Bitcoin Forum

Bitcoins have different economic functions. It acts as a central bank. Bitcoins are known as fixed quantities as stocks have limited supplies. The rapid rise in prices has given us many different questions. What is the economic function of this algorithmic currency?

Exchange function of Bitcoin

Anyone with a bitcoin address can use bitcoin. It is impossible to know who controls each address. Therefore bitcoin must be freely exchanged. This means "sacrifice" that bitcoin has created. This free flow of capital can be from any source. This allowed the bitcoin to become worthless a few years ago.

When this currency is rising in value over time. This is due to the limited provision of bitcoins. While there is increasing demand for them. This is similar to how you bought Apple stock in 1980 during your IPO. You will have to pay $ 22 per share. Due to the limited supply of Apple shares and the increase in demand. Today it is valued at $ 520 per share

At present, Bitcoin is going down continuously, so is it a deflation?

I was attracted to this post by your topic "the economic function of bitcoin" but on reading your post it really doesn't reflect in fact the general idea behind this post is blurred.

 Not with standing I would not necessary agree with you that bitcoin act as a central bank there are two worlds apart
And  yes you correct about the price increasing according to demand some yes passed 10,000btc was used to purchase 2box of pizza but right with the Same amount of BTC those particular pizza are the world most expensive pizza.

The basic economic function of bitcoins is the ability to be used as a remittance of money without the use of traditional banking system. The other function of it serving as a store of value and investment is not what bitcoin was created by satoshi to be but we made it so.

In my opinion, the economic function of bitcoin is opening the door to people to earn extra income. Then it connects people all though out the world in term s of purchasing item.

Exchange function of Bitcoin
Anyone with a bitcoin address can use bitcoin. It is impossible to know who controls each address. Therefore bitcoin must be freely exchanged. This means "sacrifice" that bitcoin has created. This free flow of capital can be from any source

Bitcoin put both positive and negative effects on world economy. Some time it help many people or country to improve their country economy or sometime it is put negative effect. In countries like middle Africa it help their people to solve their economy related problems and also help their government to solve their unemployment issues. In some countries it also put negative affect on their country economy by affecting their country national currency value at international market. Due to its digital in nature its user does not pay tax and Ultimately it affects their country economy.

Bitcoin is a digital currency that is fluctuating, sometimes bitcoin has a high value and sometimes low. Bitcoin is the same as we trade in the real world, bitcoin has an economic function that is sometimes profitable and sometimes detrimental, because just like people trade, they are not always profitable sometimes they have to feel losses

Bitcoin as a decentralized asset has a great function in an economy, bitcoin have serve as a currency with a great value on the exchange market due to it high price against other exchange commodities and currencies such as the euro and U S dollars. And bitcoin also offer us the total financial freedom and help the Economy to grow greatly with it unique function as a secondary currency in the society.

When bitcoin falls, it doesn't say or means deflation. Deflation is even a term that is strange in the world of bitcoin rather it is used for paper money. However, bitcoin was not created because of the economy but to better individual lives, so I do not see the economy affecting it.

Firstly, bitcoin can be seen as a investment  which is attractive chance for whom want to be rich , secondly,  bitcoin is also a currency , many big company has accepted their customers to pay with it, or some universities allow student to pay fee with bitcoin , That's so cool

    I think the primary function of bitcoin is to give freedom to everyone to earn extra income without control of the government and banks. Also it could help us to have an easy and quick payment system through cryptocurrency. You don't need to go anywhere to pay your bills or buy some goods if you have bitcoin yoy can always use it even you just setting on your chair at your house.

Indeed, what you say is true, the function of bitcoin gives the freedom of every user, without the control of the government and the bank. This makes time and costs more efficient and fast. Bitcoin deserves to be maintained because it has superior and fast-developing functions.

In my understanding, I think that bitcoin has open many opportunity to the people who had supported bitcoin. Bitcoin has provided the people the chance to make payment transaction peer to peer and other payments in electrical bills, water bills, payments in goods and services online using the btc currency. Lastly, btc had helped any countries economic situation such as alleviation of unemployment and underemployment where people could be able to earn profit through their bounty campaign participation.

