Deflation based currency such as Bitcoin to counter promote economy.

[deisik]

Currently, all major currencies issued by the government have natural inflation of about 2%.

My question is, would an economy with a deflation based currency such as Bitcoin work?

A deflation based currency like bitcoin would be superior in terms of promoting long term economic stability and value

It will inevitably lead to disaster and ultimately to havoc and chaos

Though the term itself (a deflation-based currency) is not quite correct, i.e. a currency which has a limited supply is not necessarily deflationary since it may still be inflationary in terms of prices and exchange rates (as this is what OP obviously refers to in his post). The correct terms are appreciating currency and depreciating one. Fiats are typically depreciating, i.e. their purchasing power diminishes over time. On the other hand, appreciating currencies (e.g. gold when it was used as money) typically increase their purchasing power as the supply of money tokens or assets backing up a currency pegged to that asset is limited or scarce

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[Ucy]

I think the deflationary nature of bitcoin won't matter too much if price move up gradually rather than quickly.
spending could even be incentivized, made attractive or made difficult to avoid.
The deflation should remain. It is very important part of bitcoin.

[deisik]

I think the deflationary nature of bitcoin won't matter too much if price move up gradually rather than quickly.
spending could even be incentivized, made attractive or made difficult to avoid

Sorry, but it doesn't work like that

When people can buy more with less tomorrow, the hoarding will in fact be encouraged since how otherwise can you encourage it if by not increasing the purchasing power of a currency? It is easy money. Indeed, people will have to spend something to provide for simple sustenance but it is the aggregate demand that counts in the end, which is going down when a currency appreciates. On the other hand, inflation incentivizes people to spend money as soon as they receive it to avoid losing its purchasing power

[Adriano2010]

I think no, the countries still need to have their own currency even if is inflation they will still use the coins because they can control and create any time how much they need.

[exstasie]

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.

That's not really true. Eventually it will be deflationary, but right now Bitcoin's money supply is still subject to steep inflation. It's still 3-4% annual at the moment. A lot of people assume Bitcoin's price movements are based on deflation but really it's inflationary, and the market is just speculating about future utility.

My question is, would an economy with a deflation based currency such as Bitcoin work?

That's difficult to answer. It's been done with gold and gold-backed currencies, but never a commodity with a predictable and hard scarcity like Bitcoin. Until we see how it plays out in real life, this will always devolve into the classic Austrian vs. Keynesian debate.

[Afnan_faizah]

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.
Bitcoins are created less and less and the number of users does not affect the quantity of creation of Bitcoins.

Inflation on a low level promotes spending while deflation in Bitcoin promotes holding...

My question is, would an economy with a deflation based currency such as Bitcoin work?

Actually inflation is needed to make industries gain more profit. When the inflation is big the the industries will get big profit too but the problem is the value of the money. Inflation makes the value of fiat decrease. Bitcoin deflation will makes industries gain lower profit every years but the value of bitcoin is increase. Actually both are inapropriate for the world economy although bitcoin is better because the long time holders of bitcoin will gain a lot of profit. The best currency is gold, it is good for the world economy buy it is not practical to use. Maybe combination between gold and bitcoin is good.

[upsidedown75]

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.
Bitcoins are created less and less and the number of users does not affect the quantity of creation of Bitcoins.

Inflation on a low level promotes spending while deflation in Bitcoin promotes holding...

My question is, would an economy with a deflation based currency such as Bitcoin work?

As if the government would accept bitcoin to replace fiat just to avoid inflation. Bitcoin will never be a solution for i flation, if so, this would've solved the hyper inflation Venezuela had faced.

But Venezuela is already considering cryptocurrency as part of the solution to their recent crisis, they might not have implemented it but I am sure they are dare considering it and if they do agree to use it, then it will solve at least part of the inflation problem.

We don’t expect it to fully solve all the economic crisis of the world and that is why bitcoin was never even created to fully stand alone, there is a clause in the document that satoshi releases for the use of bitcoin, which states that it is to be used as an alternative but never stated that it will replace any FIAT, so why do we create some issue for cryptocurrency where there is none.

[mu_enrico]

I don't think Bitcoin is a deflation based currency because you need negative inflation to be called deflation. Bitcoin is a non-debased currency with ~21 million supply. I think it would work since it promotes price stability and economic certainty, similar to the gold-standard era.

[Pattart]

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.
Bitcoins are created less and less and the number of users does not affect the quantity of creation of Bitcoins.

Inflation on a low level promotes spending while deflation in Bitcoin promotes holding...

My question is, would an economy with a deflation based currency such as Bitcoin work?

