Deflationary character of Bitcoin - positive or negative? 💲

[Litecoindigger]

In total there are a maximum of 21 million Bitcoins, of which about 17 million are currently produced. The process of production is called mining and will last until 2140, until then the amount of bitcoin produced daily will gradually decrease. Currently 12.5 Bitcoins are produced every 10 minutes. Since so the number of Bitcoins cannot be expanded after release, it’s limited to a total of 21 million, Bitcoin is deflationary. You cannot produce more than 21 million bitcoins in total.

Inflation through theoretically unlimited monetary expansion, as with central bank money, is therefore not possible. This protects Bitcoin from manipulation and avoids inflation where the value of money becomes less and less valuable.
A negative point of a deflation can bee seen when citizens store their coins to let the value grow and not investing them. That could be bad for the economy but after all the positive arguments seems to be more important to me.

So far, the Bitcoin price was always positive, so the Bitcoins were averaged more value from year to year. Because of this, Bitcoin is often compared to gold, because it is just not reproducible. In times of expansionary monetary politics on the part of the central banks a not to be underestimated advantage. This aspect can have a positive effect on long-term value stability because it creates trust and predictability.

A danger of this deflationary effect are too many hard-forks, in which an additional version of Bitcoin is created. That was the case in 2017, when Bitcoin Cash was a major hard-fork. Since then, there are 21 million Bitcoin and 21 million Bitcoin Cash. Personally, I think hard-forks are not good and they could undermine Bitcoin, remember if we would have 100 different sorts of Bitcoin, the market cap would be spread between these 100 Bitcoins and the deflationary character would be lost.

Generally, I’m very positive about this deflation, it’s results are increasing prices in long term. What is your opinion about this characteristic of Bitcoin? Good or bad? And are hard-forks a danger?

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[notaek]

A negative point of a deflation can bee seen when citizens store their coins to let the value grow and not investing them. That could be bad for the economy but after all the positive arguments seems to be more important to me.

I disagree with you on this one. Although deflation encourages investment by stimulating saving, such investment only serves to strengthen the financial infrastructure being build around Bitcoin, thus reinforcing the overall valuation of Bitcoin.

Moreover, Bitcoin is divisible upto eight decimal places unlike that of fiat currencies that ends at two. Keeping deflationary character in mind, that will be useful in upcoming years.

A danger of this deflationary effect are too many hard-forks, in which an additional version of Bitcoin is created. That was the case in 2017, when Bitcoin Cash was a major hard-fork.

No, that wasn't the case at all. Hard forks aren't the reason behind Bitcoin being deflationary. They are done when a group decides to incorporate certain features within the core infrastructure but aren't being voted as a general consensus.

And are hard-forks a danger?

Hard forks will never pose any threat. That's a separate discussion for another day.
 

[Litecoindigger]

A negative point of a deflation can bee seen when citizens store their coins to let the value grow and not investing them. That could be bad for the economy but after all the positive arguments seems to be more important to me.

I disagree with you on this one. Although deflation encourages investment by stimulating saving, such investment only serves to strengthen the financial infrastructure being build around Bitcoin, thus reinforcing the overall valuation of Bitcoin.

Moreover, Bitcoin is divisible upto eight decimal places unlike that of fiat currencies that ends at two. Keeping deflationary character in mind, that will be useful in upcoming years.

Yes, personally this argument of storing coins to hope they will increase in value and possible effects of the economy isn't a main point for me too:

A negative point of a deflation can bee seen when citizens store their coins to let the value grow and not investing them. That could be bad for the economy but after all the positive arguments seems to be more important to me.

=> after all Bitcoin's deflation is very positive

A danger of this deflationary effect are too many hard-forks, in which an additional version of Bitcoin is created. That was the case in 2017, when Bitcoin Cash was a major hard-fork.

Hard forks aren't the reason behind Bitcoin being deflationary.

I didn't said that. My point was, if there are too much hard-forks the value of each sort of Bitcoin wil go down:

If you have 2 sorts of Bitcoin and 125.000.000 marketcap at all:

Sort             Marketcap

Bitcoin         105.000.000$
Bitcoin blue    20.000.000$



If you have 6 sorts of Bitcoin and 125.000.000 marketcap at all:

Sort             Marketcap

Bitcoin          90.000.000$
Bitcoin blue    15.000.000$
Bitcoin red       8.000.000$
Bitcoin yellow   6.000.000$
Bitcoin grey     4.000.000$
Bitcoin orange  2.000.000$

So if there are more sorts of Bitcoins you'll have a lower marketcap each sort.