Due to the volatile nature of Bitcoin, the main economic function of this coin is to open a door to the general people with a chance to invest and earn. Bitcoin is a cryptocurrency which goes up and down on a regular basis. So, even though the price of BItcoin is low, it should not be considered as deflation.

Bitcoin is helping the economy since it was launched. I don't think bitcoin acts as a central bank. Yes bitcoin is facing a downfall but this trend will not continue as soon as we enter the bull run.

It is very odd when you say that bitcoin acts as central bank. Thats very misinterpreted statement about the bitcoin. It is decentralised one by nature and neither any trades, transactions, investments of any other currency (altcoins) depends on it or gets regulated via it. So I am pretty sure that its wrong statement about it and should be corrected. Bitcoin itself is a sphere who has its own economic characteristic. They change, adapt according to the investors, public use, limits, demand etc and thus creates its own economic outputs and inputs. May be there is no currency(ies) which are inter-related here for their economic function, at least I would think that way only.

The function of bitcoin aside from being a payment tool, bitcoin also makes it easy to make transfers and can be used for long-term investments.

The basic economic function of bitcoin is the ability to be used as a remittance of money without the use of traditional banking system. The economic function of bitcoin is opening the door to people to earn extra income. It connects people all through out the world in terms of purchasing items.

I think that is not a phenomenon of deflation because if deflation the exchange rate will increase while the current exchange rate of Bitcoin continues to fall this may be a market adjustment due to the amount of competition that arises between BTCs with other coins .

Crypto is very novel technology. Might we see a central bank one day issue digital units of its currency in crypto form? Could happen. To put this in perspective though, crypto here is just a new kind of paper to print money on. Very clever, novel digital paper, but still just new paper.
Bitcoin as specific implementation of crypto has two basic use cases: a vehicle for speculation; a payments system for grey/black marekt participants looking to evade laws and taxes. As such it is and will always remain a niche item. Currencies are a creature of law, issuing forth from sovereign legal authority. Bitcoin can't challenge or displace them any more than a crowdsourced constitution could overturn established rule of law.

How can it acts central bank? It is decentralized. So there is no need for central bank with Bitcoin. Only miners could be useful.

Maybe it meants the other way. When referring to central bank it meants that Bitcoin is the center of its own blockchain and no outsiders can change its system.

The beauty of bicoin is that there is no central bank and no central authority. This is probably why satoshi walked away because he doesn't to take control of what is intended to be a decentralised economy

The economic functions of the bitcoin network causes it to behave like a central bank. This has a few effects: bitcoins (the payment unit) behave like stock due to the fixed, known supply of units being subject to open market operations. What happens when the market price of bitcoin changes is the velocity of bitcoin falls into disequilibrium until a new equilibrium is found.

The function is bitcoin is almost as same as the fiat coins apart from that it's decentralised, that makes it an individual currency which is only used as an individual business product and it's purpose is to serve only the individual, nor any mass or country.

Not deflation that occurs and this will not continue to go drop as your words,the economic function of BTC is similar to fiat but for the freedom of every person to make a transaction not high taxed.In the past it was too little to know BTC so human knowledge was not wide as its now.So it's not worthless like your words but it's the initial process made,Like a toddler who is still in the process of walking and then becoming a teenager.

Bitcoin does have many benefits and one of them is that the use of Bitcoin can avoid paying taxes. But this is also a negative thing because the government will get less income and this can be a big problem if someday Bitcoin is used globally.

Bitcoin must be used wisely because it will provide positive value for the development of the use of Bitcoin in the future.

I would not consider bitcoin as the central bank or Apple stocks. Bitcoin, as an investment tool, is more like gold. Although it is more technologically advanced and differs in functionality.

this is one of the weaknesses of bitcoin, which is certainly the advantage of bitcoin, its price fluctuations. But most people interpret this to be too high, bitcoin, which like the end of last year experienced the hype and the market is sluggish so they blame the market

"In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. Inflation reduces the value of currency over time, but deflation increases it. This allows one to buy more goods and services than before with the same amount of currency." - Source : https://en.wikipedia.org/wiki/Deflation

So based on this question - " At present, Bitcoin is going down continuously, so is it a deflation? " your assumption is wrong. The value of the currency must go up for deflation to happen.  ;)

The Bitcoin price has gone up, if you look at the long-term historic price history. <Year on year>  ;D

Bitcoin opens up great economic opportunities. This is that increased security, global volume transactions, while the commission will be minimal. I think that the prospects are very good and therefore you just need time to see them.

