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Title: A huge test of the majority peoples feeling about deflation Post by: johnyj on July 31, 2012, 02:18:35 PM As we all know, BTC is deflative in nature, and now time has come to test people's tolerance for deflation
With difficulty rise quickly in a couple of weeks, miners will see their BTC production speed decrease very quickly, so in terms of BTC income, it is getting less and less everyday (unless they keep expanding the mining scale) At the same time, the BTC/USD exchange price has almost doubled. So in terms of income measured by USD, it actually increased But this is a psychological question: Does people feel more comfortable with increased amount of BTC income at same stable value or they feel more comfortable with decreased amount of BTC income at a increased value? I think the later to be quite mind twisting, against common sense, e.g. not majority of people think in this way, but this might also depends on people's mathematical skills and awareness of economy/financial If most of the people have difficulty to quickly judge the value of BTC, it might stopping them from using this coin as a medium of exchange Title: Re: A huge test of the majority peoples feeling about deflation Post by: nevafuse on July 31, 2012, 03:10:54 PM With difficulty rise quickly in a couple of weeks, miners will see their BTC production speed decrease very quickly, so in terms of BTC income, it is getting less and less everyday (unless they keep expanding the mining scale) Regardless of the reducing reward size, with exception of the bubble last summer, the currency has been deflating for a while. or they feel more comfortable with decreased amount of BTC income at a increased value? And people are more comfortable having a savings account that makes less interest than inflation? Why does the only way to avoid inflation have to involve the risky/complicated stock market? I think it makes a lot more sense to be able to put money in a savings account & have it worth the same or more later even w/o interest. You shouldn't have to take on so much risk to save your hard earned money. This only allows the rich to keep getting richer because they are the only ones w/ access to stock advisers & financial planners to make sure their savings doesn't become worthless. At the very least I should be able to stash cash in my mattress & have it be worth the same years later. People are stuck with the mentality that if my savings is going to be worth less tomorrow I might as well spend it today. Now none of these people have safety nets in case things go bad. And for critics that claim this will cause people to hoard their money, I still have to buy things. I can't live without food, water, safety, shelter, transportation, etc. Title: Re: A huge test of the majority peoples feeling about deflation Post by: molecular on July 31, 2012, 03:24:45 PM With difficulty rise quickly in a couple of weeks, miners will see their BTC production speed decrease very quickly, so in terms of BTC income, it is getting less and less everyday (unless they keep expanding the mining scale) Regardless of the reducing reward size, with exception of the bubble last summer, the currency has been deflating for a while. hm? Bitcoin supply has been inflating and will continue to inflate for a couple of decades. Are you talking about falling "prices" maybe? If so: the reason is not deflation. Maybe inflation of USD, but certainly not deflation of bitcoin. Title: Re: A huge test of the majority peoples feeling about deflation Post by: Stephen Gornick on July 31, 2012, 05:34:00 PM If most of the people have difficulty to quickly judge the value of BTC, it might stopping them from using this coin as a medium of exchange You are confusing using the currency as a medium of exchange and holding bitcoins for speculation. If I convert dollars to bitcoins to make a purchase, I really don't care what the exchange rate is. $50 worth of bitcoins costs $50 today. A week from now, it will also take $50 to buy $50 worth of bitcoins. Additionally, you aren't considering the comparative cost between using bitcoin as a payment method versus credit card. Some merchants offer cash discounts. In the U.S. this is seen where there are two prices at the pump, a cash price and another price when paid using credit or debit card. Bitcoin has this same cost advantage. Because bitcoin has such dramatically lower payment network merchant fees, it can be used by a merchant for competitive advantage. So you you buy $100 at NewEgg, and your option is to pay $98 worth of bitcoin or $100 if using your credit card, which method might you use to pay? For those who are speculating, as long as you can replenish your BTC wallet to allow you to use bitcoins for spending yet maintain a certain level of investment then there's no resistance to using bitcoins for payment. Title: Re: A huge test of the majority peoples feeling about deflation Post by: sunnankar on July 31, 2012, 06:49:53 PM I think the later to be quite mind