Topic: Will deflation be the fatal weakness of bitcoin? - page 4. (Read 10669 times)
To all who wanna bitcoin be inflanatory: you can always send periodically small amount of your bitcoins to 1waSPoZabGQw9a2MeWmJYaqaUyDJBcGmj. There, problem solved.
As far as deflation itself being a weakness, I don't think it will cause the end of the currency or anything, but I think it will hinder its widespread adoption. Volatility may be fun to play, but it's not fun to run a business around.
I bet you that, if given a long enough term, Bitcoin will be less volatile than any government fiat currency. On one hand, we have a currency with a fixed (non-volatile) supply, and on the other hand, we have currencies with very volatile supplies. To disagree with me, you have to make the absurd claim that a currency with a highly volatile supply will tend to be less volatile than one with a perfectly predictable supply in the long run.
Bitcoin's price volatility will roughly resemble the asymptotic curve shape of its inflation schedule. Volatility is already far lower than a year ago, and a year from now will be lower than today, and so on. There have already been days this year where BTC was less volatile than EUR... an amazing statistic, for such a small market so soon.
No government will ever allow a legitimate business to pay its employees in an unregulated and untraceable currency. Bitcoin is the currency of the black market.
The US government is currently allowing it today. Your point is demonstrably false.
Bitcoin is the currency of the market, because it is mankind's most efficient means of exchange (or perhaps I should say, this is its potential at least). Whether the market is black or white or anything in between, we'll see increased adoption of Bitcoin throughout. Dismissing Bitcoin because some smart criminals have caught on earlier than the average gas station owner is silly.
Today there is a flurry of news about how Silk Road is turning over $2 Million a day. And that is just SR. If no one is spending, how does that happen?
This whole "Deflation is bad" meme is just propaganda set loose by people who want to collect seignorage (the central banks) - aka Inflation TAX. Deflation is not bad, otherwise the computer industry would be in a recession since the 1950s.
In the FIAT world, a credit contraction is bad. And this causes Deflation in the FIAT world. Credit contraction is bad because everyone is forced to pay back loans instead of investing and consuming.
This whole "Deflation is bad" meme is just propaganda set loose by people who want to collect seignorage (the central banks) - aka Inflation TAX. Deflation is not bad, otherwise the computer industry would be in a recession since the 1950s.
In the FIAT world, a credit contraction is bad. And this causes Deflation in the FIAT world. Credit contraction is bad because everyone is forced to pay back loans instead of investing and consuming.
Bitcoin will never replace fiat because it can't be easily controlled by a central government. It's a parallel currency, like gold. Its best uses are:
No government will ever allow a legitimate business to pay its employees in an unregulated and untraceable currency. Bitcoin is the currency of the black market.
Here's a milestone to keep an eye out for: the first kidnapping with ransom demanded in Bitcoin. No more briefcases of cash and police stakeouts.
Take my wife, please. - Store of value (hoarding)
- Unregulated/illegal trade (silkroad)
No government will ever allow a legitimate business to pay its employees in an unregulated and untraceable currency. Bitcoin is the currency of the black market.
Here's a milestone to keep an eye out for: the first kidnapping with ransom demanded in Bitcoin. No more briefcases of cash and police stakeouts.
If you believe deflation is a problem, answer this question: Would you rather work and be paid with a deflationary currency (gold / bitcoin), or inflationary currency (USD / zimbabwe dollars)?
Answer this question: How would you rather pay your employees? With a deflationary currency, or inflationary currency? When I hire someone for a year, I'd rather not have to change their salary every week to make sure it stays around the same value. And as long as employees don't get paid in BTC, it's never becoming a mainstream currency, but stays a commodity.
I think you are proving my point?
I'd rather PAY in an inflationary currency. Be it my employees or my groceries.
Till now, bitcoin seems the perfect currency in in the free world, it has many advantages as we can see. Such as convienence, decentralization, no worry of inflation, except for the boring blockchain file lay in system partition.
But to me, I think I treated it as gold as many others did, so maybe we will hardly to use them, just holding to see price up, obviously it will cause the deflation, and then the bitcoin will not be currency any more, but like treasure.
But it is not treasure, and let's consider this situation, one day, bitcoin has been granted, and suddenly a big catastrophe attacks somewhere in the world, and destroyes all, people die, bitcoins of those people then lose forever, so the price up, others will hold their bitcoins more tightly, and no bitcoins are in the circulation.
No curculation, so it can be called curreny?
But to me, I think I treated it as gold as many others did, so maybe we will hardly to use them, just holding to see price up, obviously it will cause the deflation, and then the bitcoin will not be currency any more, but like treasure.
