Would a permanent 50BTC block reward have changed the discussion?

[gollum]

What is wrong with deflation?

A deflationary economy will probably lead to greater gap between rich and poor. Either you are born into a rich family where you inherit bitcoins that were mined by your grandfather, or you are born into a poor family where you have to work for a few satoshis.

In a inflationary economy however inherited wealth will lose value over time which is more fair for newer generations that are not born yet.

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[Elwar]

Nothing, but it makes loans more difficult and also its hard for economists who like a consumer economy to accept a money with an incentive to save built in.

I am quite pleased with the return on the loans I give out. Currently getting 19% return compounded daily.

[Elwar]

What is wrong with deflation?

A deflationary economy will probably lead to greater gap between rich and poor. Either you are born into a rich family where you inherit bitcoins that were mined by your grandfather, or you are born into a poor family where you have to work for a few satoshis.

In a inflationary economy however inherited wealth will lose value over time which is more fair for newer generations that are not born yet.

The way that inflation is created by government currency creates inflation for the poor and shields the wealthy from inflation.

With bitcoin the playing field is even. And an economy of savers helps to stave off the need for a safety net for everyone which helps to enslave the poor.

[edmundedgar]

Obviously a FedCoin would not need hashing at all.  They could just release new coins at a whim.  It does not need miners.  It does not need to be peer-to-peer.  The Fed computers could simply track everything just like they do for dollars today.

The hashing/miner thing is because Bitcoin is NOT FedCoin.

There would be a use case for having a system where the money supply was controlled by a central entity, but transactions were robust, decentralized, pseudonymous and censorship-resistant. Government-sponsored cash works exactly like that.

This would be a very sensible thing for governments to do, because it would be incredibly useful for commerce (all the usefulness for transactions of Bitcoin, but without the volatility which is a big old PITA) while removing any threat to the government's ability to print money.

Obviously they won't though - somebody would worry that it was going to be used by terrorists or pedophiles or something.

[jubalix]

When I explain Bitcoins to people for the very first time the one thing that always gets them interested, the one hook that gets them into Bitcoins above and beyond any other statement is:

Noobs know nothing about preminers, hoarders and lost wallets (destroyed coins)
We need a small nominal inflation of 1-5% just to keep the real inflation to 0% in the bitcoin world.

Cough Cough.....PPC.

[wumpus]

I don't think Bitcoin would have even had a fraction of its current success if it was eternally inflating. Much if the attraction, especially in the beginning, was that there was only ever going to be a fixed amount. If the eventual amount was effectively infinite it would be regarded like the MMORPG currencies with the supply eternally expanding and the developers working hard to create sinks as to prevent runaway inflation Inflation is a much larger risk for currencies/commodities that have no physical basis than deflation, especially if there is no pre-existing basis of trust like in fiat currencies.

A deflationary economy will probably lead to greater gap between rich and poor. Either you are born into a rich family where you inherit bitcoins that were mined by your grandfather, or you are born into a poor family where you have to work for a few satoshis.

OTOH, the deflationary economy forces the initial adapters to eventually spend their coins (if they want any use out of them at all). In inflationary currencies it's easier to create more wealth with your wealth by loaning it out with a high % of interest, keeping the pyramid afloat.

We currently already have the biggest gap between poor and rich in recent history. All that with inflationary currencies. Do you really think it would be even worse? And there is no chance in hell (IMO) that bitcoin will overtake all of them. Both inflationary and deflationary currencies have their use. Most likely, the future will have many different currencies with different trade-offs. This makes the "which one would be best if there could be only one" argument besides the point. For a grassroots cryptocurrency, the current reward scheme is pretty optimal. For a government-mandated one it would not be.

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As a side note: a currency with a fixed reward of 50 BTC per block would still be considered deflationary by economists. An inflationary currency would have the block reward increase over time, or at least as a fixed percentage of the current number of coins in existence.

[gollum]

The dilemma of cryptocurrencies: when coin X becomes too hoarded and too deflationary, coin Y will  emerge and take over, and so on for infinity til we got hundreds of crypto currencies.... Lim _{t-> infinity} f(t)=0 for all crypto currencies since there is no intrinsic value in them. All cryptocurrencies compete for the same potential computing power and user base. Cryptocurrencies are basically fiat, but we trust in hash power instead of governments.

One potential solution to the crypto dilemma: use them as IOUs instead of as fiat. The IOUs can be the promise of a certain commodity (gold, silver etc) for example. In this case the value and attraction of the cryptocurrency depends on the IOU it contains and the counterparties connected to the IOU.

