Increases in bitcoin prices are bad for merchants

[notme]

I meant a percentage of the fees.... Percentage of transaction is indeed obviously bad.

Allowing thr price to differ from the basket of currencies that it's supposedly tracking isn't a good idea.  If the miners want to continue to get all of the transaction fees, they will sell enough of the new coins to keep the destruction threshold from kicking in.  Otherwise they will horde and horde until they have all the coins as speculators try to buy them up and your algorithm prints more money to try and quell the rally.  Even with transaction fee destruction, it seems like there might not be enough destruction capacity to make this work.

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[Revalin]

I think it works out OK.  It's a case of the prisoner's dilemma:  If all the miners collude it's a problem, but any individual miner gets an advantage by selling at the peaks when their coins are worth an extra 30%.  Also, because of the time-value of money, and especially because we're pinning to inflating fiat, they're better off spending their coins than hoarding hoping to increase the payout.  Keep in mind they're having to pay electricity bills the whole time.

It's an interesting objection that no one has raised before, though.  I'll have to consider it some more and see if there ends up being some hoarding strategy that would let miners game the system.

[hazek]

I thought it was proven the last time the value increased dramatically that the dreaded deflationary spiral is a fallacy and people actually spent more? 

[PrintCoins]

I thought it was proven the last time the value increased dramatically that the dreaded deflationary spiral is a fallacy and people actually spent more? 

I don't think that it proved a fallacy. A deflationary spiral only is a problem when everyone believes it can only go up in value. I think there are enough people that think the current price of bitcoins and the rate of increase is nuts, and just want to dump what they have.

[hazek]

Can you really envision a world where everyone meaning 100% of participants think something will only go up in value? I sure can't.. And that's why it's a fallacy.

[PrintCoins]

Can you really envision a world where everyone meaning 100% of participants think something will only go up in value? I sure can't.. And that's why it's a fallacy.

I think most people believe oil will just continue to go up in value. The same could be said for uranium and other non-renewable resources that are consumed (gold and silver doesn't count).

Gold, silver, bitcoins, etc aren't really consumed, so even though they follow the same extraction curve as oil, their price floats based upon the whims of speculators.

[Piper67]

Can you really envision a world where everyone meaning 100% of participants think something will only go up in value? I sure can't.. And that's why it's a fallacy.

I think most people believe oil will just continue to go up in value. The same could be said for uranium and other non-renewable resources that are consumed (gold and silver doesn't count).

Gold, silver, bitcoins, etc aren't really consumed, so even though they follow the same extraction curve as oil, their price floats based upon the whims of speculators.

Actually, Bitcoins are very much "consumed" in the sense that, over time, the total number will drop due to things like hard drive crashes and so on. In fact, it is quite likely that of the 8 million plus BTC mined so far, a fairly good number were lost in the early days. People weren't taking much care of them then, drives crashed, flash drives got lost and so on.

The rate of consumption is slow, and I don't agree with the writer who said it will ultimately reduce to zero (if we as a species can keep alive the Spanish Flu virus, we sure as shit can keep a few BTC safely guarded), plus the mining curve is asymptotic, so there will always be one more bitcoin to be mined. But they're certainly consumed.

[FreeMoney]

Can you really envision a world where everyone meaning 100% of participants think something will only go up in value? I sure can't.. And that's why it's a fallacy.

I think most people believe oil will just continue to go up in value. The same could be said for uranium and other non-renewable resources that are consumed (gold and silver doesn't count).

Gold, silver, bitcoins, etc aren't really consumed, so even though they follow the same extraction curve as oil, their price floats based upon the whims of speculators.

Bitcoin (and gold I think to some extent) are very different than oil. If Bitcoin gets expensive it holds a lot of value and that makes a good money. If oil gets expensive we suck more up until we ultimately find a different means to our ends.

[Vitalik Buterin]

> I don't see how you can do that without making it centrally controlled and acting like the fed (printing more or less based upon an inflation target of 0%).

Network hashrate relative to a projection from the 2-year moving average (eg. hashrate of 100 110 121 133 146 is just Moore's law doing its job, 110 110 121 140 170 signifies a spike in popularity). If there's a spike in popularity, print more, otherwise print less.