[CHART] Bitcoin Inflation vs. Time

[sum1tro]

Good thanks

[1714259526]

1714259526

[johny08]

so we are until 2017 driving with 10% inflation a year. That should be enough new coins for growing the ecosystem, ~$650Mill a year, and from 2017, ~325Mill. a year, there will be still the altcoins forks, which can grow in value.

[painlord2k]

so we are until 2017 driving with 10% inflation a year. That should be enough new coins for growing the ecosystem, ~$650Mill a year, and from 2017, ~325Mill. a year, there will be still the altcoins forks, which can grow in value.

No, we are until July (maybe June) 2016. Then inflation drop to >5%.
Inflation is countered by adoption.
Broadly speaking, if 500 M of new USD are converted in bitcoins in a year (what Chair Yellen print, currently, in 12 hours, 24h/7d) BTC inflation is completely countered at current exchange rate.
Given the current users bases of around 2 million people if everyone put buy other 250$ worth of BTCs in a year, inflation is countered.
Obviously, someone will buy >1 M USD in bitcoin and others will buy 1$ an the rest will be in between.
And we have increasing adoption worldwide.
If we are able to double our users base in a year (not so improbable), other 2 M people could buy a mean of 100$ of coins and the other 2 M of old users could buy the other 150$.
It must be understood, our users base got x5 in 2013 and probably will grow in the same way in the future (maybe 2x or x4 we will see).

Currently, blockchain wallets are 100x in two years (10x in a year), volume transactions (blockchain) are the same (but USD conversion rate is a lot larger than 10$ in september 2012) and the number of transactions is tripled (this last  number is much more interesting). Apparently adoption (as RPietila pointed out) happen in waves and we are waiting the next wave. This wave should bring in a lot of fairly deep pockets and propel the price a lot higher.

But deep wallet are waiting inflation to get down under the USD M1 inflation level (maybe they don't know they are waiting for this, they could be observing other metrics of their interest, but in the end, it all turn around this simple metric). Chair Yellen will need to print a lot more (or have someone to print for her indirectly) to avoid postpone the coming inevitable economic collapse.

[audereyy]

Nice review, thank you

[painlord2k]

No, we are until July (maybe June) 2016. Then inflation drop to >5%.

I want amend this.
I just checked the Bitcoinclock and it give "Reward-Drop ETA: 2016-08-06 13:49:52 UTC (101 weeks, 3 days, 6 hours, 40 minutes)"
The math is done considering ten minutes intervals between blocks.

If hashing power increase at the current rate, we will have 20% more blocks and coins mined and the halving will happen before. I consider this improbable. More probable a 10% increase every two weeks.

With 20% more inflation than the design (12% instead of 10% and 11% instead of 9%) the reward halving will happen 10 weeks before. This is around March 15, 2016.
With 10% more inflation than the design (11% instead of 10 and 10% instead of 9%) the reward halving will happen 5 weeks before . This is around May 26, 2016.

People looking at the schedule of the charts in OP will be mislead to believe the halving will happen many months later.

[ahoenk]

sorry im nubie here...is it mean that the BTC we hold now will be decreasing in value ? i think it will increase agains fiat ?

[07Ghost]

I think the chart should be updated as the data changes a lot....

[LMGTFY]

I think the chart should be updated as the data changes a lot....

Awesome! You could maybe ask whitslack for pointers on generating the chart.

[painlord2k]

sorry im nubie here...is it mean that the BTC we hold now will be decreasing in value ? i think it will increase agains fiat ?

This imply there will be less BTC mined when the halving happen and the value will, ceteris paribus, go up a lot.

Bitcoin exchange rate go up as inflation (number of btc mined) go down.

The previous halving moved the price from 10 to 1200 USD in less than one year (reducing inflation from 25 to 12.5% year)
This is impressive if we remember the USD was inflating less than BTC.

When BTC will inflate less than USD we will start to see increasing flow of value in BTC from the USD.

[angelaeames221]

http://www.mattwhitlock.com/Bitcoin%20Inflation.png

Bitcoin Inflation 4x3.pdf (8"×6") | Bitcoin Inflation.pdf (8½"×11")


http://www.mattwhitlock.com/Bitcoin%20Inflation%20logarithmic.png

Bitcoin Inflation logarithmic.pdf (8"×6")

Permission given to use and reproduce freely.

Very nice

[Hustle2survive]

sorry im nubie here...is it mean that the BTC we hold now will be decreasing in value ? i think it will increase agains fiat ?