twisting, against common sense, e.g. not majority of people think in this way, but this might also depends on people's mathematical skills and awareness of economy/financial First, we all know that cryptographers are not any good at the maths so they will be particularly mind twisted. Second, Bitcoin is inflationary, not deflationary, as you have asserted. Inflation is the increase in the currency supply (http://mises.org/quotes.aspx?action=subject&subject=Inflation). For the next few decades, there will always be a constant increase in the supply of bitcoins created. The block reward changing will merely decrease the rate of increase but the rate of change will still be positive and therefore inflation of bitcoins will still be happening. Third, with regards to miner's income just look at the performance of the GIGAMINING (http://gigamining.com/) or BITBOND (https://us.glbse.com/asset/view/BITBOND) assets. On 7 May 2012 GIGAMINING produced 0.02333570 BTC per bond or about $0.122512425. On 27 Aug 2012 it will produce approximately 0.01731418 BTC per bond (~75%) about $0.174474055 (~142%). The differences are due to changes in difficulty and exchange rate. Title: Re: A huge test of the majority peoples feeling about deflation Post by: nevafuse on July 31, 2012, 08:43:37 PM hm? Bitcoin supply has been inflating and will continue to inflate for a couple of decades. Are you talking about falling "prices" maybe? If so: the reason is not deflation. Maybe inflation of USD, but certainly not deflation of bitcoin. Deflation = falling prices in an economy. And as stated above my hunch is an increase in popularity that is out pacing the growing supply of bitcoins. Title: Re: A huge test of the majority peoples feeling about deflation Post by: niko on July 31, 2012, 10:25:29 PM The only situation where actual price of bitcoin plays a role for me is if price was so low (and total value of Bitcoin economy so tiny) that individual transactions move the market. Fortunately, we are moving away from this extreme, despite the inflation which is there by design and will gradually disappear over the next few decades.
Other than that, I don't care if it's $10 or $2000 per coin. There is plenty of room in eight decimal places. I spend and buy them according to their current value. Even if I'm speculating, I still don't care about the absolute value, but about relative change over time, and whether I can predict this trend (I can't). The only thing that bothers me is volatility, but that'll get better with time, and even now in many cases the problem can be circumvented with real-time conversion through paysius or bit-pay. Title: Re: A huge test of the majority peoples feeling about deflation Post by: nedbert9 on July 31, 2012, 11:01:28 PM Stagnant wages = debt-based consumerism = unprecedented wealth consolidation (higher than 1920's) Now is the time for Bitcoin. If for nothing else, but to counter the current state of capitalism that is strip mining the foundation of the economy. The people should be allowed to possess a real, immutable share of the economy by way of currency. Title: Re: A huge test of the majority peoples feeling about deflation Post by: sunnankar on July 31, 2012, 11:07:38 PM Deflation = falling prices in an economy. No, deflation is not falling prices in an economy. Sure, falling prices are sometimes associated with deflation of the currency supply but to assert the effects as the action is like saying that wet streets are rain. Perhaps you are using a bastardized definition; which has happened over the decades from the influence of mental Keynesian midgets. Quote Ludwig von Mises in Mercury in 1942 (http://mises.org/efandi/ch18.asp): Everybody knows that inflation consists of a large increase in the available quantity of money and money substitutes such as bank credits. If for nothing else, but to counter the current state of CRONY capitalism that is strip mining the foundation of the economy. Important to understand that what is currently in place is not capitalism but a form of crony capitalism or, in other words, fascism. Title: Re: A huge test of the majority peoples feeling about deflation Post by: notme on July 31, 2012, 11:21:17 PM Deflation = falling prices in an economy. No, deflation is not falling prices in an economy. Sure, falling prices are sometimes associated with deflation of the currency supply but to assert the effects as the action is like saying that wet streets are rain. Perhaps you are using a bastardized definition; which has happened over the decades from the influence of mental Keynesian midgets. Quote Ludwig von Mises in Mercury in 1942 (http://mises.org/efandi/ch18.asp): Everybody knows that inflation consists of a large increase in the available quantity of money and money substitutes such as bank credits. If for nothing else, but to counter the current state of CRONY capitalism that is strip mining the foundation of the economy. Important to understand that what is currently in place is not capitalism but a form of crony capitalism or, in other words, fascism. He's