Bitcoin Forum
December 10, 2016, 01:07:21 AM *
News: To be able to use the next phase of the beta forum software, please ensure that your email address is correct/functional.
 
   Home   Help Search Donate Login Register  
Pages: « 1 2 3 4 5 6 7 [8] 9 10 »  All
  Print  
Author Topic: A modest amount of inflation should be part of bitcoin  (Read 16346 times)
ShadowOfHarbringer
Legendary
*
Offline Offline

Activity: 1470


Bringing Legendary Har® to you since 1952


View Profile
May 04, 2011, 01:10:43 PM
 #141


It was never going to be a smooth ride.

For it to be steadily rising price or stable you would have to somehow match the increase in supply, currently fixed at BTC 7200 per day, with an unpredictable amount of demand for new BTC.

Currently inflation is at the 7,200/6.086e06 per day, i.e. 43.8% annualised rate. Wrap your head around that, monetary issuance is expanding at 43.8% annualised and the value is still rising ...

Exactly.

Isn't 43,8% a "modest" amount of inflation already ?

Bitcoin will have inflation for the next 100 years, its just that demand for it rises much faster than inflation.

There are several different types of Bitcoin clients. The most secure are full nodes like Bitcoin-Qt, which will follow the rules of the network no matter what miners do. Even if every miner decided to create 1000 bitcoins per block, full nodes would stick to the rules and reject those blocks.
Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction. Advertise here.
1481332041
Hero Member
*
Offline Offline

Posts: 1481332041

View Profile Personal Message (Offline)

Ignore
1481332041
Reply with quote  #2

1481332041
Report to moderator
amincd
Hero Member
*****
Offline Offline

Activity: 772


View Profile
May 04, 2011, 02:37:17 PM
 #142

Quote from: CoinOperated
This is the paradox.  The rising price is gathering attention to bitcoin.  This is good. I've argued in several posts that due to any random shock to the system, prices my fall (even if temporary). While things could work out well if prices rise steadily for a long time, and that at some point a real merchant economy emerges as the BTC total quantity tails off.  That is the ideal scenario.  But I also can see that any bump in the road could cause a drop in prices, followed by a move away from BTC.  At that point merchants may decide this was just a fad and the whole project will fizzle out.  It will be very difficult to restart.

I hope for the first outcome, but prefer to plan for the second since I've not encountered many smooth roads in life.  That is why I argue for considering ways to modify the system to encourage merchant participation soon.  I'm not the only one, I see many people exploring and considering different ideas along these lines, stemming from the same concern.

It's price drops, not price volatility, that would most discourage merchants from accepting it, and a fixed supply is the best way to give people confidence in it maintaining its present value into the future.
CoinOperated
Newbie
*
Offline Offline

Activity: 28


View Profile
May 04, 2011, 06:34:25 PM
 #143

But then consumers won't want to spend bitcoins.  They would rather hold them since they are rising and spend fiat currency which is falling. Merchants won't bother to offer BTC prices since it will not get enough use.  A situation where the price of something (BTC) is far in excess of its actual utility happens all the time in markets, but then you get the inevitable downdraft.  I know it is very powerful to believe in the "always upwards if we leave it alone" idea but we need the wisdom to see both sides of it.

Just a thought: What if bitcoin replaced all the money in the world, what would its present value be in USD?  The velocity of money in the US historically has been approximately 2, meaning there is half the amount of money as GDP (the money turns over on average twice a year).  I don't know what it is in other countries, but just guessing that is reasonable worldwide, and the world economy is approaching $60T, I get ($60T/2)/21M ~= $1.43 Million per BTC present value.  That is the theoretical end value of the deflation once it hits 21M cap and replaces all the fiat currency.  After that monetary theory says it will deflate or inflate at the GDP growth rate if velocity does not change.

I know that sounds rather attractive, but it won't happen.  It will unravel before then, who knows next month or next year.
AntiVigilante
Member
**
Offline Offline

Activity: 98



View Profile
May 04, 2011, 06:51:58 PM
 #144

There's a culture developing around bitcoin.

That culture overrides supply and demand dead locks.

Paypal just shut down coinpal. I am not going to be an idle bitcoin user.

Welcome to the Streisand effect.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
tomcollins
Full Member
***
Offline Offline

Activity: 182


View Profile
May 04, 2011, 06:56:59 PM
 #145

But then consumers won't want to spend bitcoins.  They would rather hold them since they are rising and spend fiat currency which is falling. Merchants won't bother to offer BTC prices since it will not get enough use.  A situation where the price of something (BTC) is far in excess of its actual utility happens all the time in markets, but then you get the inevitable downdraft.  I know it is very powerful to believe in the "always upwards if we leave it alone" idea but we need the wisdom to see both sides of it.

