Topic: Uncapped coin vs capped coin supply - page 3. (Read 4993 times)

Yeah, I see where you're coming from. I understand this, and I'll change my stance. Let's bring up my point again with time: this will happen in over a hundred years. The main goal of Bitcoin is to overthrow fiat money. Now, going on the assumption that we are successful in this endeavor, Bitcoin could be a main currency for at least one country. If it begins to deflate rapidly, then although the apple farmer will want to charge less for his product, the resources he requires will begin to cost less aswell. Also, if Bitcoin is the only way you can buy an apple in some situations, farmers are going to want to up the price so they can get a more reasonable profit, and people are going to have to pay the higher price because of this. Technically this would make deflation and inflation into equilibrium, since there's always going to be an equal amount of Bitcoin. Yes, depending on population it will continue deflating anyways, but I don't think it will be as drastic as you're making it out to be.

You may be thinking that the economy will deflate rapidly due to the deflation trend it's going through now. If we were to hit the limit now, you'd be right, and then Bitcoin would become primarily an investment. However as long as the price keeps going up, people are going to begin to sell their bitcoins to get their profit before the drop in price that would come as soon as really anyone with a huge investment does just this. Everyone's going to sell their bitcoins for fiat and it will become worth nothing, essentially killing the system.

21 million bitcoins is a very high cap. Whether fiat currency has been overthrown will determine if Bitcoin will remain successful when the cap is reached.

Yes but we never reached the total supply did we? What happened when we realized that we had a finite supply of gold? We went off of it. Good or bad thing? I don't know but we did increase quality of life since gold standard days no?

What would happen if we mined all the gold and we were on the gold standard? Maybe that's what we averted by going to no backing.

What we did realize was that we needed more money based on our population growth, and that got perturbed into capitalism 2.0 where big corporations misused the need for money growth based on balance sheet expansion.  The system is fine minus the big corporations who do not offer much value or innovation but own a bigger percentage of our monetary base than they should.

Alot of the wealth gets created by the market and trading for speculative purposes which does not provide and innovation, just misplacement of currency. This should be banned in my oppinion and it is the wrong incentive to earn $$. IE: Hedge fund places a trade on the lumber futures market based on a mill with x amount of surplus inventory. That trade is backed by inventory, and the guy next door who also owns a fund, learn of this and bids up the market so that when hedge fund A buys he will buy higher, providing profit for fund B. Fund B should not be allowed to trade unless there is someone with the inventory who wants or needs to hedge his position in the market due to external circumstances. That was the true intent of the futures market and we allowed speculation for the sake of liquidity to ruin the market.

Yup, for thousands of year the world ran on gold, wich cannot be printed at will and whose supply is limited (sure, supply cap is "unknown" but guess what, you can't just print gold at will)

Not sure if its good or bad, its just "different" than how we work today. Have we actually seen it work? Remember human phscyology cannot be assumed to "change" or adapt because we know that will not happen as fast as we need it to.

Your point is taken on the psychological affects of using mBTC or uBTC and that is not really the issue here. Wolverine actaully made a good point in that deflation is always a good thing as it rewards those to innovate to eliminate waste, but we've seen from the past that deflation can lead to a halt in spending and either we would need to go all out, go through a bad recession and force people to look in the mirror, or we adapt our current situation to use something like DVC and slowly move towards a purely deflationary-hybrid scheme.

I'll make it more clear for you using our example of the apple and btc.

At 21 million the apple costs a certain amount. Now there are more and more people fighting for the same apple as population grows. Since there are no more coins available we divide them up as things become "cheaper"... the incentive is the hold money as it grows in value and then spend when you "need" to. That will drive the cost of the apple down to uBTC numbers from mBTC numbers. The Apple farmer wants to get more BTC so he innovates new ideas to make his apple grow cheaper yet doesn't sacrifice quality otherwise people won't buy from him at all. However, it is to be seen to see if this is feasible as my argument was that this may be well on paper but practically breaks down when spending grinds to a halt and noone will buy the apple, they will sacrifice to hold off until the apple farmer goes out of business and shuts down. There is a competitive cycle of driving prices down to a poitn where it is always less and less profit to build the same thing, and you will have less and less people willing to take risks to provide service to the industry whereas you can just hold your money and gain more "wealth". See where I'm going with this?

On the other end of the spectrum, as more people want the apple the price should go up, while more people need coin to buy it and thus the price drops back down, equalizing as population(demand) grows for both currency and product. The key is the incentive of what to do with the money and where to spend. Yes the apple price may be fixed in terms of btc but what about investment, innovation, wealth? Will people want to create a service when profits are minimized to a point where it may not be a benefit in becoming an apple farmer for some length of time? Why not just work 9-5 and save up as money becomes worth moreand more, but then who's offering you your job, what incentive do they have to keep offering you work? If noone works how can we put food on the table? What is the true price of the apple?

So you are about "deflation is bad" am i right? 

Deflationary pressures increase innovation, in what universe? It would increase the amount of cheap bastards there are out there by 1 million folds for sure Deflation is its uses and you need a bit of both, but to say that its better to sit on one side or the other you can't so for sure, all we know is we need a balance of both, as it has been working so far. I can't say what the future will look like to know if deflation would solve all of our problems in finance, but I'm confident it won't.

We know that as people stop spending or park their money because of deflationary pressures, economic contraction will surely ensue. How do you get people to spend anything other than what is needed or what they are comfortable with? How do you get ppl to try new things to spark interest and possible innovative ideas for future generations?