But it is not treasure, and let's consider this situation, one day, bitcoin has been granted, and suddenly a big catastrophe attacks somewhere in the world, and destroyes all, people die, bitcoins of those people then lose forever, so the price up, others will hold their bitcoins more tightly, and no bitcoins are in the circulation.
No curculation, so it can be called curreny?
I think you have a valid point, but the solution is to have a POS system created. BTC will become mainstream and then no more a "treasure", but more of what it was intended to be... a mode of transactions.
Why do you need to decrease salaries every week? Do you do increase them every week with an inflationary currency?
Because the purchasing power of the BTC will grow quickly after 21M, while the purchasing power of USD can be kept pretty stable by the controlled inflation.
The purchasing power of USD has fallen by 98% in the last 100 years. That's stable to you?
And let's not forget that in a "mature bitcoin world", the rate of BTC appreciation in purchasing power will be small. BTC will not increase by 10% in a month in a mature market. It might increase a few percent per year, and market participants will not have problems transacting in a currency which increasing a few percent annually, for they are already today doing so with a currency that is depreciating by that amount.
The problem of deflation in the classical sense stems from the lack of granularity of paper money.
You can't practically spend less then 1 cent.
You can't practically spend less then 1 cent.
I've seen this argument before, and it is hilariously awful. The indivisibility of a cent has absolutely nothing to do with the problems of deflation. Ok, theoretically in some bizarro world it could have potentially been a problem, but not in any historic era of deflation. Not even close. The problem of bitcoin's coin distribution is "resolved" by having near infinitely divisible coins.
As far as deflation itself being a weakness, I don't think it will cause the end of the currency or anything, but I think it will hinder its widespread adoption. Volatility may be fun to play, but it's not fun to run a business around.
If you believe deflation is a problem, answer this question: Would you rather work and be paid with a deflationary currency (gold / bitcoin), or inflationary currency (USD / zimbabwe dollars)?
Answer this question: How would you rather pay your employees? With a deflationary currency, or inflationary currency? When I hire someone for a year, I'd rather not have to change their salary every week to make sure it stays around the same value. And as long as employees don't get paid in BTC, it's never becoming a mainstream currency, but stays a commodity.
You forget the aspect of competition. An employer doesn't get to unilaterally "chose" in which currency to pay his employees. His employees will demand a certain compensation in line with market expectations. If everyone wants Bitcoins, the employer will need to offer salary in Bitcoins.
Further, if the market rate for labor is X in a depreciating currency, it will be X-Y in an appreciating currency, meaning that an employer can pay nominally less in the appreciating currency and thus may well chose to do so. An employee may say, "I'll work for $20,000 in USD or $19,000 in BTC" and through negotiation both the employer and employee will meet on mutually beneficial terms.
Bitcoin will never replace fiat because it can't be easily controlled by a central government. It's a parallel currency, like gold. Its best uses are:
No government will ever allow a legitimate business to pay its employees in an unregulated and untraceable currency. Bitcoin is the currency of the black market.
Here's a milestone to keep an eye out for: the first kidnapping with ransom demanded in Bitcoin. No more briefcases of cash and police stakeouts.
- Store of value (hoarding)
- Unregulated/illegal trade (silkroad)
No government will ever allow a legitimate business to pay its employees in an unregulated and untraceable currency. Bitcoin is the currency of the black market.
Here's a milestone to keep an eye out for: the first kidnapping with ransom demanded in Bitcoin. No more briefcases of cash and police stakeouts.
An 'economist' I met while riding a bus saw my bitcoin logo and informed that while bitcoin was an awesome idea, it was going to completely fail because of deflation. I acted surprised to hear this and said "oh, does that mean it will be worth a lot more?" In case you are wondering, yes, yes it will, then it will be worth nothing because everyone wants it so much.
I disagree with the economist as well... I like "stuff" too much. Sometimes money burns a hole in my pocket. I strongly believe that having a bird in hand is worth two in the bush. Which means that I like having physical things that can't be taken away from me in a puff of economy crashing, etc.
I hold on to bitcoins only until I can afford that thing that I currently want to buy.
If someday they skyrocket to 100s or 1000s of dollars per, then I will buy a nicer boat than I currently own.
Or cash out to pay off my house, etc. I take the middle road of not knowing if bitcoins will win or lose, so I just buy things now. If they crash, great, I "won". If they skyrocket in value, then I will feel good for you guys who gambled and won that game.
I think everyone has a "cash-out" value where they think "ok, they're high enough, time for me to cash out and buy something cool".
"Nah. We have robots mining asteroids for gold. We came to flood your gold market to enslave you with your Bitcoin."
