Topic: Deflation based currency such as Bitcoin to counter promote economy. (Read 12611 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)

I think what people are mistaking is bitcoin doesn't have to be "currency" by itself, bitcoin could be like gold that supplements the economy but has the advantage of being used for purchases as well. I mean being able to purchase something with bitcoin doesn't have to be the main selling point for bitcoin, it is a great thing to have and I am glad we are capable of doing it specially online however it doesn't have to be the main topic.

Bitcoin could have that option but still could be like gold where people who have excess money that they saved over the years invest into bitcoin and wait for it to mature, you do not look at gold prices every single day unless you are some sort of margin day trader, any normal citizen in the world will look at it only when they need to cash out and bitcoin could be perfect for that.

Deflation of a currency is also not good for an economy and it can't be used as payment method as well.For that we have to get something stable price range for bitcoin and most of the people hoping that it will happen when most people adopted crypto currency as type of payment.

But that's the problem

As it pretty much means there's is nothing to discuss in that case because any discussion in that direction assumes that some deep changes in the human nature have already occurred. But that implies we should first define these changes, i.e. what a fresh human should look like, metaphorically speaking, for the new laws of economics not to fall to pieces and be "compatible with life". Put simple, we should define that life (and its life forms). Otherwise, we will be talking about "economic communism"


That was just an example

And while we are at it, he was not alone back then and he was definitely not the last one at that. The fundamental laws of quantum mechanics (e.g. Heisenberg's uncertainty principle) were discovered some time after "Albert Einstein had proposed such a law"

I guess the question is not actually "will it work", its more like "what will it become". After all we can see how it could actually work, it works right now, we have over 200 billion dollars in marketcap, that is more than some of the smallest countries stock markets combined, which means bitcoin actually works. The question should be will bitcoin ever be used daily for regular stuff since it has a deflation based system.

Considering you can actually buy something for small but then bitcoin goes up so that payment you just made became a lot larger whereas a 10 thousand dollar worth of house 50 years ago worth over a million today. That is why I think bitcoin will replace stock markets and forex and stuff like that for regular people but it will have a huge problem with regular daily stuff payments.

It wasn't my intention to go off-topic, and I'm sorry that I didn't explain what I meant more precisely. By "happy" I meant economically happy. There are more happy people in North Korea than in Switzerland, in percentage terms, but that zombie-happiness has nothing to do with the economical one. People are starving in North Korea, and they are definitely not economically happy. Since we are in the Economy section, let's talk in economic terms only.



Yet, Albert Einstein proposed such a law, and it has been working until today. If you would tell physicists in the end of 19th century that time is dependent on speed and on the distance from a heavy object, they'd call you crazy ... But, sorry, I'm going off topic again.

My main point is that I think maybe there can be a working economic model of Bitcoin-based economy, a new economic system for which inflation is not a mandatory component.

Personally, I keep to the same convention

But whenever possible (which is almost always) I myself use the term appreciating (depreciating) currency if i want to make it cleat that I refer to the deflation (inflation) of prices. Like I said, I have no grudge against anyone using the terms in respect to changes in prices but when I first tried to use the terms inflation and deflation in this context specifically (i.e. in respect to purchasing power of a currency), I was surprised that some people were hellbent on proving that deflation as well as inflation is related only to the money supply (as in shrinking or expanding)

Who said deflation refers to decrease in supply? The concept of inflation/deflation is not proportional to supply rather it is related to price.
You can't say Bitcoin is inflationary because new bitcoins are mined everyday. When you compare the rise in demand of Bitcoin with rise in supply, you will notice that demand is rising at much more rate than supply. This is what causing surge in Bitcoin prices. Thus, the value of other commodities in terms of Bitcoin is decreasing as the demand is rising and new supply is shrinking with every halvening. This makes the Bitcoin deflationary.

Some define deflation as the decrease in the money supply and each day more bitcoin is being mined so this is not accurate, what happens is that eventually the rate at which bitcoin is being mined will be very small compared to the available supply but it will still count as inflation, now if what you are talking about is the amount of bitcoin lost, the truth is that those coins are not lost forever since someone could generate the private key in the future by accident and they could move and use those coins as they please, this is unlikely but there is a very small chance of that happening.