Just a thought: What if bitcoin replaced all the money in the world, what would its present value be in USD?  The velocity of money in the US historically has been approximately 2, meaning there is half the amount of money as GDP (the money turns over on average twice a year).  I don't know what it is in other countries, but just guessing that is reasonable worldwide, and the world economy is approaching $60T, I get ($60T/2)/21M ~= $1.43 Million per BTC present value.  That is the theoretical end value of the deflation once it hits 21M cap and replaces all the fiat currency.  After that monetary theory says it will deflate or inflate at the GDP growth rate if velocity does not change.

I know that sounds rather attractive, but it won't happen.  It will unravel before then, who knows next month or next year.


But you can't eat Bitcoins.  You can't do anything with them.  I can accumulate all the money I want, but I'll die of starvation or have no enjoyment of life.  That will encourage people to spend.
CoinOperated
Newbie
*
Offline Offline

Activity: 28


View Profile
May 04, 2011, 07:58:19 PM
 #146

But then consumers won't want to spend bitcoins.  They would rather hold them since they are rising and spend fiat currency which is falling. Merchants won't bother to offer BTC prices since it will not get enough use.  A situation where the price of something (BTC) is far in excess of its actual utility happens all the time in markets, but then you get the inevitable downdraft.  I know it is very powerful to believe in the "always upwards if we leave it alone" idea but we need the wisdom to see both sides of it.

Just a thought: What if bitcoin replaced all the money in the world, what would its present value be in USD?  The velocity of money in the US historically has been approximately 2, meaning there is half the amount of money as GDP (the money turns over on average twice a year).  I don't know what it is in other countries, but just guessing that is reasonable worldwide, and the world economy is approaching $60T, I get ($60T/2)/21M ~= $1.43 Million per BTC present value.  That is the theoretical end value of the deflation once it hits 21M cap and replaces all the fiat currency.  After that monetary theory says it will deflate or inflate at the GDP growth rate if velocity does not change.

I know that sounds rather attractive, but it won't happen.  It will unravel before then, who knows next month or next year.


But you can't eat Bitcoins.  You can't do anything with them.  I can accumulate all the money I want, but I'll die of starvation or have no enjoyment of life.  That will encourage people to spend.

That is the standard argument that in a deflationary environment after some time people will get tired of deferring consumption and will start to consume and that will end the deflation of its own accord.  But those arguments were made historically for closed economies or economies where external trade was minor compared to GDP (say <10%).  What we are talking about is the exchange rate between bitcoin and a much larger fiat economy.  That is why I said "They would rather hold them since they are rising and spend fiat currency which is falling" .  They do have a choice, they can use fiat currency to eat for now.  Human nature is they will hold BTC while it is rising, and as soon as it start to fall they will try to buy everything in sight with BTC, it will fall faster and then merchants won't want to take it anyway.  We don't have an experiment of a diversified mostly closed economy that can supply most its needs internally that runs 100% on BTC.   If we did we should see inflation of 43% - grwoth rate.
FreeMoney
Legendary
*
Offline Offline

Activity: 1246


Strength in numbers


View Profile WWW
May 04, 2011, 08:24:11 PM
 #147

But then consumers won't want to spend bitcoins.  They would rather hold them since they are rising and spend fiat currency which is falling.

This would mean people will end up holding no dollars and only bitcoins. And then they spend coins because they want stuff.


Merchants won't bother to offer BTC prices since it will not get enough use.  

They will if they want to get Bitcoins, which is a premise.

Play Bitcoin Poker at sealswithclubs.eu. We're active and open to everyone.
kiba
Legendary
*
Offline Offline

Activity: 980


View Profile
May 04, 2011, 08:35:02 PM
 #148


That is the standard argument that in a deflationary environment after some time people will get tired of deferring consumption and will start to consume and that will end the deflation of its own accord.  But those arguments were made historically for closed economies or economies where external trade was minor compared to GDP (say <10%).  What we are talking about is the exchange rate between bitcoin and a much larger fiat economy.  That is why I said "They would rather hold them since they are rising and spend fiat currency which is falling" .  They do have a choice, they can use fiat currency to eat for now.  Human nature is they will hold BTC while it is rising, and as soon as it start to fall they will try to buy everything in sight with BTC, it will fall faster and then merchants won't want to take it anyway.  We don't have an experiment of a diversified mostly closed economy that can supply most its needs internally that runs 100% on BTC.   If we did we should see inflation of 43% - grwoth rate.