Stocks are not deflationary, when the demand rises they just give out extra stocks.
Although I didn't previously know, it appears Google did this in 2005. But I couldn't find any other examples with large companies, so it appears to be pretty rare. So sounds like for the most part, the number of shares stays pretty set unless it is split (which is no different than moving the decimal point in bitcoin). I still think this is a good example of a successful deflationary system that carries similar characteristics.
The only true point why deflation was chosen as a feature of Bitcoin is to make early adopters (and Satoshi) rich. If Bitcoin succeeds in the future it will be just a side effect. Unfortunately, probability of such event is very low. So deflation will rather be fatal.
Bitcoin is not deflationary. It is inflationary. The rate of inflation is currently high, and it falls to zero over time, but never goes negative. For the gazillionth time, let's stop calling Bitcoin deflationary.
Bitcoin as it exists today will fail. Bitcoins are constantly being lost. Yet there will never be more than 21,000,000 created. Someday the last bitcoin will disappear and there will be none left.
For example, say Satoshi is dead and nobody knows about his bitcoin wallet. Nobody knows Satoshi except his Mom. And maybe his Mom doesn't know anything about Satoshi's cryptocurrency habit. Whatever she does with Satoshi's computer probably destroys the bitcoins.
Gold is different. It too is constantly being lost but it can be found again. There was just a story about a ceiling full of gold being found in a house in France. Gold never disappears.
When government fiat fails the people left just create a new fiat. Because people still want to trade whatever they use for trade is currency. Similarly bitcoin will eventually be replace with something else, something people like better.
For example, say Satoshi is dead and nobody knows about his bitcoin wallet. Nobody knows Satoshi except his Mom. And maybe his Mom doesn't know anything about Satoshi's cryptocurrency habit. Whatever she does with Satoshi's computer probably destroys the bitcoins.
Gold is different. It too is constantly being lost but it can be found again. There was just a story about a ceiling full of gold being found in a house in France. Gold never disappears.
When government fiat fails the people left just create a new fiat. Because people still want to trade whatever they use for trade is currency. Similarly bitcoin will eventually be replace with something else, something people like better.
Hmmmm.
A) The last Bitcoin will never be lost. In fact, it's almost certainly true that the rate of "loss" of Bitcoins falls off asymptotically, so that each year fewer and fewer coins are lost. This is true because as the coins get more valuable, people are increasingly careful with them (if you own a $1000 coin you will be careful with it, I assure you). It is also true because as people get comfortable with BTC they won't lose coins as often. Given the above, I might go so far as to say that the maximum number of lost coins will likely never pass a few million btc.
B) Gold is not different. There is a fixed amount of gold on earth, and a fixed amount of Bitcoin. Both can be lost. Gold definitely "disappears"... there are plenty of sunken ships that will never be recovered, and lost wedding rings thrown into lakes with no attempt to recover
C) Yes, "eventually" Bitcoin will be replaced by something else... just as gold is about to be replaced by Bitcoin
hypothesis : Bitcoin will fail because of deflation
--
If bitcoin fails then price will go towards 0
If price goes to 0 then there is no deflation
Conclusion : Hypothesis is false
--
If bitcoin fails then price will go towards 0
If price goes to 0 then there is no deflation
Conclusion : Hypothesis is false
This is so beautifully stated. Thank you!
Wrong statement. U assumed that deflation is a permanent state.
The only true point why deflation was chosen as a feature of Bitcoin is to make early adopters (and Satoshi) rich.
That is how comic books work.
Bitcoin money supply is inflating like crazy at the moment, but the price is still increasing.
Exactly my point! If the price is increasing fast now, even thought it's inflating, can you imagine how much harder it will sky-rocket as soon as deflation actually kicks in? I love everything about Bitcoin, except for the fact that it can never have a stable value by nature.
I share your love of Bitcoin, but I think you got past my point altogether, and went backwards through the debate some more. Why don't you do some research on how options contracts work and think about how they can be made easier to use? Maybe they aren't as much of a solution as I think, but at least it would give something to argue about.
Besides, as you are also presumably talking about inflation of the money supply, when do you think the deflation will kick in? In 10 years? 20? As Bitcoin is distributed more homogeneously throughout humanity, the volatility should actually get lower. Why do you think the value will increase rapidly? If it were such a certainty, the current price would already reflect that.
hypothesis : Bitcoin will fail because of deflation
--
If bitcoin fails then price will go towards 0
If price goes to 0 then there is no deflation
Conclusion : Hypothesis is false
--
If bitcoin fails then price will go towards 0
If price goes to 0 then there is no deflation
Conclusion : Hypothesis is false
This is so beautifully stated. Thank you!
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