Most likely, it will be "incompatible with life"

And then someone will start blaming its failure on life itself. The point is, we can't do anything economically to change the current state conceptually. It is like trying to discover a new physical law in the nature, which is highly unlikely in this Universe. So our only choice is to change humans themselves (or wait for that to come about naturally). But that would have more to do with eugenics rather than economics (read, not everyone will be happy). Otherwise, it may take long years, actually many thousands if not millions of years (unless we stick with some form of eugenics after all)

Again, you are talking in terms of a system that has been working for more than 200 years, and I personally can't propose anything better, I'm not that smart, but I think maybe someone can. Or, we can do it together by proposing and discussing various ideas.

What do you think, for example, of a society where people are encouraged to think more of today that of tomorrow? I agree that all the people can't (and shouldn't) live like that, but maybe for the vast majority this model can be a good choice. And by "encouraged" I don't mean giving them loans, basically making slaves out of them, that's what we have today. It should be something else, something that makes people happy with their lives right now without overspending.



Communism doesn't work exactly because of that. But we are what we are. Isn't it ridiculous to invent a system that is incompatible with life and then blame it on life?

In simple terms, you can't run an economy on an appreciating currency

Well, technically, if the economy is quickly expanding economy, e.g. due to a major shift in technology (like free unlimited energy for all), its expansion can somewhat offset the burden of an appreciating currency that it puts on producers and their profit margins (read, these margins are so high that they can compensate for the negative effect of deflation). But it won't last forever and ultimately deflation will start to eat away at producers' profits and that will send the economy into the death spiral of first stagnation and then depression


It all comes down to people and their flaws

It does work in a sense that its a great investment opportunity. When you have a currency that promotes holding and waiting out that becomes an investment, if you are going to make a currency that you want people to invest then what bitcoin is doing is great and that is why I definitely prefer this over investing into banks or investing into stocks and so forth.

Nevertheless, when it comes to using bitcoin for daily stuff it is making a bit of a challenge, why would you want to spend something that will get bigger in price ? The thing you bought for 100 bucks right now could worth 200 bucks tomorrow with the bitcoin you paid, so you are going to consider how if you paid with fiat only 100 bucks will be gone but your 200 bucks worth of bitcoin is gone now which makes it harder for mass adoption since people prefer to keep it.

It is not destroying bitcoin at all since its still a viable investment option but its creating issues for daily use for sure.

I understand your point. Almost every economist from the old school would agree with you. And by "old school" I don't mean something that is from the past. I understand that those are the economists that are in charge right now. I just think that maybe here, on bitcointalk, we can come up with an idea of a new economic system for which inflation will not be a mandatory component. I know it may seem too ambitious, but we can try at least.

I personally think that current capitalist economy is the best one around. But I also agree with people who say that it is falling apart, and that something new have to be implemented in the nearest future.

But the question is not about Bitcoin as such

It is assumed (at least so I think) that a currency is constantly appreciating in value, which is a safe assumption if the supply is limited and tapers off eventually. Indeed, Bitcoin, with its wild price fluctuations, is far from such a currency but you can take gold as another, more solid example. People are hoarding gold, and if it was used as a currency today as it had been a few hundred years ago, it would cut pretty close to that. They would hoard it even more, though it would likely mean an imminent collapse of the whole economy in less than no time

Deflation? Means it is not increasing? Correct me if I'm wrong dude but Bitcoin has bot inflation and deflation aspects because any given moment it will grow and decrease regarding on how people use it's technology. Anyways, government will not be depending on a volatile currency to gamble for it's economic growth.

But this is not what happens in reality. Bitcoin was $19k in December 2017 and has been basically going down since until recently. It's not daily fluctuations, which we could ignore, we are talking about years here. Same behavior patterns happened before and will be happening in the future, as we all know. There is no such thing as "people can buy more with less tomorrow" regarding Bitcoin on a yearly basis, let alone on a daily one.

I'm not saying I know how can economy work with Bitcoin as a single currency, but what I know is that "You can buy with 1 USD tomorrow less than you can buy with it today" and "You can 1 BTC tomorrow more than you can buy with it today" are false assumptions on a daily basis.