This imply there will be less BTC mined when the halving happen and the value will, ceteris paribus, go up a lot.

Bitcoin exchange rate go up as inflation (number of btc mined) go down.

The previous halving moved the price from 10 to 1200 USD in less than one year (reducing inflation from 25 to 12.5% year)
This is impressive if we remember the USD was inflating less than BTC.

When BTC will inflate less than USD we will start to see increasing flow of value in BTC from the USD.

So whats expected for 2018 prices?

[painlord2k]

If there is no show stopper in the form of some irreparable weakness of the network, you will see some interesting stuff.
5% difference in inflation between USD and BTC imply the BTC will be up 50-60% in ten years and I do not foresee the USD be able to not inflate more than 5% without bankrupting the US Treasury, the states, the local municipalities and a lot of banks choke full of debts and bad loans.

To keep up with BTC, the USD should offer bonds able to cover the natural increase in value of BTC due to lower inflation plus something.
Given the USD is less and less used for international settlements, the value of USD will fall where the value of BTC will increase with adoption. So more people, in anticipation of this price action will try to enter driving the price up for BTc in USD and € and other currencies.

Apparently the Federal reserve, the ECB, BoJ and others are working in shifts to QE. When one stop another start. So, overall, they never stop.
BTC just don't care. When the Fed slow down, the ECB accelerate. So, when less USD will be printed and converted in BTC more € will be printed and converted in BTC.

Every currency inflating more than BTC will be subjected to competition from BTC as a store of value. But only BTC have a hard limit on the issuance of coins. And higher the exchange value, higher the utility in having a balance in BTC and not in fiat.

[eXch]

I fully agree with your opinion, this is the reality of future

[MarioSPGroup]

@painlord2k:
What do you think - isn't the same relation between BTC, LTC, Doge and other altcoins like between Federal reserve, ECB, and other issuers of fiat currencies?
Is it possible a consequence that when less USD will be printed and converted in BTC more USD and EUR will be printed and converted in LTC or other altcoins?
So the approximated inflation of BTC could be linked not only to the  USD/EUR-fiat system, but to the these altcoins which capitalization is relative high regarding the cryptocurrency market?

[painlord2k]

@painlord2k:
What do you think - isn't the same relation between BTC, LTC, Doge and other altcoins like between Federal reserve, ECB, and other issuers of fiat currencies?
Is it possible a consequence that when less USD will be printed and converted in BTC more USD and EUR will be printed and converted in LTC or other altcoins?
So the approximated inflation of BTC could be linked not only to the  USD/EUR-fiat system, but to the these altcoins which capitalization is relative high regarding the cryptocurrency market?

Probably you have

The ECB, the Fed and the other Central bank have the power to print their currency but they have not the power to control where the new currency will flow.
If a currency (fiat, crypto, commodity based do not matter) inflate less now and in the future compared to another currency, people will prefer to keep a balance in the less inflating currency.

But inflation is not the only parameter to judge a currency. Other parameters are liquidity, fungibility, durability, how easy is to use, security, privacy, etc.
The network effect of Bitcoin is a lot larger than the network effect of other alt-crypto-currencies, so another Alt-crypto need to offer some very compelling feature to attract users and capitals and contrast the pull of the bitcoin network.
So, I don't think the alt-crypto will be able to have any significative impact to the exchange rate of BTC in any type of fiat.

In the next few years, BTC inflation will fall from 10% (2013) to 5% (2016) then to 2.5% (2020), then to around 1% (2024). Another cryptocurrency just inflating less will have not enough advantages to pull users from BTC, because the costs of switching would be larger than the costs due to the inflation differential. And you can not have a deflating currency because as inflation advantage spenders, deflation advantage loaners. Both want a plain field and the only plane field is ~0% inflation.

A new different crypto-currency could start to steal market and users from BTC, in the future, but I believe it must have some serious improvement over BTC, not just some minor tweaks. And it is a future where BTC have already won the battle against fiat. And nothing prevent BTC from implementing the feature of this new currency (if possible).

[MarioSPGroup]

Yes, you are right about these other parameters as liquidity, fungibility, durability, how easy is to use, security, privacy. There are critical "points of power" of BTC.