As you said, deflation based currencies such as bitcoin will only benefit to holders only. for the economy it could have a bad effect, when the amount of money is limited and many people actually hold their bitcoin in the hope that prices will rise, of course will make the price of goods cheaper and lower? of course it will slow down the economy

[nur rochid]

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.
Bitcoins are created less and less and the number of users does not affect the quantity of creation of Bitcoins.

Inflation on a low level promotes spending while deflation in Bitcoin promotes holding...

My question is, would an economy with a deflation based currency such as Bitcoin work?

As you said, deflation based currencies such as bitcoin will only benefit to holders only. for the economy it could have a bad effect, when the amount of money is limited and many people actually hold their bitcoin in the hope that prices will rise, of course will make the price of goods cheaper and lower? of course it will slow down the economy

I agree. therefore to enjoy the results of bitcoin we must become members and take advantage of opportunities well. many of the bitcoiners have set up businesses like their dreams, so they help economic rotation in a country

[fiulpro]

The fact is the deflation based Currency as you would say doesn't govern major stocks in the market and at the same time it doesn't actually doesn't work as Integrated with the government as you think , if deflation was the enemy then the entire stock market should be wiped out along with other things who are considered investments and go down in price.
This deflation based Currency is actually something that had proven experts wrong and given more profit that it could ever would.
Therefore I won't ever doubt it's potential.
It's very essential for our current generation, it's true that we cannot entirely give the entire power of money to Bitcoins and others since they are unstable ,but we cannot even separate it from them.

[Falgorn]

The economy of any state can work effectively only on the basis of its national money. However, no economy will be able to function if only decentralized cryptocurrency is allowed in the state. Such a cryptocurrency in a short time will quickly unbalance the economy of any state. Cryptocurrency can and should go in society only along with the national currencies of the states. Using only cryptocurrency will not destroy the economy, but will affect it very negatively.

[Reid]

They would better create another than choose one like bitcoin even if it is already the best option out there.

Pride? No. It is the control that they want. How could they manipulate everything if they cannot even have the upperhand.
We say bitcoin is already being manipulated but no. As long as you dont have the the mainframe there will always be a chance for others to take part.

History already speaks for itself. They used gold cause they can control it and created fiat for the same purpose.

[Gozie51]

My question is, would an economy with a deflation based currency such as Bitcoin work?

Does this not sound as a contradiction where you have said bitcoin is a deflated currency and we understand that a country will hardly work with a deflated currency because it will fall the standard of living, goods, commodities and services will be high. It is clear it won't work.

[Betwrong]

~
When people can buy more with less tomorrow, the hoarding will in fact be encouraged since how otherwise can you encourage it if by not increasing the purchasing power of a currency? It is easy money. Indeed, people will have to spend something to provide for simple sustenance but it is the aggregate demand that counts in the end, which is going down when a currency appreciates. On the other hand, inflation incentivizes people to spend money as soon as they receive it to avoid losing its purchasing power

But this is not what happens in reality. Bitcoin was $19k in December 2017 and has been basically going down since until recently. It's not daily fluctuations, which we could ignore, we are talking about years here. Same behavior patterns happened before and will be happening in the future, as we all know. There is no such thing as "people can buy more with less tomorrow" regarding Bitcoin on a yearly basis, let alone on a daily one.

I'm not saying I know how can economy work with Bitcoin as a single currency, but what I know is that "You can buy with 1 USD tomorrow less than you can buy with it today" and "You can 1 BTC tomorrow more than you can buy with it today" are false assumptions on a daily basis.

I would like to say more about USD and its incentivising power, so to speak. Average inflation rate of USD is about 2% per year. How many of us would buy all the rice we would probably need in 2020 today, in order to pay for 1 kg $3.80 today instead of paying $3.88 in 2020?

[Ranly123]

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.
Bitcoins are created less and less and the number of users does not affect the quantity of creation of Bitcoins.

Inflation on a low level promotes spending while deflation in Bitcoin promotes holding...

My question is, would an economy with a deflation based currency such as Bitcoin work?

Deflation? Means it is not increasing? Correct me if I'm wrong dude but Bitcoin has bot inflation and deflation aspects because any given moment it will grow and decrease regarding on how people use it's technology. Anyways, government will not be depending on a volatile currency to gamble for it's economic growth.