I would like to say more about USD and its incentivising power, so to speak. Average inflation rate of USD is about 2% per year. How many of us would buy all the rice we would probably need in 2020 today, in order to pay for 1 kg $3.80 today instead of paying $3.88 in 2020?

Does this not sound as a contradiction where you have said bitcoin is a deflated currency and we understand that a country will hardly work with a deflated currency because it will fall the standard of living, goods, commodities and services will be high. It is clear it won't work.

They would better create another than choose one like bitcoin even if it is already the best option out there.

Pride? No. It is the control that they want. How could they manipulate everything if they cannot even have the upperhand.
We say bitcoin is already being manipulated but no. As long as you dont have the the mainframe there will always be a chance for others to take part.

History already speaks for itself. They used gold cause they can control it and created fiat for the same purpose.

The economy of any state can work effectively only on the basis of its national money. However, no economy will be able to function if only decentralized cryptocurrency is allowed in the state. Such a cryptocurrency in a short time will quickly unbalance the economy of any state. Cryptocurrency can and should go in society only along with the national currencies of the states. Using only cryptocurrency will not destroy the economy, but will affect it very negatively.

The fact is the deflation based Currency as you would say doesn't govern major stocks in the market and at the same time it doesn't actually doesn't work as Integrated with the government as you think , if deflation was the enemy then the entire stock market should be wiped out along with other things who are considered investments and go down in price.
This deflation based Currency is actually something that had proven experts wrong and given more profit that it could ever would.
Therefore I won't ever doubt it's potential.
It's very essential for our current generation, it's true that we cannot entirely give the entire power of money to Bitcoins and others since they are unstable ,but we cannot even separate it from them.

I agree. therefore to enjoy the results of bitcoin we must become members and take advantage of opportunities well. many of the bitcoiners have set up businesses like their dreams, so they help economic rotation in a country

As you said, deflation based currencies such as bitcoin will only benefit to holders only. for the economy it could have a bad effect, when the amount of money is limited and many people actually hold their bitcoin in the hope that prices will rise, of course will make the price of goods cheaper and lower? of course it will slow down the economy

I don't think Bitcoin is a deflation based currency because you need negative inflation to be called deflation. Bitcoin is a non-debased currency with ~21 million supply. I think it would work since it promotes price stability and economic certainty, similar to the gold-standard era.

But Venezuela is already considering cryptocurrency as part of the solution to their recent crisis, they might not have implemented it but I am sure they are dare considering it and if they do agree to use it, then it will solve at least part of the inflation problem.

We don’t expect it to fully solve all the economic crisis of the world and that is why bitcoin was never even created to fully stand alone, there is a clause in the document that satoshi releases for the use of bitcoin, which states that it is to be used as an alternative but never stated that it will replace any FIAT, so why do we create some issue for cryptocurrency where there is none.

Actually inflation is needed to make industries gain more profit. When the inflation is big the the industries will get big profit too but the problem is the value of the money. Inflation makes the value of fiat decrease. Bitcoin deflation will makes industries gain lower profit every years but the value of bitcoin is increase. Actually both are inapropriate for the world economy although bitcoin is better because the long time holders of bitcoin will gain a lot of profit. The best currency is gold, it is good for the world economy buy it is not practical to use. Maybe combination between gold and bitcoin is good.

That's not really true. Eventually it will be deflationary, but right now Bitcoin's money supply is still subject to steep inflation. It's still 3-4% annual at the moment. A lot of people assume Bitcoin's price movements are based on deflation but really it's inflationary, and the market is just speculating about future utility.


That's difficult to answer. It's been done with gold and gold-backed currencies, but never a commodity with a predictable and hard scarcity like Bitcoin. Until we see how it plays out in real life, this will always devolve into the classic Austrian vs. Keynesian debate.

I think no, the countries still need to have their own currency even if is inflation they will still use the coins because they can control and create any time how much they need.

Sorry, but it doesn't work like that

When people can buy more with less tomorrow, the hoarding will in fact be encouraged since how otherwise can you encourage it if by not increasing the purchasing power of a currency? It is easy money. Indeed, people will have to spend something to provide for simple sustenance but it is the aggregate demand that counts in the end, which is going down when a currency appreciates. On the other hand, inflation incentivizes people to spend money as soon as they receive it to avoid losing its purchasing power

I think the deflationary nature of bitcoin won't matter too much if price move up gradually rather than quickly.
spending could even be incentivized, made attractive or made difficult to avoid.
The deflation should remain. It is very important part of bitcoin.

