Topic: Inflation and Deflation of Price and Money Supply - page 30. (Read 1475831 times)
If said "In inflationary system like we have today it's suggested that 2% inflation is "healthy" for the economy."
An area dedicated to discussing the differences of these two terms and the theories supporting them.
I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the forum, and thought it may be reasonable to dedicate a thread on the matter.
Pulled from a discussion in Wall Observer
Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.
Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.
So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.
Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!
Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.
Now that we've gone over PRICE Inflation and Deflation (which honestly, to me, is a term made popular by Keynesian's to hide the real facts, as price inflation/deflation is simply the market exchange rate, reflective of the money supply into a currency from itself and other currencies), let's go over the REAL inflation/deflation of a currency (otherwise known by many as Monetary Inflation).
MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.
MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.
When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.
This leads me to the last section.
What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.
What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.
What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).
What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.
Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.
We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of Bitcoin when simply multiplying the two factors; a sort of inflation-adjusted view of the currency.
Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.
Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...
Happy trading!
InvolvingI'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the forum, and thought it may be reasonable to dedicate a thread on the matter.
Pulled from a discussion in Wall Observer
Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.
Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.
So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.
Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!
Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.
Now that we've gone over PRICE Inflation and Deflation (which honestly, to me, is a term made popular by Keynesian's to hide the real facts, as price inflation/deflation is simply the market exchange rate, reflective of the money supply into a currency from itself and other currencies), let's go over the REAL inflation/deflation of a currency (otherwise known by many as Monetary Inflation).
MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.
MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.
When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.
This leads me to the last section.
What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.
What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.
What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).
What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.
Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.
We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of Bitcoin when simply multiplying the two factors; a sort of inflation-adjusted view of the currency.
Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.
Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...
Happy trading!
commodities in the same sense in economics as inflation is near the impossible.
Right now digital currencies are considered Commodities that's the easiest way
to consider it from now until at least another year from now. It's just going
to get really confusing if you try to manipulate that as a cash flow versus
inflation index.
An area dedicated to discussing the differences of these two terms and the theories supporting them.
I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the forum, and thought it may be reasonable to dedicate a thread on the matter.
Pulled from a discussion in Wall Observer
Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.
Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.
So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.
Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!
Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.
Now that we've gone over PRICE Inflation and Deflation (which honestly, to me, is a term made popular by Keynesian's to hide the real facts, as price inflation/deflation is simply the market exchange rate, reflective of the money supply into a currency from itself and other currencies), let's go over the REAL inflation/deflation of a currency (otherwise known by many as Monetary Inflation).
MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.
MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.
When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.
This leads me to the last section.
What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.
What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.
What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).
What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.
Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.
We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of Bitcoin when simply multiplying the two factors; a sort of inflation-adjusted view of the currency.
Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.
Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...
Happy trading!
I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the forum, and thought it may be reasonable to dedicate a thread on the matter.
Pulled from a discussion in Wall Observer
Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.
Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.
So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.
Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!
Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.
Now that we've gone over PRICE Inflation and Deflation (which honestly, to me, is a term made popular by Keynesian's to hide the real facts, as price inflation/deflation is simply the market exchange rate, reflective of the money supply into a currency from itself and other currencies), let's go over the REAL inflation/deflation of a currency (otherwise known by many as Monetary Inflation).
MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.
MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.
When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.
This leads me to the last section.
What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.
What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.
What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).
What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.
Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.
We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of Bitcoin when simply multiplying the two factors; a sort of inflation-adjusted view of the currency.
Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.
Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...
Happy trading!
nice seem to be right and meaningful also helpful for me as a newbie to cryptocurrency :-)
Дa пpocтo cкopocть pocтa биткa cлeгкa пyгaeт
И чтo бы тaм кeйcиaнцы нe гoвopили зoлoтo этo дeньги a битoк вpoдe кaк нeт
И чтo бы тaм кeйcиaнцы нe гoвopили зoлoтo этo дeньги a битoк вpoдe кaк нeт
Which is potentially the most profitable altcoin in your opinion? Could be that investing in them is a more profitable strategy than mining? Sure, owning mining rigs, you can switch to mining another alts if one of them fails, but the difficulty rises quite fast on all of them, and hardware becomes obsolete in a matter of months. On other hand, investing in a basket of alts, rather than in mining equipment can prove more profitable and trouble free (as there won't be no hassle with installing and setting it).
