Bitcoin Forum

I have a dream about the future...

Imagine, in 20 years, all people on Earth are using bitcoins and the amount of coins is fixed. Wait a moment...not fixed. It is decreasing, because:
People will inevitably lose access to their wallets. They may die and not tell a password to their wallet to anyone. They may just forget. Their harddrive may crash and they have no backup.
Or, imagine, someone has a job and brings home more money than he needs - he just hoards the rest, because that is the best form of investment in this kind of economy.
Whatever the reason, the number of coins in active use decreases.

On the other hand, the number of people is probably still increasing, because there are new technologies providing more food and better healthcare.

This future is impossible. Economy cannot reasonably work when there is constant deflation. No one is motivated to invest and take risks.

If bitcoin stays the same as it is today, it will NOT become the main currency in the future, because this future is impossible.

The idea of digital currency is great, but the current coin generation is flawed. It must be repaired. I do not know how, but it should be tied to the amount of subjects using it or the amount of coins exchanged for actual goods or services in the recent past. I do not know if that is technically possible. If not, even connecting the generation rate to the current exchange rate of BTC/USD or other physical currency would be better than the current way.


What Bitcoin needs most are sellers and buyers of actual goods. None of them are motivated right now to use Bitcoins. On the other hand, investors and hoarders are motivated a lot.

If the situation does not change soon, the bubble will burst and there will be a lot of upset users and Bitcoin 2.0 with different rules will appear...

oh word for real?

So what actual goods are you willing to buy with Bitcoins?

I don't want to be a cynic but you are absolutely correct.

You've got to be kidding me. ::)

FFS please read: http://forum.bitcoin.org/index.php?topic=10426.0

Dude, your technical explanation of inflation and deflation is nice and all and very accurate. However, it doesn't solve the problem that - almost no one outside of the community is willing to accept BTC as a payment service. Even people are in the community won't do business unless you escrow with Clearcoin.

BTC will officially take off if someone can convince Amazon to accept it. Until then this is just a investor/hoarders game.

Oh sorry, yeah I misunderstood what it is that you don't understand. Now I get it.

Here's your problem. You believe there is a way to plan and design Bitcoin for success. Well I'm sorry to burst your bubble but there is not one person in the world who would poses such a knowledge. The best we can do is have a technologically and economically sound project and let the market figure it out, see what sticks and what doesn't.

You are of course more then welcome to start your own version of a digital currency with your own ideas, present it to the market and see if it fares better. But you cannot plan for success. If we had a person capable of such a thing I'd want them to plan for my life and be our king.

I read that. I do not want to haggle about the meaning of words. I call it deflation, you can call it differently if you wish. The economic implications are what is important. And they cannot be easily dismissed by saying that we experience inflation.

Denying the deflation is like claiming that humans have fur, because they have 1000s of hairs all over their bodies. Technically it is correct, but everyone knows that humans do not have fur.

+1

I have no intention to do that, but others might.

What I am advocating is a change that fixes what appears to be flawed while there is time. You cannot hide from the economic reality and simply focus on the technology. A digital currency must fulfill the needs of the users if it should expand. I want to believe, the community wants Bitcoin to grow and be accepted in many places. If it is just a fun project to test out a technology, then maybe I am in the wrong place.

Deflationary spirals can't last forever, for the same reason why bubbles can't keep growing forever: eventually speculators realize that the value of a bitcoin will keep going up and up, the market gets overexcited, and eventually someone decides to cash out. At that point, the market once again gets overexcited and the value of bitcoin crashes right back down again.

I hope you realize that there is room for several approaches.   In order to implement your stuff, there is no need to alter bitcoin in any way.  Just fork it, and use it with people who share your point of view about money.   The bitcoin community will keep using bitcoin, and your community will use your inflacoin.

Bitcoin doesn't even need to be accepted in many places.  If I want to buy something in a "inflacoin-only" store, I'll just buy enough inflacoins with my bitcoins on the exchange market.  And everyone is happy.

Exactly. And that the beauty of the truly free market. No one is forced to do anything. If you like it, do it, if you don't, don't. But don't try to initiate force against those who disagree with you.

Have you considered that Bitcoin users like me will simply refuse such "fixes". I will either fork the block chain with others like me, or I will sell all my Bitcoins and move on to the next money system that doesn't rob me of value.

Technology will find ways to reduce the amount of lost coins. Safety features, automatic wallet ownership transfers upon account inactivity (death), etc. You are making a mountain out of a molehill.

Since when does being born entitle you to money?

Suggesting that no one will invest in a deflationary economy is ludicrous. What it will do is drive off malinvestment. Good ideas will remain hugely profitable.

Hoarding is temporary. Not many people can enjoy staring at a fat Bitcoin wallet. People enjoy things like life, vacations, toys, fast cars, boats, planes, guns, food, alcohol, houses, land, automatic flushing toilets, a toaster that knows when you wake up, exotic animals roaming the courtyard, replacing body parts with mechanical representations, etc. etc. etc.

If you can design a block chain with rules that are more desirable, please, feel free. Let it compete with the current implementation and the more desirable block chain will rise to the top. Perhaps, because there are so many people that want their money to lose value over time, both chains will coexist! I couldn't imagine a more perfect world! Then the people who love inflation will leave this block chain alone. You can all sit around and watch your money lose value together!

Just published an article that address some of the concerns: http://bitcoinweekly.com/articles/one-apple-today-two-apples-tomorrow-or-how-i-stopped-being-afraid-and-learned-to-love-deflation

This is just from looking at the tittle but I really wished you didn't call it delfation when it's in fact price appreciation which are not one and the same.

