Topic: Is crytocurrency hyperinflationary? (Read 5255 times)

For most of the people, it will not really matter. The definition of money is pure rhetoric. But the whole point of bitcoin is to be used mostly online. Is there system that already exist to pay online? Yes: credit card, paypal, wire transfers. Are those system easy to use? More or less, at least there are quite easy for the sender. Do they guarantee who is the receiver, do they allow you to send messages with your payment? Yes. Wire transfer allows you to do that, paypal allows you to do that.


In the online world, a money doesn't exist without a nice "transfer system" on top of it. The dollars or the euro doesn't have such system so some private companies built their own and are now competing against each other.

Bitcoin, as a money, have a basic built-in system. That's really nice but if you want the people to use bitcoin instead of dollar+paypal or euro+IBAN, you have to provide at least the same level of features.

History shown with Linux/XMPP/Firefox that people are not sensible to new features (as astonishing as they could be) as long as they don't have the same features they had in the old system.

Ok, let's say you have bitcoins OR dollars,
how would you decide to keep bitcoins and better dump dollars then?

you could also keep your dollars and better NOT get that new computer today, you will get that same computer much cheaper next year,
but that's not what you do, because you want/need that computer now and not in a year.

point is, you can only hoard money, if you don't need to spend it.

there are some alternative blockchains already for different purposes,
some used as game-currencies (i heard of MartianBotCoins, whatever that is), some as domain-currencies (namecoin), some as test-currencies,
feel free to create anotherone. 

Do U.S. dollars or gold provide a way to trust the receiver is who they say they are, identify yourself as the sender, or add an arbitrary message?

I would say no to all of the above, in which case, why does Bitcoin the currency need to have those features?

That's, IMHO, one of the weakest point of Bitcoin. It's really hard to use.

People usually want to send money to someone/some organization and:

- Trust it's the good person
- Be identified as the sender
- Add a message (like "Happy Birthday from your grandma")


Bitcoin does not provide that and, IMHO, it will be a critical step to make bitcoin acceptance easier.

Could we do it on top of bitcoin. Yes, I believe. But it means designing a *protocol* on top of bitcoin. The transport could be XMPP or HTTP, I've wrote some ideas about it there: http://ploum.net/post/building-your-web-identity

I wish someone would start a new blockchain just to test this. We'll see if anyone uses it.

No, since the clone wouldn't be the same as the real bitcoin if it is at all different (say it has the 21b coin limit you suggested). If it is the same, you're using bitcoins!

No matter how you argue it, you're still wrong. Bitcoin will not be hyperinflationary. Period.

It's bad if there are no differences between them.  Competition is good (although bad if you hold a lot of Bitcoins, perhaps).  But the big draw is there are only 21M Bitcoins that will ever exist.  If that number changed to 21B, that would be awful.  Having a clone that could exist with the same features essentially doubles that number.

Sure maybe one would win out, and maybe both would live, but it's a threat.

I think competition is good. There may be be an possibly unlimited number of cryptocurrencies but how many are actually going to be widely used? The incentive for people to flock to new currencies is small as long as Bitcoin is doing what people want it to do.

Right - my assertion is that there doesn't need to be someone actively advertising bitcoin as soon as businesses start to accept it - the businesses will advertise it themselves, given that it is a better currency, and people will hear about it more. Especially with the little bitcoin accepted here stickers. So it will be advertised, but there doesn't need to be a campaign. Let it creep over people.

And there is something that makes Bitcoin unique, and something that you still aren't getting. There is an economy behind bitcoins. There is significant hashing power backing up the blockchain. It also has mindshare and people would likely not be willing to change from bitcoin to something else unless there is a significant reason to. Which there might be, I'm not denying, but we haven't even seen a competing CC, unless you count namecoins but those are different.

So yes, there are unique things to bitcoin, so you're wrong on that count.

Advertising will handle itself - wrong there, and I'd appreciate it if you thought things through a bit more before insulting me.

Which by the way, I still don't get your reference to the Kool-Aid. Either you're using it wrong or I'm just misinterpreting it - there's nothing I'm accepting here that doesn't have a logical basis.

It's been explained already.  There is nothing that makes Bitcoin unique among cryptocurrencies.

You are claiming "it doesn't matter about advertising" as well.  You couldn't be more wrong.  Without advertising, no one would be here.

I obviously know the reference, but not what you're referencing specifically. As shown, the folks who believe that bitcoin can hyperinflate are simply wrong. Until you can come up with a good reason for bitcoins to hyperinflate, then you are beating a dead horse.

Drink Kool-Aid much?

Yes. If someone could print more Bitcoins, Bitcoins would lose value and be "dumped". But your point was that "The supply of alternative, competing cryptocurrencies is unlimited. Very bad."