EMD looks like it will run out fast, only 31 mil coins
Other coins are easier to pump and dump when they are mined..
You can mine other coins and change it to EMD .... peak EMD - peak inflation
Oooh Yay! Let us all be like Plato and fake that words and phrases have objective meanings so we can argue about them without having ever acquiring anywhere!There are lots of people brainwashed or dishonest ample to misuse conditions in a way that makes it hard to comprehend issues. An argument of what the terms indicate only implies that you are a slave to an utterance employing these words, and so you should get others to use them the way you comprehend them. That looks variety of foolish and pointless (and cultish and spiritual and educational). What they mean is crucial if you want to comprehend a claim created making use of them, but whoever manufactured the assert can just substitute them with other phrases that are simpler (and often far more numerous).
Good post.
Rising prices and price reductions, yes that is what happens when the sale value of a good thing rises or falls, but it will always happen when the price of an item decreases then the price of other goods will rise, it happens not without reason because from time to time trend Everyone is different, whether it is economic factors, clothing, vehicles, electronics and others.
Therefore inflation and deflation will continue to occur from year to year.
So that determines the bitcoin price, may be true as you say because of the increase and decrease in the price of goods.
Rising prices and price reductions, yes that is what happens when the sale value of a good thing rises or falls, but it will always happen when the price of an item decreases then the price of other goods will rise, it happens not without reason because from time to time trend Everyone is different, whether it is economic factors, clothing, vehicles, electronics and others.
Therefore inflation and deflation will continue to occur from year to year.
So that determines the bitcoin price, may be true as you say because of the increase and decrease in the price of goods.
This rise up and go down are already a traditional process. In trading when the supply is low then in demand the price of that supply will rise up but if the supply are very high then in low demand the price will going down naturally. These supply and demand system chain are mostly common in trading in which hoarding technique is commonly applied to all goods in the market and now is being applied to bitcoin. Thats the fact in trading
A coin with 0% inflation generates a problem: the total amount of product in the society is increasing, but there are no enough coins to "match" them. As currency gets more valuable, people will hoard it instead of investing, things will get problematic.
The rate at which bitcoin rises and falls is one of a kind and that has been bothering me for sometime. Bitcoin could lose up to $300 of its value in just a day and it can also gain more than that in a day.
I'm wondering how alt-coins with unlimited token issuance mechanisms factor into the overall macroeconomic equation. Wouldn't they be essentially the same as central banks, controlling the inflation rates and issuance of the currency?
Good post.
Rising prices and price reductions, yes that is what happens when the sale value of a good thing rises or falls, but it will always happen when the price of an item decreases then the price of other goods will rise, it happens not without reason because from time to time trend Everyone is different, whether it is economic factors, clothing, vehicles, electronics and others.
Therefore inflation and deflation will continue to occur from year to year.
So that determines the bitcoin price, may be true as you say because of the increase and decrease in the price of goods.
Rising prices and price reductions, yes that is what happens when the sale value of a good thing rises or falls, but it will always happen when the price of an item decreases then the price of other goods will rise, it happens not without reason because from time to time trend Everyone is different, whether it is economic factors, clothing, vehicles, electronics and others.
Therefore inflation and deflation will continue to occur from year to year.
So that determines the bitcoin price, may be true as you say because of the increase and decrease in the price of goods.
Well imo OmiseGo for the win.
A very interesting case does not exist other than this, it will not fully represent the current monetary system (fiat). By carefully observing the system, you may change the system as directed.
