Bitcoin is no hedge against inflation - i unadopted it.

[venlo]

People like to call it 'hedge against fiat inflation' others said 'it's digital gold'

None of it is true. In fact it is misleading. Bitcoin inflates twice as heavy as fiatmoney until 2016 - after that it'll continue to inflate at the same rate as fiatmoney. So how can that be a hedge against inflation or compared to gold? It's a lie.

Bitcoin is inflating heavily with around 10% per year. This is causing negative feedbackloops like we see now and causes high volatility.
The high inflation in bitcoin also impacts adoption in a negative way. People will probably not adopt something that goes down 90% of the time to make a crazy rise (maybe) at one point for a few weeks and then starts declining again for ages.
Sane people will not adopt that.

So, can i ask. Why was it again we are having that inflation? What sense does it make? Why do we need it?
Is Bitcoin maybe just a plot to make big miners rich?

I myself unadopted bitcoin again for that reason.
I refuse to invest in inflationary coins.

your thoughts?

[1714998276]

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[franky1]

my thoughts are that your research is lacking the big picture. and you need to do more research.

5 years ago bread was $2 now its $2.50
pick ANY item in the world you want to buy and then look at the price now.
beef, oil, car fuel, pepsi, beer.

now for another example, using bitcoin this time:
5 years ago 2 pizza cost 10k bitcoin. now 2 pizza cost 0.1bitcoin. meaning to can get 200,000 pizza's for the same 10k bitcoins

learn about what inflation really is, and dont worry about the small day to day price changes, much like economists dont worry about day to day special offers of 50c off bread, or 'happy hour' in bars. or buy one get one free on pepsi.. the big picture long term is that bitcoin is DEFLATIONARY and legal tender is INFLATIONARY.

as for your unadoption.
lets say you only had 1BTC and now have cashed out
i dare you to hold your bank notes for just 2 years. and on that piece of paper write out a shopping list of things that you can buy with it. ($400 shopping list).

and in 2 years lets see how many of those items on your shopping list you can buy. and compare it to purchases using bitcoin.

goodluck with your FIAT savings 

[newyorker91]

So, can i ask. Why was it again we are having that inflation? What sense does it make?

As any currency it has that inflation. You need to wait a few year when it will be more stable.

Why do we need it?
Is Bitcoin maybe just a plot to make big miners rich?

To make transactions/payments smooth and quick without having a middleman, there are many reasons why. And, no, it's not about making big miners rich.

[venlo]

sure, sure, but am i not better off not using it and to just jump in every 4 years 2 weeks before the halving, ride the wave and leave again? I don't see a reason to hold it during times of low adoption at least until 2020 when the inflationrate is at a reasonable level. I think for me it'll make more sense just to stay out until 2020.

I think my gold bullion will do a better job in protecting me against a collapse of the dollar.

We had 9 months of a bearmarket, adoption is not picking up and now the thing tanks on good news. No, thank you. You can have it.

Google trends shows declining interest in it. Not a good investement with that inflationrate, i guess. It is not designed to hold value or to be adopted at this point in time.

[Lauda]

No matter what one does, they can't please everyone.
Even if Bitcoin were to become near perfect someone would find things that are "wrong" with it.
Stop complaining. FIAT is bad. End of story.

[venlo]

Sure, Bitcoin is currently experiencing monetary inflation. The new coins are being distributed.

Apparently Bitcoin can't do everything right in the eyes of everyone. One person complains about the early adopters having too many coins, another complains that the inflation is too high.

right. The problem is see is: early adopters are punished for holding it to accomodate the latecomers who may never come actually for various reasons. The inflation does make no sense. If inflation was lower latecomers could still benefit because what difference does it make for them not to be able to hold as many coins and become as rich with it when it only was designed to hold value? They could still benefit from it if it wasn't as inflationary. Now the problem we are having: people leaving why? so the latecomers can have more  worthless coins in 10 years?

I hold bitcoins because it allows me to store and transfer value without the help of a middleman or the permission of an authority.

wrong. It doesn't allow you to store value yet.