It will inevitably lead to disaster and ultimately to havoc and chaos

Though the term itself (a deflation-based currency) is not quite correct, i.e. a currency which has a limited supply is not necessarily deflationary since it may still be inflationary in terms of prices and exchange rates (as this is what OP obviously refers to in his post). The correct terms are appreciating currency and depreciating one. Fiats are typically depreciating, i.e. their purchasing power diminishes over time. On the other hand, appreciating currencies (e.g. gold when it was used as money) typically increase their purchasing power as the supply of money tokens or assets backing up a currency pegged to that asset is limited or scarce

It is. The supply is still increasing and it won't turn deflationary till the next century, by which time we'll all be dead!

It'll be hard to be completely reliant on a fully-deflationary currency such that there will not be a way to stimulate the economy and control the flow of cash in the event of a financial crisis. On paper, deflationary currencies seem to be "perfect" in storing value, but currencies are meant to be spent and not hoarded; it needs to go around in order to be useful. In a society where everyone is holding and very few is spending, how can one ensure the stability of the domestic economy?

Bitcoin's yearly inflation is right now %3.78. Source:
https://www.bitcoinblockhalf.com/

Next year it will be as low as %1.80

Right now bitcoin isn't a complete deflationary currency but we will get very close in 2028. (%0.45)

Everything will go nuts after 2024 imho. ($1m+/coin) Most of us probably will cash out in the next pump when it hits $50k-100k so I don't really expect many people holding a full coin by 2024, only the smartest and the youngest ones.

A deflation based currency like bitcoin would be superior in terms of promoting long term economic stability and value. The main reason fiat currencies are heavily promoted involves the vast majority of financial markets focusing on short term profit to the exclusion of long term perspectives. We've seen proposals for publicly traded corporations to shift from 3 month reporting cycles to 6 month terms to encourage a greater emphasis on long game strategy.

Investment banking, hedge funds, HFT trading, derivatives and many modern investment vehicles are built around utilizing short term leverage in an effort to maximize gains. The necessity of short term focus meshes well with inflationary currencies which carry a variable supply. This format of short term investment however clashes and is more difficult to integrate with deflationary currencies like bitcoin, which constitutes the main motivation for negative outlooks regarding them.

Current inflation rates are subject to debate. There has been some effort made to redefine how inflation is calculated. The official numbers cited linger in the 2% to 3% range. However utilizing older methods of calculating inflation its easy to end up with a number far closer to 10%. Inflation is similar to unemployment in this way, in terms of the number typically cited by the media perhaps not representing the best or most accurate statistic a person would expect when discussing topics like inflation.

No. And for some reason many people around this forum are unable to understand this.
Inflation don't realy boost spending, it boost export of the country. So it is much easier to buy different things in another country when their money are cheaper than yours. For example China artificialy inflate their currency to boost their export and Germany forcrd EU to create Euro in order to deflate getman mark and boost their export.
This is not about that case.
Without any extra barriers people would always buy the cheapest product. There is no way to provide a high demand on expensive goods that could be easily bought somewhere else much cheaper. Especially when those things are happening on the global international level.

The problem with your question is that it assumes there can only be one currency. I think a deflationary currency can work in conjunction with an inflationary one: the first to promote savings and the second to promote spending. There is room for cryptocurrencies and fiat currencies to coexist.

The thing with bitcoin is it is a currency that is not being wildly used in different fields, not like the fiat where there needs to money in trading banking markets shops ect, meaning that money needs to be available when people need it, because they can't just go an print money while the demand increases, and when the demand on bitcoin increases the amount of bitcoin produced increases at a slow rate that does not make it able to keep to wheel turning if used in real economic.