Bitcoin has many economic functionalities. It can be be used as an investment scheme. It can also be used as a currency for trade in exchange of other currencies and goods.

There are many features of bitcoin which can act as a economic function. People can earn money through it and change their livelihood, there are many investment oppurtinities too and also it can be used in online shopping as a currency.

Bitcoin can work as a medium of exchange. So it does act as an economic function. The feature of investment also help in this matter.

I couldn't find the corelation between OP and the title. Anyway, by definition it is showing inflationary characteristic due to price decrease. But when you consider it has fixed asset, you would realize that bitcoin is invariable deflationary.

I don't think it is deflation per se, but it is more like a price correction for the ghastly spike. We experienced earlier this year. Next, Bitcoin and any crypto currency is not jist an algorithmic currency but the next currency. I think crypto currency and the blockchain technology could be big if allowed to be big.

do check out "money vs currency" on youtube by Mike Maloney. It may appeal to you.
Paper money (currencies) was invented for debt. and subsequently widely used for fraud purposes.

Actually Central banks are creating their own cryptocurrencies as well. very soon we will dive into an era full of cryptos, just have to e careful which are the proper ones.

In the early years, many hyped up people in the public used "deflation" as a form of argument.
Actually the utility of bitcoin or any other cryptos doesn't actually create a deflation, it follows inflation and "correct" it with new variables in the equations so the economy remain simple but more tech-influenced.

It is also a way to earn extras into a user's pocket as well. It has the ability to create a new economy by itself if adoption increast to about 10% world population. That is what banks and central banks are afraid of.

Absolutely agree.

I agree. currently the data on bitcoin users is only about 1% of the world population. we can imagine if it increases by 10x, of course this should be anticipated by the government so that it does not cause turmoil

It also experiencing arbitrage in the bitcoin economy.
Especially with the tether crash
https://theblockchaintoday.com/bitcoin-arbitrage-across-countries/

but many world banks are interested in blockchain technology
but they only use and adopt the blockchain system,

Meanwhile, governments are frantically coming up with regulations so that they will not to be "circumvented" and still have taxes to levy on. They should be seeing crypto as a great disruption to their reserves... since most of the reserves don't really have real money ever since the paper currencies are no longer backed by gold. 😅

maybe what you say is true that bitcoin is an economic function that uses the times and of course the development of technology is also practically fast and efficient that is needed, someday in the future it will use digital facilities

I think it about the used of blockchain technology, With regards to the advancement of technology people are accessing over the internet to purchase product online with a transparent transaction.

One of the added values of the bitcoin currency is to make it easier for business people, especially trade between countries that usually always use dollars, with bitcoin we don't need to exchange our money anymore this can avoid the possibility of inflation, the second bitcoin The advantage can make it easier for tourists to visit our country. we don't need to complicate with money that must be exchanged first, this makes it very easy for traveler to attract tourists, so that is a lot of added value for bitcoin for the country if the country facilitates crypto currencies ..

Central bank you say? How could it be a bank if it's just a currency? Maybe we have different definition on Bitcoin but it would be easy to say that we use Bitcoin as a means of payment in online transactions and in an exchange of other cryptocurrencies.

Bitcoin decentralised really gives the economic a change of system, we usually used centralised transactions system now we can choose when we make transaction, bitcoin and crypto actually can disrupt the economic if being used too much, crypto got value because of the supply and demand, not the same with fiat, fiat value is given and control by the government, bitcoin still affect economics in a small scale

With crypto inflation can be minimized like people can keep their money in crypto and with this the fiat is also controlled so the extra money can not be printed so money devaluing is decreases ultimately the economic situation is good.

This is a good question and it has so many economic phenomenons revolving around it like the reduction of costs, the decline in the transaction costs and the up gradation of the existing banking system to the next level.