Your argument appears to me that infinite competition with an unlimited number of currencies will water down Bitcoin. But as my example illustrates, the supply of other unused cryptocurrencies has no effect on Bitcoin. Only usage of other currencies affects it. And usage is decidedly limited - neither unlimited nor infinite. Usage does not appear in a vacuum, it only comes about due to a new currency being better in some circumstances. And the amount of 'betterness' available to exploit for new currencies is, again, anything but unlimited.

Like eMansipater said, "Why weren't there many competing shell currencies in 19th century Africa?"


A beautiful analogy to be sure, but a little hard to work with since we're discussing more than one 'water' here. Yes, if there were competing liquids, they would sometimes fill up holes water would otherwise. And the more liquids there would be, the less of any one there would be in the existing holes. But here the comparison becomes thin, because what would the incentive for creating and applying ever new liquids be? Indeed, the opposite incentive exists because most people already have water and keeping what you have is easier than creating anew.

Building up a new currency is hard work with no small amount of catch-22 built in. Why would you start using a new currency when it starts out useless? You have to somehow be convinced there will be future utility greater than that of your current money. Your leap of faith and those of others may eventually fulfil the prophecy. Or it may not.

There may be a million tiny currencies but if there is no improvement in one over the other, the inertia of the existing value of an economy is insurmountable. Smallness in itself is a negative for a currency. All things equal, meaning both currencies are exactly as 'good' in convenience, value store capacity and so on - you will go with the currency useful in the most places - the larger one.

Well if a better currency comes along I'd imagine people would move to it over a period of time, similar to what is happening with BTC/USD now.

We can only speculate, but if you're making false assumptions, you're speculating poorly.

As far as branding, it doesn't matter if we don't or do advertise it - once people use it, it advertises itself.

Put another way, there are too many crappy little news sites, and nothing controlling their proliferation. People read their news where they think they can trust it. Or where the brand is strong.

Which gets back to the original question. If there is no control on the number of crytocurrencies, will we end up with masses of "crappy little news site" equivalents? Or will something (bitcoin or something better) float to the top and keep people engaged?

Maybe bitcoin just becomes a branding exercise. Battling to stay on top of a morass of competition. First mover might help, and might keep it entrenched for a while. Think Microsoft. But it will constantly be under assault if people can come up with something better. Actually that would be a good thing. Good money driving out the less good.

But since there is no central ownership (or so I'm told) who will fund the branding? Maybe the users in an attempt to protect the utility. But equally possible is a competitor currency driven by business people and cryptobankers. Who know how to make it work in a bigger piece of the economy. How to market it. How to work on PR. How to brand it, essentially.

Claiming to know the answer to all this is not really credible. We can only speculate on the outcomes.

Why would people use Facebook/Myspace?  After all, Friendster has all of your contacts!

I was being deliberately simplistic here, as obviously there are lots of factors affecting currencies on a day to day basis. But over the long run, print more and your currency will get dumped as people switch into (and bid up) others.

Maybe I should have said "existing" or "fiat" currencies to be clear. One that are in use. Obviously if you create one that no one uses it won't affect others. But it there is wealth tied up in it, and that wealth moves away, the value of the currency will fall. Put another way, buyers will pay less to get it and sellers will demand less to sell it.

Think of money like water. It flows between different places. Where it flows determines prices.

This is not so. There is no magical property of currencies that automagically change the value of other currencies. If I started printing bills of a new "robm dollar" currency right now I would not affect any other currency in the world, no matter how many or how few I printed.

If I could convince some people to accept robems for a good, a service or another currency I would open up for some amount of arbitrage. But the amount of such value exchange would be directly proportional to the amount of usefulness of the new currency. E.g. if I said I would sell 10 grams of gold for 1 robem, someone might pucharse 1 robem for an amount of USD lower than what 10 grams of gold costs. And that would technically have 'lowered' the value of the USD since one person wanted to get rid of a small amount.

But it was not the creation of the currency itself that lead to this. It was the creation of new economic opportunity. You can create new crypto currencies all day and it wouldn't make a difference unless you also convinced people to use it.

Why would people begin to accept other currencies? Without an economy backing them up, they'd be useless. It's like all these crappy little news sites that pop up on the web - it's trivial for them to be setup, so why not do it? But people don't go to them, because they aren't reliable, or just that the bigger news sources are better.

Half right, half wrong.

All other currencies affect each other. Print a lot and your currency falls versus the others. Control the supply relative to demand and it stays strong.

Currencies are currently more or less bounded by physical borders and a limited number of countries issuing them. Want to buy a burger in Idaho? Don't show up with Swiss Francs (even though Swiss Francs keep their value much better).

So what happens if you remove all physical border constraints (as with cryptocurrencies), but you also remove all constraints on how many currencies exist or can exist?

I don't think this has ever happened before. We've gone from many small communities with many currencies to progressively fewer countries with fewer currencies (think eurozone for recent, albeit disastrous, example).

Slam it in reverse with no constraints (on borders of numbers of currencies) and I don't think we should presume to know what might happen.