[Timo Y]

   
Would a permanent 50BTC block reward have changed the discussion?

Yes, I would not be part of it.

Aren't you being a bit petty?

[virtualmaster]

They are enough inflationary currencies if somebody want inflation should take that currency instead of bitcoin.
Alone the discussion to make bitcoin inflationary scares the investors and let the bitcoin curse go down.
So you should better propose inflation by litecoin or by feathercoin, where will be anyway 336 millions of coins.

[hazek]

   
Would a permanent 50BTC block reward have changed the discussion?

Yes, I would not be part of it.

Aren't you being a bit petty?

Is being against theft petty now?

[zebedee]

There's a lot of talk about the limited supply and "deflationary" model of Bitcoin.

My thought exercise is: what if the block reward were (originally) permanently set to 50BTC?  How would the conversation have changed?  It appears that a lot of people (particularly Keynesian economists) see "stable currency supply" and run screaming from the room.  It would have been nice to have them actually take a good hard look, instead of dismissing all other aspects of Bitcoin out-of-hand like a single-issue voter.  (On the other hand, many of those same people seem believe the Bitcoin network has no value.  At least, that's the implication, when they say there's no value backing the Bitcoin currency.)

That's OK, let them run screaming from the room.  They don't want to admit that the Austrians have it right on all these points.

The great thing is we get to find out, for real!  I know which side I'm betting on.

[yona]

Well, inflaton at a low rate is probably good, in my opinion should be set as %.
But good points were made about the 'pitch', " there will be a set amount of bitcoin", this is probably because fiat curreny is being printed right and left and we are FED of being robbed.

After bitcoin is u derstood and adopted i think there will be a good sense to raise this question. Would it be too late in the game to change the set limit?

[Impaler]

People consistently confuse BTC monetary base growth with inflation.  Inflation is a change in PURCHASING POWER, and this has never been negative (outside of the crashes) for BTC after the existence of effective exchanges.  Even if the money supply was expanding 20-30% in a year back in 2010 the user base was growing sufficiently fast and the utility from that wider network as adding yet more value to mean that their was never inflation.  Their has only ever been deflation and it has averaged something like 1000% a year over the long run, well into anyone's definition of hyper-deflation.  Regardless of your opinion on inflation or deflation don't be confused as to the actual history.

[Anon136]

People consistently confuse BTC monetary base growth with inflation.  Inflation is a change in PURCHASING POWER, and this has never been negative (outside of the crashes) for BTC after the existence of effective exchanges.  Even if the money supply was expanding 20-30% in a year back in 2010 the user base was growing sufficiently fast and the utility from that wider network as adding yet more value to mean that their was never inflation.  Their has only ever been deflation and it has averaged something like 1000% a year over the long run, well into anyone's definition of hyper-deflation.  Regardless of your opinion on inflation or deflation don't be confused as to the actual history.

there is some legitimate debate as to the meaning of inflation. Traditionally it was used to describe an expansion of the money supply. It has gradually lost this meaning and been replaced with the more politically friendly meaning of a change in purchasing power. It should be noted that we are still in the transitional period and neither meaning is "incorrect" you just need to define your terms when talking with people.

[Raize]

To be realistic I think governments will create crypto currencies, and their crypto currencies will be something between gold and fiat when it comes to inflation. They don't need any miners to participate in their scheme since they have enough resources to create a secure currency with high hashrate. And they dont need to attract users, users are forced to use their coin since it is the currency where taxes can be paid and government employees get salaries.

You would be correct. At some point a fiat government cryptocurrency will exist and there will be people that use it because they have to pay their taxes in it. This I do not doubt.

A deflationary economy will probably lead to greater gap between rich and poor.

No, it won't. You offer no evidence of this assertion. I'll offer this bit, if you measure wealth in US dollars, the US Bitcoin hoarders are closing that gap with the 1% in the US right now, but they are doing so by refusing to use fiat as a store of wealth.

Either you are born into a rich family where you inherit bitcoins that were mined by your grandfather, or you are born into a poor family where you have to work for a few satoshis.

Whereas it's so much better that people are born into a rich family that obtained its wealth primarily by having its members be part of the farce that is the fiat banking system? How is one superior to the other? Only bright individiuals will mine efficiently and pay relevant attention to ROI. Only very studied analysis of Bitcoin use and a working knowledge of demand will separate the timely hoarder from the tardy one. Bitcoin isn't rich vs. poor, it's intelligent vs. foolish.

In a inflationary economy however inherited wealth will lose value over time which is more fair for newer generations that are not born yet.