[notaek]

I didn't said that. My point was, if there are too much hard-forks the value of each sort of Bitcoin wil go down:

If you have 2 sorts of Bitcoin and 125.000.000 marketcap at all:

Sort             Marketcap

Bitcoin         105.000.000$
Bitcoin blue    20.000.000$

So if there are more sorts of Bitcoins you'll have a lower marketcap each sort.

Nope, I still don't believe that's the case. They are separate coins altogether.
Consider them as mere altcoins with the name "Bitcoin" added to gain more public traction.

Applying your point, Litecoin, being the "source code fork" of Bitcoin, should also pose a threat. But why not? Because, its named Litecoin?

[Litecoindigger]

Applying your point, Litecoin, being the "source code fork" of Bitcoin, should also pose a threat. But why not? Because, its named Litecoin?

That's somewhere true, it's very likely the appearance of Litecoin took a part from the marketcap of Bitcoin, being a "light" version of Bitcoin.

Other Altcoins can take marketcap from Bitcoin, too, like Ethereum, but that's something all Altcoins have in common. You're right it could be also other way round that much more Bitcoin-Hardforks can support the Bitcoin-dominance in general.

[pooya87]

Since then, there are 21 million Bitcoin and 21 million Bitcoin Cash.

it is something else, so it doesn't matter. it is still a separate coin with a separate blockchain and everything. and do you think bitcoin cash or 2017 was the first case of a bitcoin fork? this has been happening for a long time. BCH just got a lot of advertisement so everyone heard about it!

if there are too much hard-forks the value of each sort of Bitcoin wil go down:

not at all. when you create a fork of bitcoin you are creating an altcoin and an altcoin price is based purely on hype, speculation and pump and dump. if you can successfully pump the coin you create then it will have a high price. if you fail to do that then it won't. pumping can be performed by you and your team with the money you have or it can be social advertising (like BCH) and getting fools to invest in it or a combination.

If you have 2 sorts of Bitcoin and 125.000.000 marketcap at all:

Sort             Marketcap

Bitcoin         105.000.000$
Bitcoin blue    20.000.000$

what does market cap have anything to do with anything here?
bitcoin blue can be worth $10 but have 100,000,000 supply so that its market cap can be $1 billion which is more than another fork coin like bitcoin red with $10 price and 21,000,000 supply which would make $210 million market cap. that doesn't make bitcoin blue any better or worse. it just makes it another altcoin that manipulated market cap to stay higher in the ranking system.

Other Altcoins can take marketcap from Bitcoin, too, like Ethereum, but that's something all Altcoins have in common. You're right it could be also other way round that much more Bitcoin-Hardforks can support the Bitcoin-dominance in general.

they don't "take" market cap from bitcoin. they have their own market cap which is simply result of their price multiplied by their supply and when they have a ridiculous amount of supply they also have a ridiculously high market cap. that still doesn't affect bitcoin.

[CoinsGazer]

Inflation through theoretically unlimited monetary expansion, as with central bank money, is therefore not possible. This protects Bitcoin from manipulation and avoids inflation where the value of money becomes less and less valuable.

If large adoption spreads, few value bitcoin will last. Bitcoin price therefore is majorly influenced by market confidence of investors. Presently Bitcoin is an investment product so it indeed is affected by economy. Imagine what if a HODL meet finance issue caused? He/she definitely adopts coins to have money back in willful.

A negative point of a deflation can bee seen when citizens store their coins to let the value grow and not investing them. That could be bad for the economy but after all the positive arguments seems to be more important to me.

This is your assumption. if you were really into cryptocurrency community, you will see most of holders act upon investment strategy.

So far, the Bitcoin price was always positive, so the Bitcoins were averaged more value from year to year.

At this point, I'm sure you either never had read the marketplace chart thorough, or lacked language skill.