But there are many initiatives on the market like "colored coins", Mastercoin, Ethereum as“Bitcoin 2.0″ protocols – alternative cryptographic networks that are inspired by Bitcoin, but which intend to make the underlying technology usable for far more than just currency. They are allowing users to create their own currencies on the Bitcoin network, and more advanced protocols like Mastercoin, Bitshares and Counterparty which intend to provide features such as financial derivatives, savings wallets and decentralized exchange.
So potentially there is no technical ban to issue gigantic amount of virtual money to the market "sitting in Bitcoin" as a fully "spare" coins to BTC. Any of these coins will argument that is a bitcoin practically, and will use the factors of liquidity, fungibility, durability, etc. from the bitcoin network.

What do you think - will be changed approximated BTC inflation by these facts of issuing of any (fully-integrated-with-Bitcoin) new coins? From the economic theory if there is more money on the market then inflation will growth? Bitcoin will be in the same amount on market, but probably will be big amount bitcoin derivatives e.g. BitCoin2 working in the same Bitcoin wallet, fully exchanged to Bitcoin in decentralize way and offering him for example a premium by each bitcoin block.

What is your opinion? 



 

[mmortal03]

These charts are somewhat out of date. The current estimate of the block reward halving date is now August 2016, correct? All else remaining equal, this would put the Bitcoin inflation rate at ~4% from that date forward?

[painlord2k]

These charts are somewhat out of date. The current estimate of the block reward halving date is now August 2016, correct? All else remaining equal, this would put the Bitcoin inflation rate at ~4% from that date forward?

A standard 4.5% just after the halving.
5% if hashing increase 10% after every re-targeting after the halving.

And it will fall to ~3.5%/year in other four years then halving to 1.75%/year in 2020.

[painlord2k]

Yes, you are right about these other parameters as liquidity, fungibility, durability, how easy is to use, security, privacy. There are critical "points of power" of BTC.

But there are many initiatives on the market like "colored coins", Mastercoin, Ethereum as“Bitcoin 2.0″ protocols – alternative cryptographic networks that are inspired by Bitcoin, but which intend to make the underlying technology usable for far more than just currency. They are allowing users to create their own currencies on the Bitcoin network, and more advanced protocols like Mastercoin, Bitshares and Counterparty which intend to provide features such as financial derivatives, savings wallets and decentralized exchange.
So potentially there is no technical ban to issue gigantic amount of virtual money to the market "sitting in Bitcoin" as a fully "spare" coins to BTC. Any of these coins will argument that is a bitcoin practically, and will use the factors of liquidity, fungibility, durability, etc. from the bitcoin network.

What do you think - will be changed approximated BTC inflation by these facts of issuing of any (fully-integrated-with-Bitcoin) new coins? From the economic theory if there is more money on the market then inflation will growth? Bitcoin will be in the same amount on market, but probably will be big amount bitcoin derivatives e.g. BitCoin2 working in the same Bitcoin wallet, fully exchanged to Bitcoin in decentralize way and offering him for example a premium by each bitcoin block.

What is your opinion? 

There is no technical ban to issue whatever they want issue... but will people adopt, accept and use what they issue?
This is the point.

We already have Bitcoin as a generic payment system, why adopt another?
If Mastercoin or Bishares or others will build decentralized systems for financial derivates, futures, etc. what will be the user base of these? Who will start adopting them? What will be the advantage to move from Bitcoin and similar systems using bitcoins.
Ethereum use ethers. But Reggie Middleton's Ultra-Coin use bitcoins and the BTC's blockchain to do essentially the same derivatives/future stuff.

There is a huge value in using the same type of money as everyone else. There must be a gargantuan advantage to move to another (or a very tiny cost).

If any system/protocol built on top of bitcoin and using BTCs is able to deliver 90% of the value of any system built outside of BTC, people will naturally continue to gravitate around BTC.

This do not prevent the development or adoption of new cryptos, it will just relegate them to niches where they deliver absolutes advantages for specific applications.

Every improvement created outside of Bitcoin will be ported to Bitcoin if technically possible, just because there are too much wealth at stake the people invested in Bitcoin will fund developers to add these to Bitcoin.

A few years ago we had 3D web browsers developed. Now we use the same 2D browsers and if we want 3D navigation we add a specific extension using open protocols.

[MarioSPGroup]

We already have Bitcoin as a generic payment system, why adopt another?
If Mastercoin or Bishares or others will build decentralized systems for financial derivates, futures, etc. what will be the user base of these? Who will start adopting them? What will be the advantage to move from Bitcoin and similar systems using bitcoins.

Thanks, I agree with you. My first and fresh observation about derivatives, futures and Mastercoin let me know that there is no impact on value of Bitcoin, too. In the fact they are only peripherals in a bit way of main stream.