A simple answer is that, it won't work

It could technically work in a simple economy like those of the Middle Ages (and before) but with complex economies which came about after the Industrial Revolution (the second half of the 18th century and even more so from the beginning of the 19th), a deflating currency (more correct, an appreciating currency) will be constantly creating imbalances in the economy (by discouraging producers from production in different fields), so instead of facilitating economic growth it will be impeding it


In more mundane terms, people will be hoarding money instead of spending it

No it won't work. The economy works on the concept of 'scarcity' i.e. limited resources. Hence, the resources which are relatively scarce are more expensive than others. The value of the resources are measured in terms of Fiat currencies which are inflationary in nature. The basic reason why currencies are inflationary is due to the concept of Marginal Utility. In economics, we consider the MU of currencies to be constant because of the unlimited supply of money. That's the reason inflation exists.
Now consider a situation where currencies are substituted with Bitcoin. Now Bitcoin has limited supply hence we cannot take the MU of Bitcoin to be constant. Every unit of Bitcoin spent will make the remaining units of Bitcoin more dearer to the holder. When both the resource and the currency become more affectionate with reducing supply, it will become impossible to conduct economic transactions after one point of time. So it is theoretically impossible for deflationary currencies like Bitcoin to become mainstream currency.

It would work but there is no government that would make Bitcoin as their based currency.
We have 21 Million Bitcoin as a max supply and 1 Bitcoin could be divided into small unit called Sats so even if the Max supply has been mined we wouldn't have a problem.

I am not an economist, but I think that will need to test it first, so we will know what the result is.
There will be a trial and error before one system integrates with the other and that will need time to see how good is the result.
And that will depend on the government; maybe we will hear something from them.
And if everything can run properly, then maybe that thing will work with bitcoin.

In my view, since we are living in a very diversified world even if there will be massive adoption of Bitcoin it does not mean that it will be used as the exclusive medium of commerce and domestic and international commerce. Bitcoin then can be a very good and very attractive choice but there will be no monopoly as that can be detrimental to any economy. Bitcoin is not coming to the global choice to limit the choices of the people. Right now, there are still limitations that Bitcoin is facing  though it is evolving.

Seems this situation is a bit illusory. A deflationary economy would make goods cheaper even more, but at same time, your salary, your income would decrease as well, thanks to this deflation. It would worth to save money in an economy like that more than in ours, but if many people aim this, it would hurt the economy anyway, as the money needs to keep circulating, like our blood in our bodies to keep us alive.

As if the government would accept bitcoin to replace fiat just to avoid inflation. Bitcoin will never be a solution for i flation, if so, this would've solved the hyper inflation Venezuela had faced.

Isn't Bitcoin being mined everyday? I thought this was some kind of controlled inflation. We believe that no one's will change the cap limit. But it is still possible that a government fork Bitcoin and change this limit.

More you print money more the currency decrease. 20 years ago with $1 you could buy a coca-cola bottle, today you can't even buy a stamp.
With Bitcoin, it does the opposite, because more time goes and fewer bitcoins to mine there are.

Keynesian Vs. Austrian Economics
http://multi-act.com/austrian-school-of-economics-vs-keynesian-economics/
https://fee.org/articles/it-s-not-just-keynesians-vs-austrians/

I don't think it's that simple. The general presupposition making deflation bad is based on perfectly rational behaviour of customers. However, as we know, people are not the rational creatures economists want them to be. If one wants to buy something today, it's not likely one will wait a month to do that. Moreover, other factors should be considered. Here's an interesting article, reconsidering deflation: https://www.investopedia.com/articles/markets/111715/can-deflation-be-good.asp.

In my opinion, If Bitcoin reach a specific prices while it can only be divided by 8 decimals then it will have a little problem as a form of payment. Perhaps, Bitcoin can be just an assets to hold and can't be a form of payment anymore for a little amount of transactions. Of course this deflation model could works but only until it reach the limit. When the limit comes, there must be an upgrade from community so Bitcoin could fit again in society.

No government would completely depend on BTC as their primary source of payment since that would be a foolish choice here. BTC is still an extremely volatile currency due to which it is highly unstable and many basically view it as an asset primarily.

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.
Bitcoins are created less and less and the number of users does not affect the quantity of creation of Bitcoins.

Inflation on a low level promotes spending while deflation in Bitcoin promotes holding...

My question is, would an economy with a deflation based currency such as Bitcoin work?