> Talks about central bank and bitcoin. The very problem about central banks is centralization whereas bitcoin decentralizes all transaction, it cannot be manipulated like what the banks are doing and the number of bitcoins created is only up to 21million. The banks can do so much more but they won't because they know hyperinflation is a problem.

it is not deflation but correction. And most importantly, its the whales doing it for their Christmas shopping spree. LOL

the limited supply of bitcoin will further alienate a country from inflation because there is no policy to make new money that can cause inflation with a smaller value each year. supplay remains bitcoin with the increasing number of requests from users this will increase the value of bitcoin, and this also applies to other altcoins.

Bitcoin is very useful in economic because of the blockchain we can transact our bitcoins such as paying bills , trading assets  and most important of all is remittances.  If every countries still accepting and promoting bitcoin as a partner , i think bitcoin will go up again because of the investors and the good news of bitcoin in every countries.

Bitcoin is not like central bank,it is bank on our hand so we can make transaction if we want but its value only depends on about its acceptance and demand so it will have value until it been transacted and used by the people and as you said there are chance for that bitcoin go worthless even satoshi said that statement so use it at your own risk because it is decentralized and highly manipulated.

The economic function of Bitcoin is the technology behind it whether the public will adapt and accept the innovation then utilize it for goods and services, and merchants to accept is as another option for mode of payment. I do not believe that what's happening is some kind of deflation. It actually showed its true value which was predicted at last year's price by end of 2017. Give it time to recover, slowly but surely.

The reason I'm interested in bitcoin is that it's a marvelous medium of exchange, but a terrible store of value and an even worse unit of account.

One of the most revolutionary things about bitcoin is that it challenges some of our ideas about what is money.  For example, why *does* the medium of exchange have to be the unit of account or a store of value.

The main function of bitcoin is to serve as a payment means which in this case a P2P payment without a third party and where you can be your own banks. We all know as a respect of that, a lot of people will have the freedom to do things without being hindered and the freedom to spend what they have.

Believe me, when it comes to using the banks, they have practically enslaved us over the years, tell us how much we can spend, change policies however they like, rip from us without any apology, have issues when it comes to making international transfers among many others and all these put together is what the crypto space is going to be solving and that is one great economic importance as far as I am concerned.

There are so many ways bitcoin can be used aside from its main purpose of using it as a payment system. It can be used as a means to transfer money and or use it as if a real currency to buy food and other supplies. Yet even with all these functions bitcoin was unable to go up in value and started to move down. This is simply because the rise in value was almost artificial due to a sudden rise among investors holding the coin without a real purpose. Due to an unfavorable market people started dropping their interest as they are driven by too many FUDs and failure of bitcoin price to move up.

They have not even seen a thing yet, because I am sure as things are going, there is great possibility of seeing the market even grow bigger than this, and in that case obviously, they will feel even more threatened. Regulation as it is will be their main savior in the long run, but my hope is that they get to be lenient about it, most especially for the developed countries.

As the technology keeps developing and we get to start seeing real life usage the more, there is the obvious part of seeing the market serve a great function in the payment sector most especially when it comes to sidelining the banks for international transactions, which is already happening anyway.

I think like you. The value of the currency is depreciating but it is only a small influence. I think most of the time the whale wants to adjust the price of Bitcoin to make investors anxious and sell off.

To me it has always been the ease of use. I have always supported the fact that bitcoin is a great way of paying someone. I try to pay people with bitcoin and I try to get paid in bitcoin whenever I work, that is my number one option to be paid in. That way it takes almost no time compared to bank payments. Now you may think bank payments are easy and you just click some bank app on your phone to send money to someone and you are done but you are thinking just local.

I mean bitcoin makes that happen on a huge global scale. Someone from USA can send money to someone in nigeria (probably a nigerian prince for example) and it will take just couple minutes at most to arrange that. Yes there are some other things that makes bitcoin amazing but the ease of use will always be my number one reason.

I do agree with the economic importance of Bitcoin and that it has been one great coins in the market do far but economists who formulate policies call it a poison for the economy of any nation and that is the reason this is banned in my country.

Whales always have an idea and plan to earn more profits. They usually don’t care about what would happen with others’ profit. Since they have control over market, they can do much.