actually using the most common definition... http://en.wikipedia.org/wiki/Deflation What you're talking about is more commonly referred to as monetary deflation... http://en.wikipedia.org/wiki/Deflation#Money_supply_side_deflation Title: Re: A huge test of the majority peoples feeling about deflation Post by: runeks on July 31, 2012, 11:23:45 PM Second, Bitcoin is inflationary, not deflationary, as you have asserted. Inflation is the increase in the currency supply (http://mises.org/quotes.aspx?action=subject&subject=Inflation). For the next few decades, there will always be a constant increase in the supply of bitcoins created. The block reward changing will merely decrease the rate of increase but the rate of change will still be positive and therefore inflation of bitcoins will still be happening. Deflation = falling prices in an economy. And as stated above my hunch is an increase in popularity that is out pacing the growing supply of bitcoins. No, deflation is not falling prices in an economy. Sure, falling prices are sometimes associated with deflation of the currency supply but to assert the effects as the action is like saying that wet streets are rain. Perhaps you are using a bastardized definition; which has happened over the decades from the influence of mental Keynesian midgets. When you hear the terms mentioned in the media and by most Keynesian economists, "inflation" and "deflation" refer to price inflation/deflation, and not monetary inflation/deflation. Title: Re: A huge test of the majority peoples feeling about deflation Post by: Factory on August 01, 2012, 12:21:54 AM Bitcoin is inflationary, not deflationary Nonsense, Bitcoin is deflationary, just like gold. There is a capped amount in existence, we just haven't mined all of it yet. And because coins continue to get lost, that total amount will only decrease with time. In normal economies prices are kept stable by regulated inflation, but Bitcoin prices will always be on the rise, as coins get more and more scarce compared to the demand. I understand why Satoshi choose the 21M limit, as it's a big incentive for miners and early adopters to get involved, but I wish that Bitcoin was inflationary, because it would allow for much more stability once it's goes mainstream. A common misconception is that people believe bitcoin is inflationary because more is being created each day. One must realize that that is only part of the equation. In relative terms, bitcoin is deflationary. The rate at which it is produced is a constant amount (excluding the halving occurring in a few months.) Bitcoin's value has increased greatly vs major global currencies, and that is because of another factor: demand. While it (bitcoin) is constantly being created, it is being utilized in markets and in many ventures (think bitcoin-based websites.) It is also hoarded, though I am not sure to what extent. As demand for bitcoin increases, it's relative value MUST increase, simply because the 'production' of it is finite. Of course, when deflation occurs, there is an increase in hoarding. This is logical; who would want to get rid of something when it is continually gaining greater relative value? It will be interesting to see what the future brings. There are so many variables involved, no one can be certain of what will happen; only what may happen. Title: Re: A huge test of the majority peoples feeling about deflation Post by: notme on August 01, 2012, 12:24:11 AM monetary inflation vs. price inflation
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Also, watch your tenses, it'll help you think more clearly. Bitcoin is currently inflationary. It will become deflationary once the rate of mining drops below the rate of loss. Who cares? I don't. I simply use Bitcoin, and will continue to do so. Title: Re: A huge test of the majority peoples feeling about deflation Post by: myrkul on August 01, 2012, 03:21:10 AM Folks, as notme repeatedly pointed out, this is an issue of semantics. Also, watch your tenses, it'll help you think more clearly. Bitcoin is currently vmonetarily inflationary. It will become vmonetarily deflationary once the rate of mining drops below the rate of loss. Who cares? I don't. I simply use Bitcoin, and will continue to do so. It's currently price deflationary, and that will likely only speed up. Title: Re: A huge test of the majority peoples feeling about deflation Post by: johnyj on August 01, 2012, 06:59:41 AM I see that most people answering this post are not majority of people that we can meet daily ;D
