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Author Topic: Why was bitcoin designed with no inflation?  (Read 3741 times)
makomk
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July 05, 2011, 12:31:54 PM
 #21

1) Inflation is good for holders of debt. Nonsense. Inflation makes interest rates higher, which is bad for holders of debt. Inflation makes it harder for people who hold debt to refinance and makes creditors want their money back sooner, which is also bad for holders of debt.
I think you're confusing nominal interest rates with real interest rates. Inflation increases nominal interest rates - the amount of interest charged in terms of the currency in question - which matter to savers but not debtors. Debtors care about real interest rates - the cost of the loan taking into account both nominal interest rates and inflation/deflation - because that's their actual cost of borrowing that they have to repay.

2) Inflation gives people an incentive to spend money. Nonsense. Inflation means you can get a higher interest rate if you save the money, giving you an equal incentive to save.
Inflation gives you an incentive to invest the money rather than just stuffing it under the mattress, either directly, by sticking it in a savings account where it's used to make loans, or by buying something that will give you future benefits.

3) Deflation gives you an incentive to hold money. Nonsense. You can just as easily sell the right to hold  that money and get its value today rather than holding it yourself.
Why should someone buy it for more than it'd cost them to get the same amount of money right now, though?

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Vladimir
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July 05, 2011, 12:46:08 PM
 #22

It is extremely difficult to bootstrap currency like Bitcoin. It is simply necessary to have in place significant incentives in the first few years to get over period of initial vulnerability and ensure that  the network is secured as quickly as possible.

Go create your own inflationary currency, if it is so easy. You talk the talk, now show us that you can walk the walk.

Also many noobs seem to fail to realize that they ARE the early adopters. In age of ASIC mining anyone who mined using GPU's in GPU age will look like CPU miners of early 2010 look now.

Do not be a stupid jelly whiner, cease the opportunity instead. For example, go sell miners some shovels and jeans if you are too frail to work in the pit yourself.




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Etlase2
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July 05, 2011, 01:14:37 PM
 #23

You get pretty angry when people threaten the value of your bitcoins, vlad.

incognegro
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July 06, 2011, 05:28:37 AM
 #24

I have found Vlad's posts to be of high quality.
Been reading for a month now.
davidk
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July 06, 2011, 07:39:17 AM
 #25

good stuff
vaxo_nba
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December 27, 2016, 06:18:51 AM
 #26

I'm rookie but I think that world inflation will, no doubt, affect bitcoins too, because at the last point bitcoin owners have to exchange their virtual money to the actual currencies, which, as you know, is very variable.
naidray
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December 27, 2016, 09:18:03 AM
 #27

It is believed that gold has limited supply (unless aliens bring it from other planet), still it was successfully used for medium of exchange for centuries, then why not we can use bitcoin in modern days in digital format.

Bitcoin was designed by keeping gold in mind.



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JoelKatz
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January 20, 2017, 01:17:53 PM
 #28

I just noticed this post now. It's been five years, but it's still relevant.

2) Inflation gives people an incentive to spend money. Nonsense. Inflation means you can get a higher interest rate if you save the money, giving you an equal incentive to save.
Inflation gives you an incentive to invest the money rather than just stuffing it under the mattress, either directly, by sticking it in a savings account where it's used to make loans, or by buying something that will give you future benefits.
Right, but that doesn't matter. I agree that inflation changes the way you invest money, but it doesn't change your incentive to spend versus invest. (Stuffing money in your mattress acts just like a general investment in the economy because taking money out of circulation increases other people's buying power.)

Quote from: makomk
3) Deflation gives you an incentive to hold money. Nonsense. You can just as easily sell the right to hold  that money and get its value today rather than holding it yourself.
Why should someone buy it for more than it'd cost them to get the same amount of money right now, though?
What difference does it make how much they buy it for? Say Bitcoin weren't deflationary and so didn't include the right to hold it and make money, and say the price of bitcoin were $300. Now, say you keep everything else the same but make Bitcoin deflationary so it now includes the right to hold it through its appreciation. The net present value of a bitcoin might now be, say, $100 because it includes the appreciation right. So nobody's willing to sell a bitcoin for less than $400.

There's still not a special incentive to hold it. You can either hold it, and get the value of its appreciation, or sell it for $400 today, which includes that extra $100 that is the value of its appreciation. Either way, you get the same value.

It is essentially impossible to have predictable, excessive, prolonged deflation. Why? Because if we all agreed that some commodity would be worth $500 in a month, almost nobody would sell it for $450 today.

The price of a bitcoin today includes the expected value of its future appreciation moderated by the risk that this appreciation may not materialize. If that appreciation were certain, it would have already happened.

I am an employee of Ripple. Follow me on Twitter @JoelKatz
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Paxful_Marketing
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January 20, 2017, 04:24:26 PM
 #29

Keep in mind that Bitcoin is divisible to eight decimal places. So:

"There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin system."

Source: https://en.bitcoin.it/wiki/Myths

So when the time comes, i would - just a guess - think that people would not even mention ONE bitcoin, but rather in smaller parts. Same as Gold being spoken about in ounces rather than Kilos, as it makes it easier to relate to for the average person and trading. So with this in mind, you can see that they have thought about it quite well Smiley


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