Everlasting deflation is an aesthetic flaw of Bitcoin. Not that it hurts much but IMHO it would be nicer if we would reach equilibrium between lost and minted coins at some point in time.
I disagree. I like the fact that the deflation neatly counters the risk of permanently losing coins.
Interesting point.
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Trying to keep the number of coins in circulation static would require confiscating "old" coins and that is a very hard sell.
Why that? You can simply keep the reward at any level and after a while there will be an equilibrium between lost and newly minted coins.
Going for low continual inflation wouldn't be as bad as some make it out to be (the problem with banks isn't inflation it is unfair access to pre-inflated prices) but "stable low persistent inflation" is harder to sell in a 30 second sound bite then "there will never be more than 21M BTC". A low rate of deflation doesn't have any meaningful effect on the economy and and is easier to "sell". That is likely why Satoshi went that route, it was the easiest route and honestly if implemented BEFORE the genesis block there is little difference between low (<1% annually) monetary inflation, low monetary deflation, or a system (once all coins are mined) holds the supply nearly static.
IMHO though that ship has already sailed (except for maybe alt-coins). Trying to change it AFTER THE FACT would kill Bitcoin.
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Yeah, unfortunately that could very well be the beginning of the end. But this:
A bigger problem is that as the number of lost bitcoins increases the true market size of bitcoin will become more and more difficult to estimate because we won't know how many bitcoins are lost and how many are just sitting in wallets and not being spent.
Let's say that someday it appears that 99% of the bitcoins are believed to be lost. That means there are only 210,000 in circulation. But the size of the bitcoin economy is 1 trillion dollars. That means each BTC is worth about 4.7 million dollars. Not a problem, let's say the protocol was modified to support more decimal places.
But maybe there is actually someone out there that is holding anohter 1% of the bitcoins that were believed to be lost. They could start spending these coins at any moment and wreak havoc on the bitcoin economy causing 100% inflation as those "lost" coins are now found.
As you can see, the more time goes on, and the more coins get "lost", the bigger the risk that those coins aren't actually lost which causes greater potential instability to the bitcoin economy.
Fortunately at 1% loss per year it will take 457 years until we get down to 1% (150 years at 3% loss per year). Still, this is the best argument for sustaining a minimum reward level that I have heard so far. IIRC Geistgeld had a constant reward, no idea about all the new spamcoins.