Bollocks. I have to resist the urge to spend bitcoin, as it's only "1 or 2 BTC" for y product.

tomcollins
Full Member
***
Offline Offline

Activity: 182


View Profile
May 04, 2011, 08:59:25 PM
 #149


That is the standard argument that in a deflationary environment after some time people will get tired of deferring consumption and will start to consume and that will end the deflation of its own accord.  But those arguments were made historically for closed economies or economies where external trade was minor compared to GDP (say <10%).  What we are talking about is the exchange rate between bitcoin and a much larger fiat economy.  That is why I said "They would rather hold them since they are rising and spend fiat currency which is falling" .  They do have a choice, they can use fiat currency to eat for now.  Human nature is they will hold BTC while it is rising, and as soon as it start to fall they will try to buy everything in sight with BTC, it will fall faster and then merchants won't want to take it anyway.  We don't have an experiment of a diversified mostly closed economy that can supply most its needs internally that runs 100% on BTC.   If we did we should see inflation of 43% - grwoth rate.

Bollocks. I have to resist the urge to spend bitcoin, as it's only "1 or 2 BTC" for y product.

I guess all those electronics manufacturers should be out of business any day, since customers will just resist buying new computers/televisions/etc... since the price keeps getting lower for the same stuff (or better stuff).  If only customers were smart enough to just keep waiting!
CoinOperated
Newbie
*
Offline Offline

Activity: 28


View Profile
May 04, 2011, 09:24:44 PM
 #150

Still the same argument as getting hungry.  If they want a TV they have to spend fiat dollars, because that is the only way to get a TV whether or not it gets cheaper. But in this case they have a choice of two currencies so it is a different dynamic.  It is a choice whether to spend A or B and not a choice to spend or not spend.
ribuck
Donator
Legendary
*
Offline Offline

Activity: 826


View Profile
May 04, 2011, 09:37:38 PM
 #151

But in this case they have a choice of two currencies so it is a different dynamic.  It is a choice whether to spend A or B and not a choice to spend or not spend.
If the customer has both currencies, the customer prefers to get rid of InflataBucks instead of DeflataBucks. The retailer, on the other hand, prefers to receive DeflataBucks instead of InflataBucks.

The price of goods in each currency will therefore float to the point where the interests of the buyers and sellers are matched, whichever currency they use.
jtimon
Legendary
*
Offline Offline

Activity: 1246


View Profile WWW
May 04, 2011, 10:11:15 PM
 #152

But in this case they have a choice of two currencies so it is a different dynamic.  It is a choice whether to spend A or B and not a choice to spend or not spend.
If the customer has both currencies, the customer prefers to get rid of InflataBucks instead of DeflataBucks. The retailer, on the other hand, prefers to receive DeflataBucks instead of InflataBucks.

The price of goods in each currency will therefore float to the point where the interests of the buyers and sellers are matched, whichever currency they use.

As InflataBucks, DemurrageBucks will be preferred by the payer but not by the payee.
But the price of InlataBucks would change against DeflataBucks forever while the exchange between DemurrageBucks and DeflataBucks could become "stable" if both monetary bases are fixed. DeflataBucks would be always better for saving, but maybe the payee doesn't care to receive InflataBucks or DemurrageBucks if he knows he will spend them quickly.

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
AntiVigilante
Member
**
Offline Offline

Activity: 98



View Profile
May 04, 2011, 11:31:07 PM
 #153

Is it so much to ask to have a cheerios version of bitcoin (as it is now) without the bells and whistles?

I mean look at this thread.

If this is the sort of long discussion people will have to bite their nails over when trying to create large scale solutions, I have to protest.

It's like a convention of future bloat analysis consultants. Whatever happened to composition of features?

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
em3rgentOrdr
Sr. Member
****
Offline Offline

Activity: 434


youtube.com/ericfontainejazz now accepts bitcoin


View Profile WWW
May 05, 2011, 12:30:37 AM
 #154

Is it so much to ask to have a cheerios version of bitcoin (as it is now) without the bells and whistles?

I mean look at this thread.

If this is the sort of long discussion people will have to bite their nails over when trying to create large scale solutions, I have to protest.

It's like a convention of future bloat analysis consultants. Whatever happened to composition of features?

The issue is that two competing version of the bitcoin block chain would be incompatible.  The bitcoin network would be split in two.  This means that the total strength of each individual network would be weaker than a single unified bitcoin network.

United we Stand.  Divided we Fall.  (as the Statists would say Cheesy )

"We will not find a solution to political problems in cryptography, but we can win a major battle in the arms race and gain a new territory of freedom for several years.