Which is potentially the most profitable altcoin in your opinion? Could be that investing in them is a more profitable strategy than mining? Sure, owning mining rigs, you can switch to mining another alts if one of them fails, but the difficulty rises quite fast on all of them, and hardware becomes obsolete in a matter of months. On other hand, investing in a basket of alts, rather than in mining equipment can prove more profitable and trouble free (as there won't be no hassle with installing and setting it).
i`m also considering litecoin since bitcoins difficulty will skyrocket, hence some people will move to litecoin and therefor increasing its value
I agree to you, bitcoins difficulty will surely increase due to demand rate increasing as well therefore other coins that has lower value will soon have an increase in demand therefore increasing it's value .
i`m also considering litecoin since bitcoins difficulty will skyrocket, hence some people will move to litecoin and therefor increasing its value
I agree to you, bitcoins difficulty will surely increase due to demand rate increasing as well therefore other coins that has lower value will soon have an increase in demand therefore increasing it's value . 
When comparing BTC to a traditional fiat currency, one should take the following into account:
This in of itself implies that the production and/or the increasing of decimal places will always have to outpace the attrition of BTC.
This can be seen with rising rates for transaction fees, and the progressive scale in the size of the blockchain itself.
It is natural for transactions to be forgotten over time. Unfortunately, without a way of determining lost coins from saved coins, you can't prune the blockchain if even a way was developed to do so and maintain the cryptographic chain with confirmations.
If compared to a traditional currency, the Dollar, imagine if the first dollar ever created requires a ledger from every transaction that ever was done with it. The ledger would be very large indeed when multiplied by all dollars and their ledgers. If a dollar is out of circulation, one can assume it to be lost and print another without the need to verify it as lost or saved (under a mattress). If the dollar re-enters circulation in the future, you can decrease the supply to adjust properly for the new found forgotten dollar.
In Bitcoin, all "lost" coins must be assumed to be "saved" coins.
So when students, enthusiasts try to apply current tradition metrics to bitcoin, try to make a calculation that represents the differences. There is a difference and the same models won't apply.
How can you solve? Well, you do it the same way countries replace their currencies. After a period of time, you put out notice that BTC will transfer to BTC version2, and you need to transfer you money over or the old ones left behind will be useless.
The EU is the most recent example of this occurring when they switched to the Euro. French Francs, Italian Lire, etc... all switched to the Euro. Some believe they will be switching back. That will be interesting to watch.
The Bitcoin Central Bank:
Well this is gray. The -core-dev would be the Board, the Miners would be the Reserve Banks controlling flow with 'fees'. It's gray, because if they all went away tomorrow, bitcoin could still work. The Dollar couldn't. Problem is that most end users would just drop out of the market.
Transaction Fees are a form of control, and Time is the punishment for not paying fees. There is a basic cost to fees tho, the actual cost of mining, but there also has to be a profit in mining too. So they have to take the Basic Cost + Profit Margin = Transaction Fee. Collusion can lead to hefty fees.
I'm not saying that collusion is occurring but that it can occur and if done correctly no one would ever know.
- Fiat Currency has attrition due to lost currency but that attrition is simple to rectify because you can just print more to replace it.
BTC, also, has attrition but those lost coins can't be replaced and must be dragged around by the entire chain for ∞.
This in of itself implies that the production and/or the increasing of decimal places will always have to outpace the attrition of BTC.
- Fiat Currency has no block chain bloat and no progressive cost of production of currency.
BTC gets harder and harder to drag around with time. The cost of production is on a progressive scale. (cost more over time)
This can be seen with rising rates for transaction fees, and the progressive scale in the size of the blockchain itself.
It is natural for transactions to be forgotten over time. Unfortunately, without a way of determining lost coins from saved coins, you can't prune the blockchain if even a way was developed to do so and maintain the cryptographic chain with confirmations.