I think bitcoin cannot be equated with stock market activities because both have different forms and characteristics, if in the past the price of apple shares was only 2 $ and has now increased to several times because the products produced by Apple are in great demand by the public, moving the supply and demand balance and make prices move up, while bitcoin is not the case, there are no products produced because bitcoinlah the products produced are many factors that influence price movements besides supply and demand such as halving day and hardfork

The biggest help is always known easy money transfer. You can transfer millions of dollars for pennies and still have a more trustworthy blockchain behind it compared to any other method we have right now. There are even loans written on blockchain in order to make it more permenant and easily checkable right now because bitcoin and blockchain is amazingly easy to use even at a scale.

Of course this comes with a price, the function is amazing but people have been using crypto in a way that they can make money and profit from these moves instead of taking advantage of these functions. Bitcoin could have been a system for money transfer globally but instead since it is such a great project it turned into a commodity and have been like that for a while. Hence lost its function along the way since it is not used properly.

the bitcoin that you have is your own bank and at that time there was no need for third parties to make transactions, exchanges and others, you only need a wallet and internet connection to do that. bitcoin and most crypto have a fixed amount of supply and this will be interesting when demand increases and automatically the price of bitcoin will increase because it is indeed like economic law.

If something needs to be called as currency then it have to act as perfect medium for transaction currently the Fiat money doing that but it is not a perfect system because the value of Fiat money keep losing due to inflation.so we have Bitcoin it also keep changing the value but depends on the market condition not based on the increase in the supply.

if Bitcoin will be used as a means of payment, at least its price should become stable.  But all users of cryptocurrency today earn with the help of Bitcoin and Isaev volatility.  There may be a conflict of interest and therefore the realization of all the hopes of many Bitcoin users are in a difficult situation.

Bitcoin is like giving a very simple option for financial transactions, reducing large transaction costs, can be used anywhere and
anyone. the function of bitcoin is very good for the economy, and maybe the role of bitcoin will be more vital in the future.

I don't think so. It is not deflation in that it is a normal movement. It is not really falling as falling. The rise and fall is not something that you should be treating in smaller time frames. It is unlike prices which are rising steadily the value of fiat currency which is also falling steadily. The price of Bitcoin is rising and falling depending on the demand. It may be low today but really high tomorrow and vice versa. But if you look at the bigger picture, the line is really going upward.

Bitcoin has got numerous economic functions. Among them includes the feature which makes Bitcoin to be considered as a store of value. With this, BTC can be transferred across the globe with ease in order to purchase goods and services in shops that accept it. Also, Bitcoin is considered as an asset, hence it can be bought, stored for years and transferred to younger generations to be inherited. Bitcoin also provides job opportunities such as crypto mining, crypto merchants, bounty hunting etc.

Right, this is not a deflation. Last year's bitcoin decline I think is because bitcoin has reached its saturation point so the price will bounce down and look for the lowest saturation point. This is normal when the price of bitcoin is high at the end of 2017 then everyone will sell it, of course there will be a massive dump.

I think bitcoin is not a full time job, so even though there are many people who produce from bitcoin but basically they don't have a permanent job which means they are unemployed, but with bitcoin they are able to earn income which of course will increase the economy of some residents who are aware of bitcoin.

I don't really understand your last sentence. Bitcoin is going down constantly, are you talking about its price or its supply is getting more and more limited?
If you talk about supply, it is really a deflationary mechanism that Satoshi really desires when creating bitcoin.
For this reason, supply is limited so many countries are watching Bitcoin as a solution to inflation growth too quickly.

Even with its current volatility, it is still partially very useful for payment for both receiver and sender. People still use it for payment, I still receive it as payment for salary, but the only thing is that once it is tied to salary, I quickly remove it because of its volatility. I could wake up tomorrow now and found out that the value had dropped, ad at the same time, it could be in my favor when the value increases more than what I was paid.

It is still yet to achieve this goal completely though, because this is the major reason why satoshi set up this digital payment system, but its volatility is making it less use or its purpose, but we all know that it will surely get to a point where bitcoin will become a stable coin naturally and then, it will fully accomplish its mission or its creation.

Bitcoin has given people the freedom to do whatever they want without exposing their identity. Yes people say that the Blockchain is open and you can see everything, but the real truth is that you’re seeing nothing. You’re only seeing addresses showing how much that were transacted but you’re not seeing who made the transactions, you don’t even know their location not to talk of knowing who those people are. So this is not transparency in any way. Though I saw news recently that the government are going to make exchanges to start requiring ID from those exchanging up to $1000 worth of crypto, but I think this is only going to work if you’re using centralized exchanges.