[dohh]

In total there are a maximum of 21 million Bitcoins, of which about 17 million are currently produced. The process of production is called mining and will last until 2140, until then the amount of bitcoin produced daily will gradually decrease. Currently 12.5 Bitcoins are produced every 10 minutes. Since so the number of Bitcoins cannot be expanded after release, it’s limited to a total of 21 million, Bitcoin is deflationary. You cannot produce more than 21 million bitcoins in total.

Inflation through theoretically unlimited monetary expansion, as with central bank money, is therefore not possible. This protects Bitcoin from manipulation and avoids inflation where the value of money becomes less and less valuable.
A negative point of a deflation can bee seen when citizens store their coins to let the value grow and not investing them. That could be bad for the economy but after all the positive arguments seems to be more important to me.

So far, the Bitcoin price was always positive, so the Bitcoins were averaged more value from year to year. Because of this, Bitcoin is often compared to gold, because it is just not reproducible. In times of expansionary monetary politics on the part of the central banks a not to be underestimated advantage. This aspect can have a positive effect on long-term value stability because it creates trust and predictability.

A danger of this deflationary effect are too many hard-forks, in which an additional version of Bitcoin is created. That was the case in 2017, when Bitcoin Cash was a major hard-fork. Since then, there are 21 million Bitcoin and 21 million Bitcoin Cash. Personally, I think hard-forks are not good and they could undermine Bitcoin, remember if we would have 100 different sorts of Bitcoin, the market cap would be spread between these 100 Bitcoins and the deflationary character would be lost.

Generally, I’m very positive about this deflation, it’s results are increasing prices in long term. What is your opinion about this characteristic of Bit[Suspicious link removed]d or bad? And are hard-forks a danger?

No reason to be so positive. At the moment miners are being rewarded with chance of getting BTC, after last BTC is released, how they are going to be paid? There will still be a huge amount of computing to do, validating transactions and keeping records. Deflationary character may at times push perceived value of BTC, but eventually it will shut BTC down.

[jseverson]

A danger of this deflationary effect are too many hard-forks, in which an additional version of Bitcoin is created. That was the case in 2017, when Bitcoin Cash was a major hard-fork. Since then, there are 21 million Bitcoin and 21 million Bitcoin Cash. Personally, I think hard-forks are not good and they could undermine Bitcoin, remember if we would have 100 different sorts of Bitcoin, the market cap would be spread between these 100 Bitcoins and the deflationary character would be lost.

Market cap is a meaningless metric because forks don't increase the number of Bitcoins in circulation. They only increase the number of altcoins in the market. Hard forks don't affect the original Bitcoin at all unless it explicitly attempts to fracture the community a la Bitcoin Cash, and even then, few parties have enough influence for such an action.

So if there are more sorts of Bitcoins you'll have a lower marketcap each sort.

You're misunderstanding how it works. Forks add to the overall crypto market cap from thin air. No other coin has to cede any value for them to gain value.

If Bitcoin has a market cap of $100,000,000 and something like Bitcoin B forked off it, Bitcoin's $100,000,000 would be unaffected, but the overall crypto market cap would rise by however much Bitcoin B's market cap is. But again, market cap is mostly a meaningless metric anyway, especially in this context.

[Kertmu]

In total there are a maximum of 21 million Bitcoins, of which about 17 million are currently produced. The process of production is called mining and will last until 2140, until then the amount of bitcoin produced daily will gradually decrease. Currently 12.5 Bitcoins are produced every 10 minutes. Since so the number of Bitcoins cannot be expanded after release, it’s limited to a total of 21 million, Bitcoin is deflationary. You cannot produce more than 21 million bitcoins in total.
.......
Generally, I’m very positive about this deflation, it’s results are increasing prices in long term. What is your opinion about this characteristic of Bitcoin? Good or bad? And are hard-forks a danger?

You yourself wrote that the Bitcoin production will last until 2140 and if you divide the number of Bitcoins planned for production by the remaining 122 years, then what kind of inflation or deflation can there be?
In addition, the market at the moment is manipulative market and is subject to large crypto holders.

[d5000]

A negative point of a deflation can bee seen when citizens store their coins to let the value grow and not investing them. That could be bad for the economy but after all the positive arguments seems to be more important to me.

I disagree a bit with @notaek here. The problem is that the incentive to save money is good for an asset that is meant to appreciate, like a security. But it doesn't help to incentive the usage as a "currency" (to trade goods and services).