Governments are good at cutting off the heads of a centrally controlled networks, but pure P2P networks are holding their own."
BitterTea
Sr. Member
****
Offline Offline

Activity: 294



View Profile
May 05, 2011, 12:50:28 AM
 #155

This means that the total strength of each individual network would be weaker than a single unified bitcoin network.

Miners can theoretically mine toward more than one block chain simultaneously, so more block chains are a good thing IMO. Most of the long arguments take place over proposals like this one, that fundamentally alter the technicals or economics of Bitcoin. They might as well just create a fork instead of argue that their version is better. Basically, "put your money where your mouth is" - if your version is better or more useful than Bitcoin, people will use it.
em3rgentOrdr
Sr. Member
****
Offline Offline

Activity: 434


youtube.com/ericfontainejazz now accepts bitcoin


View Profile WWW
May 05, 2011, 01:39:04 AM
 #156

This means that the total strength of each individual network would be weaker than a single unified bitcoin network.

Miners can theoretically mine toward more than one block chain simultaneously, so more block chains are a good thing IMO. Most of the long arguments take place over proposals like this one, that fundamentally alter the technicals or economics of Bitcoin. They might as well just create a fork instead of argue that their version is better. Basically, "put your money where your mouth is" - if your version is better or more useful than Bitcoin, people will use it.

interesting point...so it is basically the same computational power to mine towards two block chains, since fundamentally the thing being hashed is just a binary number with a different nonce...

"We will not find a solution to political problems in cryptography, but we can win a major battle in the arms race and gain a new territory of freedom for several years.

Governments are good at cutting off the heads of a centrally controlled networks, but pure P2P networks are holding their own."
marcus_of_augustus
Legendary
*
Offline Offline

Activity: 2100



View Profile
May 05, 2011, 01:50:47 AM
 #157


I don't think that is correct. Different block chains would be encoding a different set of transacations on the different networks right? So they would be hashing different blocks, they could be working on the two chains simultaneously but the work done for each would be separate. No free lunch.

BitterTea
Sr. Member
****
Offline Offline

Activity: 294



View Profile
May 05, 2011, 02:00:50 AM
 #158

In this recent thread, Mike explains how this could work. Previously Satoshi had expressed this idea (link in thread), but had never provided implementation details.
amincd
Hero Member
*****
Offline Offline

Activity: 772


View Profile
May 05, 2011, 02:25:32 AM
 #159

Quote from: CoinOperated
But then consumers won't want to spend bitcoins.  They would rather hold them since they are rising and spend fiat currency which is falling.

Historically, gold has had the same quality as a currency. People want to hold on to it, since it appreciates. I believe the effect of this is that it threatens the demand for gold, since it's not being circulated as currency and therefore merchants look for alternatives, which leads to price drops, which leads to increased circulation, which leads to the price coming back up as the demand for it as a currency returns, and so on.

If you look at the dollar's value when it was on a gold standard, it alternated between deflation and inflation:



After the 1950s, it was only inflation, as the dollar delinked from gold.

The point is that the value oscillates, rather than going into a free fall, due to the fixed supply always making it potentially valuable to merchants. Gold's value was volatile, but in the long run it was stable.

Bitcoin also has an advantage to all other currencies in that transaction costs are extremely low, as are the storage costs. It's like a more easily transferable, storable and divisible version of gold, and gold was used for hundreds of years as the primary currency of the world, so I think bitcoin has what it takes.

Quote
Just a thought: What if bitcoin replaced all the money in the world, what would its present value be in USD?  The velocity of money in the US historically has been approximately 2, meaning there is half the amount of money as GDP (the money turns over on average twice a year).  I don't know what it is in other countries, but just guessing that is reasonable worldwide, and the world economy is approaching $60T, I get ($60T/2)/21M ~= $1.43 Million per BTC present value.

BTCs are easily divisible, so it doesn't matter if the value of a BTC goes to $1.43 million, as then smaller denominations will be used. It's also implausible that BTC would replace all other fiat currencies, as they are legal tender in their countries, so they will always have some demand. BTC's potential is to be a major currency in one niche of global commerce.

jtimon
Legendary
*
Offline Offline

Activity: 1246


View Profile WWW
May 05, 2011, 09:42:19 AM
 #160

It's also implausible that BTC would replace all other fiat currencies, as they are legal tender in their countries, so they will always have...

Be careful when you said that. I agree in that bitcoin could be considered fiat because fiat just means "let it be done", but most people require money to be issued by a government/state to be considered fiat.

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
Pages: « 1 2 3 4 5 6 7 [8] 9 10 »  All
  Print  
 
Jump to:  

Sponsored by , a Bitcoin-accepting VPN.
Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!