I think it is stable enough though. My reason? Its because it doesn't favor those who have large amounts to take advantage of being rich in fiat money at all. Since people are occassionally going in the market, we can only see a part of the people who are having these Bitcoins get rich 'slowly' not entirely destroying the current wealth proportion of the world's economy especially in cryptocurrency.

You do not need bitcoin to be stable to actually buy or sell stuff, I mean the buyer and seller agrees on a price that is purely bitcoin worth or they peg it to dollar like most do and then both sides takes the risks and rewards.

Pizza example comes in handy in these situations, someone sold 2 boxes of pizza for 10 thousand bitcoins and both of those people agreed that it was in fact a good deal at the time, the person that got 2 boxes of pizza and paid 10k bitcoins for it must be feeling bad right now but at the time he thought he was doing something easy and he was right, he just sent 10k bitcoin with a single click and got 2 boxes of pizza which is amazing. So long story short you can't look at bitcoin at what price it will be, you have to look at it how much it is, if you see it only as an investment deal then you can never spend it ever.

i agree and aside from it the fact that it gives profit to stay at home wives and jobless people that normally has nothing to contribute
to the financial aspect of their family , now being unemployed is now not a hindrance to contribute financially it has also made a contribution as well
i guess to the economy system.

You are right, and this is the reason why we cannot continue to see bitcoin has an investment deal, we have to continue to see bitcoin for what it was created for, which is for payment and now that the market is still volatile, the best for both party would still be to work with fiat, I mean when a receiver receives payment for bitcoin, he has to convert it to fiat immediately so he does not lose the value when the price goes down.

This brings me to the first part of your statement, we still need bitcoin to be stable in other for it to become fully useful for buy and sell. We have all been clamoring for global digital coin, and some even believe it could replace fiat, how would something you cannot keep in your wallet replace fiat? It is only when bitcoin is stable that a merchant can confidently store it in his or her wallet without the fear of getting a lower value in return the next day he wakes up to his wallet.

It can be like,let your money to earn for you and this sounds perfect for bitcoin and other cryptocurrencies as well.

One thing need to remember is like you said its not a job or secured for of investment so learn the caution before doing it.

One of the main functions of bitcoin is that it is a great economic outlet for those nations that have very bad economies, and high inflation, the people who own bitcoin have a relatively high private economy with respect to the average of those who have bitcoin. They are residing in the country and enjoy a minimum wage for their work per month, many times what they earn in their salary is not enough but a few bitcoin can bail out the traditional economy.

Any group of assets has a cycle of price increases and discounts.  It is inevitable in any market.  I understand how you felt at the time of this post.  At that time, bitcoin had a very deep discount.  Bitcoin has grown very fast and has fallen rapidly during the following year.  Currently bitcoin is in a new cycle of stability.  Be optimistic and you won't miss the great thing that altcoin offers.

in my opinion bitcoin is different from the fiat economy that currently exists, but bitcoin can also affect the economy if large fiat funds flow to bitcoin. but basically bitcoin is a valuable asset in the form of digital money. however, if bitcoin can collaborate with fiat currently, it will be good for me.

Bitcoin is an alternative medium of exchange and to be an effective medium of exchange, it must be acceptable in exchange for goods and services. Bitcoin's use is still limited because only few stores or shops are accepting it worldwide compares to the fiat. But bitcoin can be used by people who want to avoid banks and other transactions that requires third party or middlemen. Bitcoin's economic function differs from fiat because it does not involve any government interventions.

Now there are more than just a "few" places where you can spend bitcoins, every year there are more and more places.
Effective medium of exchange is a trust between two or more parties, confidence in fiat system is lost a long time ago, now question is whom will you believe more: in bankers and governments or algorithm? Do you trust people or math? Bitcoin is a tool that can help economy to evolve, on local and global level. Transparency is one of the functions that bitcoin can offer to us. For how long we will live in the dark while rich people are getting richer with help from the governments and banks?

I see Bitcoin as a means to pay for goods and various services using the Internet.  Since today the number of online purchases is increasing in the world, I consider cryptocurrency to be very promising in this regard.