That Bitcoin is used to trade goods and services is crucial for its long-term viability, because it increases the stability of the price, and decreases the sharpness of boom-bust cycles.

I don't say, however, that the design of Bitcoin is "flawed". For now and for most of our lives, the design is still slightly inflationary. But we should think about the moment when Bitcoin isn't anymore an asset "to get rich quick" because its value, in one moment, will only grow slowly (e.g. 5% per year). If this point is reached, we need to convince people to not sell their coins but to actually use them. Otherwise it's possible that the value will finally collapse - it can continue to live as a speculative asset, but the use case as a "currency" will have failed.

[ALI AKBAR]

I am not agree with you. Although deflation courages invest by stimulating holding, such investment only serves to secure the financial infrastructure being build around Bitcoin. Keeping deflationary nature in mind, that will be useful in upcoming years.

[victorski]

 I have heard that some of those are lost also, so the total supply of Bitcoin is not 21 million any more it is less than that. But when all the bitcoins would be produced, the price will be forced to go up.

[dohh]

In total there are a maximum of 21 million Bitcoins, of which about 17 million are currently produced. The process of production is called mining and will last until 2140, until then the amount of bitcoin produced daily will gradually decrease. Currently 12.5 Bitcoins are produced every 10 minutes. Since so the number of Bitcoins cannot be expanded after release, it’s limited to a total of 21 million, Bitcoin is deflationary. You cannot produce more than 21 million bitcoins in total.

Inflation through theoretically unlimited monetary expansion, as with central bank money, is therefore not possible. This protects Bitcoin from manipulation and avoids inflation where the value of money becomes less and less valuable.
A negative point of a deflation can bee seen when citizens store their coins to let the value grow and not investing them. That could be bad for the economy but after all the positive arguments seems to be more important to me.

So far, the Bitcoin price was always positive, so the Bitcoins were averaged more value from year to year. Because of this, Bitcoin is often compared to gold, because it is just not reproducible. In times of expansionary monetary politics on the part of the central banks a not to be underestimated advantage. This aspect can have a positive effect on long-term value stability because it creates trust and predictability.

A danger of this deflationary effect are too many hard-forks, in which an additional version of Bitcoin is created. That was the case in 2017, when Bitcoin Cash was a major hard-fork. Since then, there are 21 million Bitcoin and 21 million Bitcoin Cash. Personally, I think hard-forks are not good and they could undermine Bitcoin, remember if we would have 100 different sorts of Bitcoin, the market cap would be spread between these 100 Bitcoins and the deflationary character would be lost.

Generally, I’m very positive about this deflation, it’s results are increasing prices in long term. What is your opinion about this characteristic of Bit[Suspicious link removed]d or bad? And are hard-forks a danger?

Depends very much, on how You look at BTC. If You understand, that it is a monetary scheme, a milking mechanism and You are OK with it, then probably that deflation is a good thing. If You are a little bit simpleminded "investor" who thinks, he is a part of revolutionary digital money, then think this: mining is a necessary task right? Task of calculating, keeping records, validating transactions. With every halving, payment for the same task halves (less BTC released). If You now look again at the graph, then You see, that the following:

before first halving, few transactions to validate (few BTC members, few transfers):   $$$$$$$$$$$$$$$$
after first halving, more job to do, as community grows, check out halved:                       $$$$$$$$
after second halving, even more work to do, checkout:                                                       $$$$
then                                                                                                                                 $$

Does it remind You anything?

So, dont be so positive about "deflation".

[timerland]

But bitcoin isn't actually deflationary? Its monetary supply is still increasing, it's just that the inflation rate within bitcoin gradually slows down and will eventually after a century or whatever be virtually stable. There isn't any deflation going on, as in the currency supply shrinking.

This controlled inflation curve is actually a positive to me. It allows bitcoin to be able to hold its value over the long term, which is something that fiat currencies are not able to do. Also, we don't need to rely on a central bank to do the task of managing the supply of money, since all of this is decentralized, another positive.

I don't really get how bitcoin's inflation model creates new forks, though. Perhaps i'm missing something?

[Ikpirijor7]

I am not concur with you. In spite of the fact that flattening valors contribute by empowering holding, such venture just serves to anchor the monetary foundation being work around Bitcoin. Remembering deflationary nature, that will be helpful in forthcoming years.