A bitcoin is only worth what someone is willing to pay for it. No more and no less.

Scarcity does not cause use something to be valuable. Buggy whips and old iPhones, for example, are not worth more money ever year even though they become more scarce every year.

Bitcoin has zero utility outside of the ability to transfer it to someone else for some other value.

At this point, it is not easy for your average person to purchase normal goods with bitcoin. Is it cheaper to use? If you talk to someone who uses credit cards and tell them it is cheaper to use bitcoin, they will not agree. Credit cards offer cash back and rewards for purchase. My credit card gives me 1.5% back in rewards for every purchase, for example. I also have the ability dispute charges I don't agree with.

Bitcoin may be cheaper for merchants to use when it comes to low volume merchants. High volume merchants make special deals with the major credit providers.

For in-person transactions, cash has zero fees and is immediately transferable. Checks have zero fees but take time. EFT is used for recurring billing quite a bit by merchants and it normally has zero fees.

Credit cards have fees but they are not comparable to bitcoin because you are not using money you have. You are borrowing money you don't have and spending it when you use a credit card. This allows people to make purchases they can't afford and that gives vendors the ability to sell products and services to people they wouldn't have buyers for otherwise.

Because bitcoin doesn't have a readily apparent advantage over any other method of purchase, international transfer is normally touted as bitcoins advantage. However, there are many ways to do an international transfer with currencies that do not incur things such as wire transfer fees.

This list compares ways of sending money abroad:

http://www.consumerreports.org/cro/2012/03/the-best-ways-to-send-money-abroad/index.htm

It is missing newer services like Transferwise which also may be cheaper. There is no inherent advantage bitcoin has to international transfer over other methods of transferring value.

Because of all that, the future value of bitcoin is entirely speculative in nature. Whether it will be worth more or less in the future is entirely dependent on individual perceptions of value.

A bitcoin is only worth what someone is willing to pay for it. No more and no less.

If you look at "how many bitcoins will exist in the future" or any other method to try and infer what the price will be in the future, you are looking at things incorrectly.

You are making a number of assumptions with that.

The first assumption is that the miners and developers will be fine with a system that does not generate the number of additional bitcoins that are generated today to pay miners. Do you think miners will be fine only generating money from transaction fees? And if so, do you feel they will accept a low transaction fee? If not and the transaction fee goes high, how do you feel that will affect desire and need for bitcoins?

The miners are apparently in control of the bitcoin protocol as shown with the current BIP situation. The small handful of miners who constitute over 50% of the network have decided on which modifications to make to bitcoin as far as the blocksize goes and are running with it.

How many bitcoins there will be in the future is really up to them. They have shown that they control the network. The developers are a distant second to them. However both have more control than the bitcoin userbase based has.

Secondly, you are not assuming any lending. All major currencies used in the world today have a fractional reserve system. There is no way to prevent a money multiplier or fractional reserve system arising when it comes to any asset or currency.

You can take someone's bitcoin on deposit, lend it out to someone else, they can buy something from yet another person and if you can get that person to deposit their bitcoin with you, you can lend it out to someone else. Re-lending the same coins increases the money supply.

If bitcoin did become popular, you would have bitcoin lending. And all currencies in the past (tally sticks, gold, etc. tally sticks were mostly a system of credit in any case) and current currencies have/had borrowing and a money multiplier. It has not happened with bitcoin (except in a tiny part) because people are afraid to lend. Due to the pseudo-anonymous nature of transactions, people don't trust to lend their bitcoins out. If bitcoin really became popular, you would have lending and bitcoin would be affected by the same inflation rates caused by ease of lending that other currencies have.

It is not the quantity of dollars in the world that causes inflation. It is the ease to which people can get dollars.

Simple example: If anyone can go to a bank and borrow as much as they want to buy a house, what happens to the price of houses?

I'll address your two main points.

First, the scarcity (deflationary nature) of something does not determine its monetary value. It is desire and need vs. ability to access that creates monetary value. If scarcity created value then an old pair of your shoes would increase in value over time as there is only one pair of your old shoes.