[deisik]

~
When people can buy more with less tomorrow, the hoarding will in fact be encouraged since how otherwise can you encourage it if by not increasing the purchasing power of a currency? It is easy money. Indeed, people will have to spend something to provide for simple sustenance but it is the aggregate demand that counts in the end, which is going down when a currency appreciates. On the other hand, inflation incentivizes people to spend money as soon as they receive it to avoid losing its purchasing power

But this is not what happens in reality. Bitcoin was $19k in December 2017 and has been basically going down since until recently. It's not daily fluctuations, which we could ignore, we are talking about years here. Same behavior patterns happened before and will be happening in the future, as we all know. There is no such thing as "people can buy more with less tomorrow" regarding Bitcoin on a yearly basis, let alone on a daily one

But the question is not about Bitcoin as such

It is assumed (at least so I think) that a currency is constantly appreciating in value, which is a safe assumption if the supply is limited and tapers off eventually. Indeed, Bitcoin, with its wild price fluctuations, is far from such a currency but you can take gold as another, more solid example. People are hoarding gold, and if it was used as a currency today as it had been a few hundred years ago, it would cut pretty close to that. They would hoard it even more, though it would likely mean an imminent collapse of the whole economy in less than no time

[Betwrong]

~
When people can buy more with less tomorrow, the hoarding will in fact be encouraged since how otherwise can you encourage it if by not increasing the purchasing power of a currency? It is easy money. Indeed, people will have to spend something to provide for simple sustenance but it is the aggregate demand that counts in the end, which is going down when a currency appreciates. On the other hand, inflation incentivizes people to spend money as soon as they receive it to avoid losing its purchasing power

But this is not what happens in reality. Bitcoin was $19k in December 2017 and has been basically going down since until recently. It's not daily fluctuations, which we could ignore, we are talking about years here. Same behavior patterns happened before and will be happening in the future, as we all know. There is no such thing as "people can buy more with less tomorrow" regarding Bitcoin on a yearly basis, let alone on a daily one

But the question is not about Bitcoin as such

It is assumed (at least so I think) that a currency is constantly appreciating in value, which is a safe assumption if the supply is limited and tapers off eventually. Indeed, Bitcoin, with its wild price fluctuations, is far from such a currency but you can take gold as another, more solid example. People are hoarding gold, and if it was used as a currency today as it had been a few hundred years ago, it would cut pretty close to that. They would hoard it even more, though it would likely mean an imminent collapse of the whole economy in less than no time

I understand your point. Almost every economist from the old school would agree with you. And by "old school" I don't mean something that is from the past. I understand that those are the economists that are in charge right now. I just think that maybe here, on bitcointalk, we can come up with an idea of a new economic system for which inflation will not be a mandatory component. I know it may seem too ambitious, but we can try at least.

I personally think that current capitalist economy is the best one around. But I also agree with people who say that it is falling apart, and that something new have to be implemented in the nearest future.

[Kevin77]

It does work in a sense that its a great investment opportunity. When you have a currency that promotes holding and waiting out that becomes an investment, if you are going to make a currency that you want people to invest then what bitcoin is doing is great and that is why I definitely prefer this over investing into banks or investing into stocks and so forth.

Nevertheless, when it comes to using bitcoin for daily stuff it is making a bit of a challenge, why would you want to spend something that will get bigger in price ? The thing you bought for 100 bucks right now could worth 200 bucks tomorrow with the bitcoin you paid, so you are going to consider how if you paid with fiat only 100 bucks will be gone but your 200 bucks worth of bitcoin is gone now which makes it harder for mass adoption since people prefer to keep it.

It is not destroying bitcoin at all since its still a viable investment option but its creating issues for daily use for sure.

[deisik]

It is assumed (at least so I think) that a currency is constantly appreciating in value, which is a safe assumption if the supply is limited and tapers off eventually. Indeed, Bitcoin, with its wild price fluctuations, is far from such a currency but you can take gold as another, more solid example. People are hoarding gold, and if it was used as a currency today as it had been a few hundred years ago, it would cut pretty close to that. They would hoard it even more, though it would likely mean an imminent collapse of the whole economy in less than no time

I understand your point. Almost every economist from the old school would agree with you. And by "old school" I don't mean something that is from the past. I understand that those are the economists that are in charge right now. I just think that maybe here, on bitcointalk, we can come up with an idea of a new economic system for which inflation will not be a mandatory component. I know it may seem too ambitious, but we can try at least

In simple terms, you can't run an economy on an appreciating currency

Well, technically, if the economy is quickly expanding economy, e.g. due to a major shift in technology (like free unlimited energy for all), its expansion can somewhat offset the burden of an appreciating currency that it puts on producers and their profit margins (read, these margins are so high that they can compensate for the negative effect of deflation). But it won't last forever and ultimately deflation will start to eat away at producers' profits and that will send the economy into the death spiral of first stagnation and then depression

I personally think that current capitalist economy is the best one around. But I also agree with people who say that it is falling apart, and that something new have to be implemented in the nearest future

It all comes down to people and their flaws