You may read thread:

http://forum.bitcoin.org/index.php?topic=9487.msg140015#msg140015

- where I proof, bitcoin currency will not survive @ current rules.
Now, I am searching for data to confirm/disconfirm my proof. You may help me, if you research the following:

- how many traders there are on all BTC exchanges world-wide, as graph/function of time?
- how many miners there are on all BTC pools (&singles) world-wide, as graph/function of time?
- how many goods (kinds of goods, volumes of goods) sell directly for BTC world-wide, as graph/function of time?

http://bitcoinweekly.com/articles/comic-reaction-after-dramatic-rise-of-bitcoin-s-value  ;)

There will only be _{(numerical price value like hazek insisted)} deflation of BTC for as long as the rate in the increase of the amount of goods/services/other available for exchange with BTC outpaces the rate in the increase of the amount of BTC available for exchange.

Once BTC's novelty wears off, and BTC is distributed evenly to all participants, and the rate of increase in the amount of new goods/services/other available for exchange with BTC is in moderation - the BTC deflation rate will equal the rate of increase in the amount of new goods/services/other (as it is now) - only more stable once saturated.

Supply and demand dictates.

Deflation should not be troublesome - the success of gold as a physical means of book keeping for millenia has shown that the digital age's digital book keeping can be successful if it is analogous to the scarcity property of gold - it pins down supply as nearly constant.  Change in demand (measured in the number of available goods/services/other) then dictates the value of deflation / inflation.  The system adjust itself in perfect balance of exchange.  See http://en.wikipedia.org/wiki/Equation_of_exchange

Total value of goods/services/other available for exchange with BTC = Total number of BTC x Value attributed to BTC

So if you are complaining about deflation - you should ask people to please stop adding goods/services/other available for exchange with BTC.

The system will find its own balance point - because if deflation is such a deterrent as you foresee for people to keep adding goods/services/other available for exchange with BTC - the deflation should adjust when these goods/services/other are not being added anymore - and when this happens, deflation goes down - incentivising people again to add goods/services/other available for exchange.  The market finds its own FORWARD LOOKING balance point.

The problem with you and the other deflation alarmists is that you are looking at BitCoin from a statist perspective. All of your arguments assume that there is only one currency in use in a particular economy (ie a monopoly). In that case I'd agree that deflation is harmful. But why assume such a scenario? Despite all its advantages, BTC will never have 100% currency market share. It might become the most widely used but there will still be competitors (Renmimbi, Canadian dollar, Aussie dollar, Brazil Real, gold, silver,sea shells). So too much deflation or inflation (i.e. volatility) will affect the relative competitive advantage that the currencies in circulation have with each other. Market forces will react to a deflating BitCoin by reducing demand, thereby resulting in a market determined optimal rate of inflation/deflation. Not some rate the so called "experts" at the central bank, issue by decree.

Ohh not again... I am wondering how much central bankers spent on brainwashing and psy-ops during last 80 years or so...


Go and build your own inflatacoin blockchain. Save the world! No carrot for you...

Somebody finally fork the blockchain to inflatocoins so that we can send all the inflation lovers there already...

How ironic it would be if we decide to make one for them, just to get over with this thing!

You just may be on to something here!

there are two distinct possibilities for bitcoin inflation w/o messing with the algorithm:
1. increased velocity ( more trades per bitcoin)
2. Bitcoin fractional reserve lending

obviously FR banking risks a run on the bank, but conservative banking practices and a high reserve ratio with full disclosure should minimize the risk.

I would quit using Bitcoin the second that or some form of monetary inflation is implemented.

Out of curiosity, what are you using Bitcoins for right now?

I agree with the inflation part, but fractional reserve banking shouldn't be something that you have to worry about. And I'm sure it will happen eventually.

A bank can practice fractional reserve banking with Bitcoins easily. But it will either have to use actual Bitcoins (if the people taking the loan wanted to interact with the block chain) or use tokens that are only accepted at that bank and it's partners (which will have nothing to do with the block chain). If they give out actual Bitcoins, they will do so either fraudulently (not informing those who deposit Bitcoins there) or legitimately (in which case I would imagine they would have to pay interest to the depositors). If they do it fraudulently, I doubt that would last long once people caught on and they will go out of business. If the do it legitimately, there is really no concern, depositors will not be able to withdraw their full amount, and this would be part of the contract for initial deposit. Bitcoins can't be created by fractional reserve lending the way the current system allows dollars to be created (the bank can't report loans and reserves as assets that are considered money exchangeable at a central bank because Bitcoins can't be created this way, only Bitcoins are exchangeable in the block chain, pretend Bitcoins aren't). Bitcoins can only change hands, so there is no concern of inflation. If the bank wants to use tokens, this isn't a concern either, because again it doesn't lead to Bitcoin creation. Interest will have to be paid with actual Bitcoins as well, meaning the loans had better be worth it. And there will not be a lender of last resort to back them up on a bank run, so they have to be open about their policies or risk going out of business.

Basically they way fractional reserve banking "creates" money is through bookkeeping and the existence of a central bank. This is impossible with Bitcoins. You can try to pretend you have more Bitcoins than you do, but the block chain knows better.

How can we know without trying? We have never had an economy where the main currency is in constant deflation.


Ironically, the constant deflation will convince them to sell things in BTC.


This "Bitcoin 2.0" already exists. Its called Ven and trades $1 = 10 Ven. Despite being introduced to the masses thru Facebook in 2007, it does not have the stellar growth rates of Bitcoins.

Gold used as reserve by most central banks are in constant deflation over long periods of time.

http://forum.bitcoin.org/index.php?topic=10552.0

The reason people invest is that they benefit more from investing than from not investing.

With Bitcoin at the moment, this is not the case. As the value of Bitcoins keeps going up, there are very few things I could do with a Bitcoin that are better than holding it.