The value of bitcoins are determined by desire and need along with the ease it is to acquire them. If borrowing bitcoin was easy, the monetary value of bitcoin would go down if you just look at the scarcity component. However, if the ability to borrow bitcoin caused the desire for it to go up, that could cancel out the negative monetary affect of the increased ease of access. It is not a single factor that causes monetary value.

Second, your comments about banks is not true. Banks do have collateral for loans, that is correct.

However, many, many times, that collateral does not make up for the value lost when a loan goes bad. There are millions of examples of this. Credit card debt is an easy one to understand. Everyone has likely known people who racked up too much credit card debt and then went bankrupt. The banks lost the money they lent in that case.

When credit card debt goes bad, banks usually sell the bad debt to a collection agency at a loss so they don't have to deal with it. You can buy collection agency debt yourself if you want and try to make money off it. There are many collection agencies. Some do decent business, some don't. Similar to banks you can simply type "collection agency for sale" in a search engine to find one if you want to buy one. Buy up the debt and hire a bunch of people to start calling people to try and collect. The banks certainly do not make a profit selling their bad debt to these agencies. The really bad debt can be bought for pennies on the dollar.

The reason the financial crisis in 2008 was so bad is because banks were making 90% or 100% loans (or more) on homes at their then market value. Housing prices dropped 50% so people didn't pay back their loans and the banks ended up with huge portfolios full of crappy homes that they couldn't manage and needed to sell. The government had to step in and loaned money to the banks so they didn't go under. And the government purchased many of the banks crappy loan portfolios. And they merged together banks with terrible loan portfolios with stronger banks. And the work done did keep the system from failing. The banks lost real money and many are still today digging out of that hole. It is the main reason the Fed has been keeping interest rate low.

So, no, banks don't always have a way of recouping the money they lose. f it was that easy, we'd all own banks and the richest people in the US would be bank owners. If you look at the rich list, they aren't the owners of banks. They are tech company founders, Walmart heirs, hedge fund traders and the like.

There is nothing about banks that "suck". A bank is a business. If you want to buy a bank yourself, go ahead. You can search "banks for sale" on any search engine and will be able to find a large number for sale.

You will need to take deposits and make loans. To get deposits, you will need to get people to trust you to take their money for safe keeping. Once you get enough deposits, you can loan those deposits out to other people. You pay the people who give you money for safe keeping an interest rate (could be 0.01%) and loan the money out at an interest rate (3%+) and then take the spread.

You will do well if everyone pays you back and people keep their trust in you. If you make stupid loans, as many banks did leading up to 2008, you may lose so much money that you can't cover the deposits.

If you don't have the Federal Reserve/government to back you up in that situation, then you will lose people's deposits.

If you loan money out long term and take in money short term (via deposit) and people lose faith in you and everyone comes in to take their money out, you will experience a "run on the bank" and could end up having to tell people that you don't have the money to give them as shown nicely in "It's a Wonderful Life"

https://www.youtube.com/watch?v=iPkJH6BT7dM

Now, as a depositor, would you put your money in a bank that had no Fed backing or one that did? In the US, we have FDIC insurance so if a bank royally screws up and lends money to people who don't pay it back, the depositors can still get their money out.

As part of that, when you own a US bank, you can't make stupid loans. You can't go loaning money out to your friends who aren't going to pay you back. You get regulated. The government comes in an audits you every few months. They go through all your loans and balances and make sure you aren't screwing everything up. And if you are screwing up, they will shut you down before they think you will lose all the money and they will usually sell or merge your bank with a decent one to clean up the mess.

You agree to submit to all that if you own a bank that takes FDIC insurance and government loans.

You don't need to do any of that, of course. If you want to start your own bank without any of that regulation, just convince a bunch of friends to deposit money with you. You can loan it out to other friends. If those friends use that loaned money to buy things from other people you know and you can convince those people to give they money to you on deposit, you can reloan the same money out again.

And there you go, you are a bank without regulation and without any reserve ratio. You can loan out money at an interest rate, get it back with deposits, loan the same money out again, get it back, loan it out again, etc. You are creating money "out of thin air" with no reserve ratio.

You will need to convince people to deposit their money with you, of course, and you better not make many bad loans.

