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Author Topic: Possible deflation problem?  (Read 2456 times)
ArtemZ
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July 17, 2010, 11:52:46 PM
 #1

Hi,
What do you think about future deflation problem? Just imagine: if bitcoin will be really, really popular and all of 21 millions will be shared between its users...there are will be a deflation. At first time it will not cause many problems, but later or sooner there are will be collapse of bitcoin. Because prices cannot decrease all the time. System will just collapse, its crazy to think its okay to pay 0.000001BTC for something like an airplane, haha (what will happen if someone will find 500 BTC on his old wallet? He will be able to buy the whole world?)
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SmokeTooMuch
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July 18, 2010, 12:24:37 AM
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actually, I don't think bitcoins userbase will ever raise above 21 million, so there will be 1 BTC for everyone, which is devisible into 1million parts.
I don't really see a problem here.

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Babylon
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July 18, 2010, 12:45:02 AM
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I don't know what bitcoins eventual userbase will be.  However I cannot imagine deflation  ever reaching the level ArtemZ describes.  The reason being that if the smallest possible denomination (which I am going to call an itty bit) becomes too valuable it ceases to be useful.  If I cannot buy bread or milk with bitcoins, or pay my electricity bill, or make other small purchases I am going to transform bitcoins into other currency in order to do so.  When I transform bitcoins into other currencies I am reducing the demand for bitcoins and this drives the prices down.  Now currently I can't do those things with bitcoins, and I am not liquidating all my bitcoins to do so, but that is because i only have a very small amount of bitcoins, and I expect them to appreciate in value.  If I had a large amount of bitcoins (and in ArtemZ's scenario one itty bit is a large amount because it has large purchasing power)  I would want to exchange part of it even if I expected it to increase in value because it would not be of any use to me.  Bitcoins value is determined by their usefulness.

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ArtemZ
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July 18, 2010, 12:52:12 AM
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actually, I don't think bitcoins userbase will ever raise above 21 million, so there will be 1 BTC for everyone, which is devisible into 1million parts.
I don't really see a problem here.
Well, then what's the reason to create payment system if only few geeks will use it?
Also, there are never will be situation when each user will have only about 1 BTC. Look at real world. There are poor people and billionaires.  Once all these 21 millions will be generated I doubt you will face problems even faster than you can expect. Even without 21 million userbase, but even with 1-2 millions of users.
SmokeTooMuch
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July 18, 2010, 01:17:45 AM
 #5

Just saying, if we will ever reach 21 million users, there were a potential budget of 1BTC for every user.

Of course there will be rich one with several thousand coins and poor ones with only a thousandth of a BTC.

Actually it isn't 21,000,000 fix units of bitcoins but 21,000,000,000,000 units of a millionth of a BTC.
And i think there's the option to make them even more divisible (not sure about this), so deflation is not a problem here.

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ArtemZ
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July 18, 2010, 01:23:44 AM
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Just saying, if we will ever reach 21 million users, there we're a potential budget of 1BTC for every user.

Of course there will be rich one with several thousand coins and poor ones with only a thousandth of a BTC.

Actually it isn't 21,000,000 fix units of bitcoins but 21,000,000,000,000 units.
And i think there's the option to make them even more divisible, so deflation is not a problem here.
Sounds good, thanks.
eugene2k
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July 18, 2010, 01:44:48 AM
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System will just collapse, its crazy to think its okay to pay 0.000001BTC for something like an airplane, haha (what will happen if someone will find 500 BTC on his old wallet? He will be able to buy the whole world?)
And yet it's okay to think that paying an ounce of gold for a good computer is normal. An ounce of gold used to cost just 35 dollars in 1934 and personal computers used to have prices set in the thousands in the seventies and eighties. Had those things been available in 1934 they would probably cost hundreds of pounds of gold.
ArtemZ
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July 18, 2010, 01:51:30 AM
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System will just collapse, its crazy to think its okay to pay 0.000001BTC for something like an airplane, haha (what will happen if someone will find 500 BTC on his old wallet? He will be able to buy the whole world?)
And yet it's okay to think that paying an ounce of gold for a good computer is normal. An ounce of gold used to cost just 35 dollars in 1934 and personal computers used to have prices set in the thousands in the seventies and eighties. Had those things been available in 1934 they would probably cost hundreds of pounds of gold.
that's why we using dorrars as primary currency Grin and us government can print them as long as they want to do it. it causes inflation, but unlike generation of bitcoins its fully controllable process which can stopped and started again depended on economic situation
eugene2k
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July 18, 2010, 09:58:10 AM
 #9

You lost me. Why are we using dollars?
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July 18, 2010, 12:03:38 PM
 #10

The eventual goal is to not use dollars at all.Imagine if your boss paid you in bitcoins and you could buy your food and supplies with bitcoins.Why on earth would you use dollars?
 Personally I will be buying gold and silver whenever to store my money and using bitcoins for liquid funds.In the perfect scenario you could use bitcoins for almost everything and pay no transaction fees or taxes.
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