It has always struck me that one "problem" with Bitcoin (and hey, you know what do I know?) is the deflation rate.
So far as I can see Satoshi tried to match the new coin introduction rate in the early days with the user adoption rate in some sense, so that the market was not flooded with 21M coins at start and this also fitted in with other aspects of the design as we know.
Given that the coin generation rate is higher at the start, even this gives rise to many more coins at the start, than latter on. Now this is all well and good early on, it gives early adopters a good chance at a profit. But it seems to me once you have a lot of people using the currency is problematic. Lets assume 100 users. A neglible part of the world population by any standards. In a year each introduces 9 new people. In a years time there are 1000 people using Bitcoin, all wanting a new currency. These figures are illustrative rather than actual. Since we still have a completely neglible part of the population using Bitcoin, this goes on and on for several more years, and by this time we have 10^7 people using the system and the demand for coins is massivly outstripping the slowly diminishing supply available from mining, which is gradully over time becoming zero. This guarantees a massive shortage of coins as time goes on, especially in the middle phase of Bitcoin adoption, a phase I would suggest we are entering now. You could argue this is the way way that late adopters are rewarded and so this is only right. But I would argue that exponential growth of demand, along with supply reduction is a particularly violent equation that does not spell good things for bitcoin adoption.
If the supply of coins remained linear or proportional to the square root of the number of users, we would still see a very healthy (for late adopters) rise in value of each bitcoin.
Its highly unlikely that this can be changed now because late adopters who have figured this out have their jaws tight round this like a doberman locked on to a piece of meat. But the truth is that there would still be massive growth during this phase if the coin supply was unbounded and there is a much lesser chance of something going wrong due to instability of demand.
How long does "this phase" last? It lasts untill most of the people who want or might want Bitcoin have it. It last until the proposition that most people dont know about it is no longer true. It lasts until Bitcoin is getting to be Mastercard in size. At this stage the groth rate at least in users must contract since the market is saturated, and its at this stage that the number of coins in existance ought to be come capped.
So the TL;DR; summary is that the supply curve for Bitcoins needs to be optimised in a new coin I suggest to keep price more stable during the mid-adoption phase.
So far as I can see Satoshi tried to match the new coin introduction rate in the early days with the user adoption rate in some sense, so that the market was not flooded with 21M coins at start and this also fitted in with other aspects of the design as we know.
Given that the coin generation rate is higher at the start, even this gives rise to many more coins at the start, than latter on. Now this is all well and good early on, it gives early adopters a good chance at a profit. But it seems to me once you have a lot of people using the currency is problematic. Lets assume 100 users. A neglible part of the world population by any standards. In a year each introduces 9 new people. In a years time there are 1000 people using Bitcoin, all wanting a new currency. These figures are illustrative rather than actual. Since we still have a completely neglible part of the population using Bitcoin, this goes on and on for several more years, and by this time we have 10^7 people using the system and the demand for coins is massivly outstripping the slowly diminishing supply available from mining, which is gradully over time becoming zero. This guarantees a massive shortage of coins as time goes on, especially in the middle phase of Bitcoin adoption, a phase I would suggest we are entering now. You could argue this is the way way that late adopters are rewarded and so this is only right. But I would argue that exponential growth of demand, along with supply reduction is a particularly violent equation that does not spell good things for bitcoin adoption.
If the supply of coins remained linear or proportional to the square root of the number of users, we would still see a very healthy (for late adopters) rise in value of each bitcoin.
Its highly unlikely that this can be changed now because late adopters who have figured this out have their jaws tight round this like a doberman locked on to a piece of meat. But the truth is that there would still be massive growth during this phase if the coin supply was unbounded and there is a much lesser chance of something going wrong due to instability of demand.
How long does "this phase" last? It lasts untill most of the people who want or might want Bitcoin have it. It last until the proposition that most people dont know about it is no longer true. It lasts until Bitcoin is getting to be Mastercard in size. At this stage the groth rate at least in users must contract since the market is saturated, and its at this stage that the number of coins in existance ought to be come capped.
So the TL;DR; summary is that the supply curve for Bitcoins needs to be optimised in a new coin I suggest to keep price more stable during the mid-adoption phase.
i came up with satoshi bucks ! =)))))
