very quickly unbalances the economy of the state. Cryptocurrency and national money of the states can go to the state only together.

There is nothing "natural" about it, its induced, often by old fashioned money printing. Because of the reigning lies of the mainstream schools of economy, lately the Chicago one.

If you want to understand how deflationary currency can work, you have to drop those debit mongers and study the Austrian school. Then you will see how all fits into place.


Economics: The Austrian School vs. The Chicago School

I'm that economist and I don't know how to tackle this problem


It is not about inconvenience as such

You can easily create an economy based on gold without actually using physical gold as a means of exchange. In fact, this is how the gold standard worked in its last century with paper money being backed up by the precious metal. In other words, it is rather a technical matter. But what is not is the kind of the economy based on gold. Gold-based economies worked in the past because they had been mostly stuck in development with constant (more or less) population over literally centuries

This is why I said 'some', there are different definitions of what it is inflationary and deflationary and there are many like you that use it in that way and I am fine with it, if you use that criteria bitcoin is in fact deflationary and that is fine, I was just trying to bring another point of view in which inflation and deflation refers to the money supply and seen from that context bitcoin is still inflationary, even if in the future the rate of this growth in the money supply is very low.

If no real economists will join this discussion, it will definitely look more like an idle talk, I agree. But I hope they will sooner or later. And I agree that they have the right to discuss on their forums anything they want. Wasn't saying anything against it actually.

Regarding gold, I believe there were gold-based economies and they worked okay in the past, but currently using gold as currency would be incredibly inconvenient, and for this reason gold has been used as such less and less.

Actually, I don't mind people on economic forums discussing this matter

After all, it is their business what to discuss there and ain't ours, right? With that said, though, the matter is not just about Bitcoin as it is equally about any other hard asset out there. For example, gold would pretty well fit in as a deflationary (i.e. appreciating) currency. In other words, this topic is broader than it seems at first glance and definitely not limited or applicable to Bitcoin only (though Bitcoin would suit just fine as an illustrative example here)

On the other hand, here what we can discuss what we want including what changes humans need to be made to, even if purely hypothetically (let's call it speculative eugenics) in case we want such an economy to prosper in the long run as that will be entirely on topic and for this board exactly (Economics). But first we should decide on whether it will be a worthy discussion at all (other than idle talk)

I agree with you, we should be definitely taking into account what you said, while discussing whether it's possible to create an economy on a deflationary currency such as Bitcoin. No way I was thinking that it was an easy task. It can take years, but I think such a discussion must start at some point somewhere, and not on economy oriented forums where many people still have no idea what Bitcoin is, regarding it as a financial pyramid, but rather here, on bitcointalk, where, I'm sure, some good economists can take part in it.

But gold is not a currency, at least not anymore (or yet)

If we consider Bitcoin kind of digital gold, then the whole point in meaningless and there's essentially nothing to discuss because Bitcoin wouldn't be a currency either and thus cannot be "deflation-based currency", to begin with. In other words, it is assumed in this topic that Bitcoin is a currency and an appreciating one at that, i.e. constantly acquiring more and more purchasing power (though these two ideas seem to be a little at odds with each other)