Not if you also inherit control over the banking system from your father or grandfather. The problem, as others have stated well before me, isn't the 1%, it's the .1%, the guys that control LIBOR, interest rates, lending, exchange rates, and have the power to do so simply because the entire world values the US dollar and believes that they know what is best for them. But the system is coming apart at the seams now. The public is now on to their game.

I've never understood why people who lament the wage-gap also strongly defend the fiat dollar. The absolute worst thing you can do, if you are being oppressed, is to continue to use your oppressor's currency. Yet here you are, proudly proclaiming it as your one-day savior. You decorate your chains, quite gladly, and defend their use here. Clearly your master is wiser, you say to the freest men you've likely ever spoken to, urging them to rejoin you in your misery. Have you no shame? Aren't you the least bit embarrassed that you covet the currency of those you detest? I cast aside my shackles a year ago when I realized I didn't have to operate in fiat anymore. At least, not as a store of my wealth.

Bitcoin provides a level playing field precisely because of its limited growth. No single man or group controls the blockchain, only an algorithm and the consensus of those participating in its growth.

[charleshoskinson]

People consistently confuse BTC monetary base growth with inflation.  Inflation is a change in PURCHASING POWER, and this has never been negative (outside of the crashes) for BTC after the existence of effective exchanges.  Even if the money supply was expanding 20-30% in a year back in 2010 the user base was growing sufficiently fast and the utility from that wider network as adding yet more value to mean that their was never inflation.  Their has only ever been deflation and it has averaged something like 1000% a year over the long run, well into anyone's definition of hyper-deflation.  Regardless of your opinion on inflation or deflation don't be confused as to the actual history.

https://en.wikipedia.org/wiki/Inflation

Modern Definition

there is some legitimate debate as to the meaning of inflation. Traditionally it was used to describe an expansion of the money supply. It has gradually lost this meaning and been replaced with the more politically friendly meaning of a change in purchasing power. It should be noted that we are still in the transitional period and neither meaning is "incorrect" you just need to define your terms when talking with people.

Austrian Inflation Definition

http://austrianeconomics.wikia.com/wiki/Inflation

Both tell us different things; however, the Austrian definition is immune to manipulation. Money supply is a fixed metric. One can make incorrect inferences from it, yet it is still objective. CPI calculation is not objective and has many critics: http://www.investopedia.com/articles/07/consumerpriceindex.asp.

[gollum]

there is some legitimate debate as to the meaning of inflation. Traditionally it was used to describe an expansion of the money supply. It has gradually lost this meaning and been replaced with the more politically friendly meaning of a change in purchasing power. It should be noted that we are still in the transitional period and neither meaning is "incorrect" you just need to define your terms when talking with people.

My definition of inflation is the delta of money supply per capita in combination with delta of velocity of money, If a developing country doubles its population in N years it should also double the money supply in order to have price stability. Velocity of money is probably high during the growth period which means money changes hands often, which leads to some inflation in prices even if the money supply is constant. But when the economy matures by time the velocity of money will go down and the relation between money supply and population becomes more important. So when the velocity of money goes down in a mature economy the money supply must expand to fight deflation in nominal prices.

[wingding]

In economy inflation refers to purchasing power. If you mean the increase in money supply, so say that, not call it inflation. Or talk about block reward, or coin creation rate. Discussions are meaningless when people put different meaning to the same word.

[Sweft]

I have extensively describe  the problems with a deflationary cryptocurrency.

See this thread

https://bitcointalk.org/index.php?topic=12109.0

[gollum]

I have extensively describe  the problems with a deflationary cryptocurrency.

See this thread

https://bitcointalk.org/index.php?topic=12109.0

Unfortunately most bitcoin-fans are computer geeks with no knowledge in macroeconomics.
Their argument is that bitcoin attracts people because its scarce (max 21 million coins).

I love bitcoin because it enables transactions around the world 247 with low costs, and with high security and with no double spending - not because of its inflation attributes.

Most bitcoin-fans don't understand that when bitcoin becomes deflationary it will become a speculative hoarding asset instead of a medium of exchange, which will lead people to focus on other alt-coins until all alt-coins are speculative and two kind of cryptocurrencies will remain as useful:
1) IOU-coin - a proposed coin with zero value which is guaranteed with hyperinflation. it is a medium of exchange and transfer values via IOUs
2) LowInflation-Coin - a proposed coin with low inflation for ever, something like gold (1% inflation over time), its scarce but is still possible to mine gold if you have right equipment and resources (labor and energy).