You could do it with bitcoin if you wanted. Take 100 bitcoins on deposit from Person #1. Give him 1% a year in interest for it. Loan out the 100 bitcoins to person #2 at 3% interest. Person #2 buys something from Person #3. Get Person #3 to deposit the 100 bitcoins with you. Loan out the 100 bitcoins to Person #4. Person #4 buys something from Person #5. Get Person #5 to deposit their bitcoins with you.

At the end, you have 200 bitcoins loaned out (to #2, #4) and people have 300 bitcoins deposited with you (#1, #3, #5). And you actually have 100 bitcoins on deposit. There are only 100 bitcoins required for this example.

You can do that forever. And it can work if everyone pays you back and people don't withdraw too much. For example, imagine you did it until there were 100,000 bitcoins loaned out and people had 100,100 bitcoins deposited with you. You would still only have 100 bitcoins on deposit and only 100 bitcoins are needed to do all that lending and depositing.

Ta da, you have a bitcoin bank with a fraction reserve lending system, a money multiplier and everything else.

Now, the questions to you are...

what is the value of bitcoin if anyone can borrow as much as they want at a low interest rate?

does it matter how many bitcoins there actually are when this is going on?

Everything is fine as long as people don't ask to withdraw more than 100 bitcoins at a time and all loans are paid back.

This is how banking systems work at their core.

Now, this is different from central banks. You don't deposit your money with central banks. Central banks exist to keep the banking system from falling apart. Rules are set to determine all sorts of things that relate to banks to keep the system from blowing up. You don't need a central bank but without something like it, you end up with a system where people create banks, make stupid loans and lose everyone's money.

Many countries have a completely government controlled banking system. In the US, it is a mix of public/private institutions and you can start your own bank (or credit union or whatnot).

You don't load a credit card up with money. When you spend money on a credit card, you are borrowing money when you pay.

In trading terms, when you buy an asset using a credit card, you are shorting (selling via borrowing) the currency the credit card is in and going long the asset you purchased. If your credit card is in US dollars, for example, and you purchase a $100,000 Mercedes car with it, you are now short $100,000 US dollars and long a $100,000 Mercedes.

If the value of the Mercedes doubles before your payment is due and you can sell it by then for $200,000 (doubtful) and make your $100,000 monthly payment to pay back the credit card loan, then you will have made $100,000 profit and it was all borrowed money. This is not a very realistic example as most people don't use credit cards to buy assets they believe will appreciate in value. They usually use them to pay bills or buy non-performing assets. However, it is true that when you use one to purchase an asset, you are going long that asset and shorting the dollar until your payment is made to close out the loan.

Credit cards are different from debit cards. A debit card is not a loan, the purchase amount is deducted from the bank account associated with the card.

Because credit cards are loans, they generally have higher fees than debit cards. One big reason is because not everyone who borrows money pays it back. Some people buy a bunch of stuff on credit cards and run away and/or file bankruptcy.

And that's one of the reasons credit cards have higher interest rates than other payment methods. You are not spending your money, you are spending their money.

There are a variety of other differences between cards, such as the amount of buyer protection you have if someone rips you off. More details are here:

http://science.howstuffworks.com/debit-cards1.htm

Interesting ranking given that you can't actually buy it yet:

"This item will be released on November 16, 2015. Pre-order now. "

I posted in the other thread on this but I think anyone who thinks that this is a good idea needs to consider this...

Why would anyone want to run a $400 miner that helps them deal with bitcoin

if instead the 21 company just deployed their own server on the Internet, in a colo that had cheap bandwidth and 24/7 cheap power, and you could connect to that with a nice web interface to do your mining and whatever else they want to do on this piece of hardware you buy

Then you wouldn't have to deal with:

- upgrading the thing with new OSes and software
- fixing it when it had problems
- the slow Rasperberry PI2 itself

and it would be cheaper because you would pay by the month as a service instead of paying $400 for something that will be obsolete next month.

The whole thing makes absolutely no sense at all. It is simply unbelievable that this is their business idea.

Why not sell a Raspberry PI that runs a web server with a daughter board to speed up web serving for $400? How about a PI that runs its own email server? Makes just as much sense as this does.