If everyone on this planet has a master degree in mathematics/economy, then things are more complicated, but just for common sense, don't you just want to avoid all these calculations/definitions as a normal user? The shape of Demand/Supply curve is decided by human nature, I think the characters that people require from a currency also comes from human nature, just not sure what it is, but simplicity is definitely an important aspect Title: Re: A huge test of the majority peoples feeling about deflation Post by: niko on August 01, 2012, 12:59:26 PM Folks, as notme repeatedly pointed out, this is an issue of semantics. Also, watch your tenses, it'll help you think more clearly. Bitcoin is currently vmonetarily inflationary. It will become vmonetarily deflationary once the rate of mining drops below the rate of loss. Who cares? I don't. I simply use Bitcoin, and will continue to do so. It's currently price deflationary, and that will likely only speed up. Thanks for fixing that. Yes, the exchange rate to USD is likely to continue to rise, so btc-denominated prices are likely to continue to drop. Unless they don't. There have been, and will be, ups and downs in exchange rates. It's also a matter of time scale and cherry-picking to suit one's favorite dogma. I've got nothing more to add to this topic. Back to the OP, I don't think we'll be actually able to tell how price deflation affects users' behavior, unless we split the user base in half and introduce one inflationary, and one deflationary coin. Any other (more realistic) aproach will be prone to ideological fallacies in interpreting data. The thing is, people use Bitcoin. If price keeps going up, despite monetary inflation, we conclude that Bitcoin economy is growing, most likely because there are more and more people using Bitcoin - even though it's price deflationary! So it seems that there is no problem. Title: Re: A huge test of the majority peoples feeling about deflation Post by: myrkul on August 01, 2012, 01:29:10 PM The thing is, people use Bitcoin. If price keeps going up, despite monetary inflation, we conclude that Bitcoin economy is growing, most likely because there are more and more people using Bitcoin - even though it's price deflationary! So it seems that there is no problem. Exactly. I like things just the way they are. Title: Re: A huge test of the majority peoples feeling about deflation Post by: Raize on August 02, 2012, 05:26:21 PM The only thing that matters about the deflationary aspects of Bitcoin is that eventually miners will have little to no incentive to mine. Every non-miner Bitcoiner thinks fees are going to be enough but they won't be and all the smart miners know this. Think about it, imagine you're someone who is creating Bitcoin and you want to encourage people to use it, you have the problem of if you make it inflationary then no one will hoard it, so it will never get used or become valuable enough to use, and if you make it deflationary it will get hoarded, but sometimes the speculation is going to create bubbles that make it unusable and eventually just a handful of people will own large amounts of it that they are unwilling to sell.
Also, because it is deflationary, at some point you know the miners aren't going to be willing to mine anymore, yet they will, having been involved in large monetary purchases of the currency, have an immense amount of sway over politicians. We're going to get "taxed" via fees that the developers are forced by law of various governments to put into their clients and mining pools will be forced by law to ignore or not accept those blocks that contain transactions without fees. Obviously this is far future, but it's still what we have to look forward to once Bitcoin has been widely adopted. Title: Re: A huge test of the majority peoples feeling about deflation Post by: niko on August 02, 2012, 05:49:13 PM The only thing that matters about the deflationary aspects of Bitcoin is that eventually miners will have little to no incentive to mine. Every non-miner Bitcoiner thinks fees are going to be enough but they won't be and all the smart miners know this. Think about it, imagine you're someone who is creating Bitcoin and you want to encourage people to use it, you have the problem of if you make it inflationary then no one will hoard it, so it will never get used or become valuable enough to use, and if you make it deflationary it will get hoarded, but sometimes the speculation is going to create bubbles that make it unusable and eventually just a handful of people will own large amounts of it that they are unwilling to sell. Also, because it is deflationary, at some point you know the miners aren't going to be willing to mine anymore, yet they will, having been involved in large monetary purchases of the currency, have an immense amount of sway over politicians. We're going to get "taxed" via fees that the developers are forced by law of various governments to put into their clients and mining pools will be forced by law to ignore or not accept those blocks that contain transactions without fees. Obviously this is far future, but it's still what we have to look forward to once Bitcoin has been widely adopted. That, or your crystal ball is broken... Title: Re: A huge test of the majority peoples feeling about deflation Post by: Raize on August 02, 2012, 06:53:30 PM Sure, it could be broken. But if we accept Bitcoin is destined to be a "success" as a currency we have to accept the fact that policy-wise it'll ultimately succumb to the nature of man and his government.
