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1  Economy / Economics / Change the rules of Bitcoin money supply to fix the price stability issue! on: May 28, 2011, 08:33:46 PM
..otherwise it will never achieve its true potential!

Bitcoin needs to have a mechanism that ensures price stability.

The current system has many excellent features, but it is broken in this critical area, and may never achieve widespread acceptance as a consequence.

The system has an inbuilt mechanism of currency destruction - as certain accounts are lost due to system failures, mistakes or death of their owners.
This in itself is not a bad thing, as long as it is balanced with an appropriate level of currency creation.

The ideal would be to manage the supply of currency such that it achieves approximate price stability relative to a broad range of goods and services.
This would increase the use and influence of the currency, and help its many advantages to be enjoyed to the fullest extent.

The current deflationary model is good for promoting adoption because early adopters have a financial incentive to adopt, helping the currency to gain a foothold.

Before very long though, I think the rules should be changed to address the price stability issue.
There ought to be an automated mechanism for doing this..

Anyone have any good ideas on this?

Note: It's not as simple as counting the number and value of transactions because many of those transactions may not be economically meaningful, merely a user shifting funds from one account to another.

Milton Friedman: "I've always been in favor of abolishing the Federal Reserve and substituting a machine program that would keep the quantity of money going up at a steady rate."
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