One thing I agree is that it prevents wasteful spending, yes, but hyper deflation would lead to no spending at all. hyper is what you get at 21 million because at that point we can see that the supply of coins stops yet real growth and demand for them don't.

I can see how btc proponents can think that as btc becomes divisible and say a new decimal place is placed, yet btc becomes 10x more valuable, that now you have new supply that didn't exist before for people who can only afford the btc with the new decimal extended. However this is still highly deflationary and doesn't solve the problems societies have with deflationary pressures. Maybe a breakthrough is needed but it may end up going back to human psychology which we know is unlikely to change as fast as we need it to.

Real wealth not measured in btc? I thought that at this point your assets would be valued in the crypto currency of choice?

If you wanted to buy that apple with a miniUSD, you couldn't, you'd have to pay two miniUSD.

My point being we'd begin referring to the Bitcoin as mBTC and uBTC because it'll be too inconvenient to say BTC as there'd be too many decimal places. That doesn't change the fact that a mBTC is worth as much as one thousand BTC. Something you could buy for one BTC could be paid for with one BTC or a thousand mBTC, depending on the way you look at it. Unless someone's a gullible stooge, you wouldn't be buying that for the wrong price.

population is not capped? that has yet to be proven.

when 21 million is reached velocity slows down? that has yet to be proven.

additionally, you could measure velocity in terms of bitcoin or in terms of real wealth. which one you choose will probably change your results.

what it means exactly to be backed by something is still up for debate.

as far as deflationary pressures, it prevents wasteful spending, increases the rate of innovation of a society, stabilizes the business cycle if not completely eliminates it, it rewards intelligent uses of resources and punishes the inverse, it prevents centralized and biased dispersing of newly created money. what's not to love?

additionally, something can be infinitely deflationary, however, since the price of a good or service that has value cannot reach 0 in price regardless of how valuable your currency is, then there is a asymptotical approach to the deflation. it may continue forever, but it will eventually slow to imperceptible changes.

This is what I don't get from the general proponents of BTC why do you think adding more decimal places will solve the problem? That is not increasing supply. This will have no effect on fixing the issue. It's like saying I want to buy an apple with $1 usd, but it will be cheaper if i use miniUsd which is $0.5 usd instead. Seems as though everyone is on the same page by saying hey we will just add more decimal places, yet I have not had a simple explanation as to how this would solve the problem. Think of the demand supply curve.

We don't need to stop that. Seeing as we'll hit the cap over a hundred years in the future, likely by then Gaven will have put in a change to sort this problem out(ex. adding 8 more decimal places) or Bitcoin will be overthrown and replaced with something better. Hey, will any of us live to see a single Satoshi having accountable value?

Please give a thoughtful answer, you did not answer what would happen after btc supply stopped expanding, yes price would rise, btc would become divisible and only a few would have whole btc. What stops the economy from becoming lopsidedly deflationary?

100 BTC could take care of the full money supply of an entire country if it got popular enough. Easily.

I'm trying to reach out to those who believe btc or crypto currency may be used to replace our medium of exchange (USDX or other fiat).

Obvious Fact: USDX used to be backed by gold (physical unit with a supply cap unknown).
Obvious Fact: USDX is now unlimited with no backing, and chart shows purchasing power dwindling
Obvious Fact: BTC is not backed by a physical commodity but by a known physical limit of 21 million coins.

Theory: BTC will replace USDX as it becomes mainstream.

My thread isn't meant to discuss why those facts exist/why that theory exists or if it can change, I merely want to know about the fact that BTC is capped, while other Alt's mainly DVC is not capped.

Anyone smart enough to know why a capped coin would be better long term than an uncapped coin?

BTC wants to preserve intrinsic value by creating a supply cap at 21 million at which point you will have to start dividing your btc units, velocity of money cannot decrease drastically or there is a recession. This is an obvious conclusion as to what has to happen at 21 million.

At this point I will introduce:

Obvious Fact: Population growth is not capped
Obvious Fact: More people on earth means more demand for natural resources as basic necessities, and as a result more currency in circulation has to supply the demand for these resources.

Speaking to some people it seems as though the proponents of BTC, who understand that as population grows the demand for currency grows,  have this theory that they think is valid:

Theory: At the 21 million cap of BTC dividing the BTC into units as population grows will solve the problem of supply

I think this is totally a unfounded conclusion and would like to have an explanation as to why they think this theory is valid? Namely how does the demand/supply curve link to the notion of dividing BTC into smaller units.

What makes total sense to me is a controlled supply with no cap, a controlled supply would grow as population grows to provide supply as demand increases. Thus my theory:

Theory 1: Devcoin or other uncapped Alt's would provide the security of a hashed network at the same time provide supply as population grows, creating a balance between inflationary and deflationary economic pressures.

Theory 2: Devcoin or an uncapped Alt, would provide an equilibrium at which the demand/supply curve wouldn't adversely affect the price of a resource like BTC would in the long term (BTC Cap limit).

One would have to question the growth rate of the Alt and ask if it is too fast/too slow, or does it matter? Population is growing exponentially and this is why USDx is allowed to go off gold standard which hindered economic expansion, thus higher quality of life at the expense of purchasing power long term. (wages housing prices increase at the other end of the spectrum to create a balance).

If we were to get off our usd standard and move to crypto's it seems to me that an Alt with uncapped supply is the way to go?

I only refer to Devcoin because it is the oldest Alt I know of that is uncapped, it almost as old as BTC as far as I understand it. I'm sure the other benefits of open source community support is a different issue and may or may not decide if this coin or another uncapped coin will be the one to survive long term, but not sure why BTC would survive over one of these.

Discuss below...

Thanks
Jag