If compared to a traditional currency, the Dollar, imagine if the first dollar ever created requires a ledger from every transaction that ever was done with it. The ledger would be very large indeed when multiplied by all dollars and their ledgers. If a dollar is out of circulation, one can assume it to be lost and print another without the need to verify it as lost or saved (under a mattress). If the dollar re-enters circulation in the future, you can decrease the supply to adjust properly for the new found forgotten dollar.
In Bitcoin, all "lost" coins must be assumed to be "saved" coins.
So when students, enthusiasts try to apply current tradition metrics to bitcoin, try to make a calculation that represents the differences. There is a difference and the same models won't apply.
How can you solve? Well, you do it the same way countries replace their currencies. After a period of time, you put out notice that BTC will transfer to BTC version2, and you need to transfer you money over or the old ones left behind will be useless.
The EU is the most recent example of this occurring when they switched to the Euro. French Francs, Italian Lire, etc... all switched to the Euro. Some believe they will be switching back. That will be interesting to watch.
The Bitcoin Central Bank:
Well this is gray. The -core-dev would be the Board, the Miners would be the Reserve Banks controlling flow with 'fees'. It's gray, because if they all went away tomorrow, bitcoin could still work. The Dollar couldn't. Problem is that most end users would just drop out of the market.
Transaction Fees are a form of control, and Time is the punishment for not paying fees. There is a basic cost to fees tho, the actual cost of mining, but there also has to be a profit in mining too. So they have to take the Basic Cost + Profit Margin = Transaction Fee. Collusion can lead to hefty fees.
I'm not saying that collusion is occurring but that it can occur and if done correctly no one would ever know.
The concept of pre-inflation and deflation of price and money supply + DEMAND is very applicable to bitcoin (BTC) since it is under one economic policy and the money is still involved. It is somewhat reliable if you understand the paradigm is to be aware of whats happening in the bitcoin system.
One dynamic which is well-known but often remains unnoticed in the academic environment is that fiat currencies are inherently depreciative due to their debt-nature (they can appreciate or depreciate one against the other, but are bound to lose value altogether against real assets).
In a hypothetical world with constant demand, Bitcoin would also be depreciative until reaching the asymptotic number of 21 million. However, unlike fiat currencies, it would not be inherently depreciative thereafter.
In the real world, as demand for Bitcoin is variable, its value would:
a) Increase, if demand increased more than supply
b) Remain stable, if demand increased at the same rate as supply
c) Decrease, if demand was less than supply
Supply includes both existing and newly-minted coins offered to the market. Current saving rates on existing coins are relatively high and new bitcoins are minted at a rate of just 4% per year. Therefore supply is relatively low.
Demand is however significantly higher, which explains Bitcoin appreciation and the consequent deflationary trend.
In a hypothetical world with constant demand, Bitcoin would also be depreciative until reaching the asymptotic number of 21 million. However, unlike fiat currencies, it would not be inherently depreciative thereafter.
In the real world, as demand for Bitcoin is variable, its value would:
a) Increase, if demand increased more than supply
b) Remain stable, if demand increased at the same rate as supply
c) Decrease, if demand was less than supply
Supply includes both existing and newly-minted coins offered to the market. Current saving rates on existing coins are relatively high and new bitcoins are minted at a rate of just 4% per year. Therefore supply is relatively low.
Demand is however significantly higher, which explains Bitcoin appreciation and the consequent deflationary trend.
Digital Currency Exchange Rates and the Law of One Price
http://www.swiftcointalk.org/swiftcoin-discussion/digital-currency-exchange-rates-and-the-law-of-one-price/
white paper
http://www.swiftcointalk.org/swiftcoin-discussion/digital-currency-exchange-rates-and-the-law-of-one-price/
white paper
Does this things strongly depicts the state or status of the economy of a certain country? If it is significant change why do it have to go along with what you said deflection. Can't it go as perfect as it should. In the case of bitcoin which area does it apply? Is it what you said 'inflection' or 'deflection'?
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