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April 19, 2013, 05:06:32 PM Last edit: April 19, 2013, 05:17:20 PM by ripple |
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The total number of the coins is designed not to exceed 21 Million. This means in order to cope with an increased number of transactions in the system that coins would have to be split and each smaller coin would increase in value. This could happen automatically as people adopt the milli-bitcoin or micro-bitcoin. This is similar to what happens when shares increase value beyond what is considered an affordable value and companies created share split.
Before this happens a new currency will appear which does not change its value. It will be in the interest of new participants to change to a new currency, for which they don't have to pay an increase in hard currency, as the new medium of exchange.
To succeed as the new optimal currency the new currency would have to have a mathematical formula built in to it to make its supply equate to the transaction demand for the currency.
[In economics the Fisher formula, MV=PT is used to show that when the money supply is increased there follows an increase in prices. In this formula T = transactions, V= Velocity of circulation, M= Money Suppy, and T=transactions. If we exclude V then M=PT, The amount of money equals the number of transactions times the price.]
I am sure that present generation of mathematicians once they get to grips with the Bitcoin algorithms then in the future they will have some fancy ideas about how to arrange this for new currencies, such as for example my namesake the ripple etc.
Failing this built-in formula then a trust authority such as the government of a country, a large commercial organisation, or large non-profit organisation would have to be tasked to make the decisions on supply, but of course the existence of such authorities may work against acceptance by the international community that likes the idea of a laissez-faire currency.
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