Title: Re: A huge test of the majority peoples feeling about deflation Post by: niko on August 02, 2012, 07:19:48 PM Sure, it could be broken. But if we accept Bitcoin is destined to be a "success" as a currency we have to accept the fact that policy-wise it'll ultimately succumb to the nature of man and his government. Fair enough. Let's wait and see. Except, I won't be waiting doing nothing, I'll be using Bitcoin. Title: Re: A huge test of the majority peoples feeling about deflation Post by: myrkul on August 02, 2012, 09:03:57 PM After block reward is 0, miners will process payments for tx fees. more blocks = more fees. They'll have little or no incentive to do single transaction blocks, but there will be plenty of incentive to process transactions.
As to government mandating fees in clients.... That's just silly. They tried a similar strategy with Napster... and now nobody actually uses Napster. Your crystal ball isn't just broken, it's fuckin' with you. Title: Re: A huge test of the majority peoples feeling about deflation Post by: runeks on August 02, 2012, 11:23:21 PM The only thing that matters about the deflationary aspects of Bitcoin is that eventually miners will have little to no incentive to mine. Every non-miner Bitcoiner thinks fees are going to be enough but they won't be and all the smart miners know this. Think about it, imagine you're someone who is creating Bitcoin and you want to encourage people to use it, you have the problem of if you make it inflationary then no one will hoard it, so it will never get used or become valuable enough to use, and if you make it deflationary it will get hoarded, but sometimes the speculation is going to create bubbles that make it unusable and eventually just a handful of people will own large amounts of it that they are unwilling to sell. Can you elaborate on this point? I don't think what follows the highlighted part explains why miners will have no incentive to mine.Quote Also, because it is deflationary, at some point you know the miners aren't going to be willing to mine anymore, yet they will, having been involved in large monetary purchases of the currency, have an immense amount of sway over politicians.adopted. What is your reasoning for thinking this is the case?I completely agree with you that governments will have huge incentive in trying to control Bitcoin. Controlling the monetary unit of a country is a very effective way for a government to finance itself. Let's hope they're as unsuccessful doing this as they have been at deterring piracy though. Title: Re: A huge test of the majority peoples feeling about deflation Post by: bg002h on August 03, 2012, 02:50:04 AM The only thing that matters about the deflationary aspects of Bitcoin is that eventually miners will have little to no incentive to mine. Every non-miner Bitcoiner thinks fees are going to be enough but they won't be and all the smart miners know this. Think about it, imagine you're someone who is creating Bitcoin and you want to encourage people to use it, you have the problem of if you make it inflationary then no one will hoard it, so it will never get used or become valuable enough to use, and if you make it deflationary it will get hoarded, but sometimes the speculation is going to create bubbles that make it unusable and eventually just a handful of people will own large amounts of it that they are unwilling to sell. Can you elaborate on this point? I don't think what follows the highlighted part explains why miners will have no incentive to mine.Quote Also, because it is deflationary, at some point you know the miners aren't going to be willing to mine anymore, yet they will, having been involved in large monetary purchases of the currency, have an immense amount of sway over politicians.adopted. What is your reasoning for thinking this is the case?I completely agree with you that governments will have huge incentive in trying to control Bitcoin. Controlling the monetary unit of a country is a very effective way for a government to finance itself. Let's hope they're as unsuccessful doing this as they have been at deterring piracy though. I wouldn't say Bitcoin is currently deflationary...in fact, the _inflation_ rate (as measured by the amount of new BTC created as a % of circulating BTC) is ridiculously high -- eg, how many coins existed 1 year ago cf. today? If you measure inflation by how much stuff costs, then every time the ticker goes up, bitcoin is deflating...but that's happening despite massive % increases in the coin supply...if governments tried to pull that of, their currency would lose tremendous % value. |