[venlo]

the point i am making: the logic is flawed. The inflation does benefit nobody. Maybe the miners. Otherwise: nobody. Also not the latecomers.

Bitcoins design is stupid. It can't hold value by design. Therefor it can't be adopted. At least not until 2016 or 2020.

[medUSA]

When someone say that something hedges against inflation, it usual means long term. Hedging does not mean risk-free, only reduced risk.

[inBitweTrust]

None of it is true. In fact it is misleading. Bitcoin inflates twice as heavy as fiatmoney until 2016 - after that it'll continue to inflate at the same rate as fiatmoney. So how can that be a hedge against inflation or compared to gold? It's a lie.

Incorrect , the next halving will happen sometime mid to late 2015 and inflation will drop below USD /Euro Inflation. USD Fiat inflation is 5-8% a year if you use the correct CPI to calculate inflation which includes food and fuel.

USD fiat  has already lost 99.9998% in value against bitcoin in the last 5 years despite bitcoin being an inflationary currency. Why? Bitcoin is technically an inflationary currency and will remain so till 2140. Despite it being inflationary it keeps going through deflationary bubbles because demand outstrips supply. So an inflationary currency becomes a deflationary currency because it doesn't have the fed tweaking the printing rates to match the demand.

Anyone getting out of Bitcoin before the next halving is crazy as their will be many more "deflationary bubbles" on this initial roller-coaster.

[balu2]

i agree with op to a certain point. But i don't see a need to unadopt crypto entirely.
Go for altcoins with solid community and low inflation. There is a few of them. They are better and will very likely hold more marketcap in the future when people realize this as a problem. There are solutions offered for the too long halving-intervals of bitcoin. Shoot me a message and i'll name you a few.

[OrientA]

BTC is being issued, so there is high inflation. But if you compare it against USD, it is deflationary.

[BitCoinNutJob]

Could we not make the same argument against gold since more gold is being dug out off the ground constantly.  What if a meteorites of solid gold start falling down?

[venlo]

BTC is being issued, so there is high inflation. But if you compare it against USD, it is deflationary.

which is untrue

3600 new bitcoins a day in 365 days = 1.3 million
Currently in circulation: around 13 million

10% inflation - insane

USD hold value better with its 5% inflation annualy and they are not in a negative feedbackloop yet.
Gold never will experience these negative feedbackloops

negative feedbackloop: people sell and sell, miners keep selling, others don't buy in, more selling, panic, more selling, selling, inflation, selling, another panic and more selling, no adoption, more selling, miners keep selling until finally: stagnation

[inBitweTrust]

i agree with op to a certain point. But i don't see a need to unadopt crypto entirely.
Go for altcoins with solid community and low inflation. There is a few of them. They are better and will very likely hold more marketcap in the future when people realize this as a problem. There are solutions offered for the too long halving-intervals of bitcoin. Shoot me a message and i'll name you a few.

Even if you ignored all of bitcoins positive attributes and just focused on bitcoin as an investment this is poor advice.

It is not so much about the rate of inflation within the currency itself but the rate of inflation vs the adoption rate. I would much rather have a mildly inflating currency that is deflating because it has more buying pressure than a fixed asset that has no future.

Many of those alts have no future and are just barely staying alive because marketing.

3600 new bitcoins a day in 365 days = 1.3 million
Currently in circulation: around 13 million

10% inflation - insane

There are many state currencies with higher inflation rates than 10%. When Bitcoin drops to 4-5% inflation next year will you be calling USD inflation of 5-8% insanely high?

Gold never will experience these negative feedbackloops

This is false, gold has the same "negative feedbackloops". Gold is also more dangerous from the aspect that the mining or "inflation" amount isn't fixed or known. There will only be 21 million bitcoins. Who knows how much gold will be circulating in the future with asteroid mining , a large gold find on earth, ect...

[Remember remember the 5th of November]

My thoughts are that your research is lacking the big picture. and you need to do more research.

5 years ago bread was $2 now its $2.50
pick ANY item in the world you want to buy and then look at the price now.
beef, oil, car fuel, pepsi, beer.

now for another example, using bitcoin this time:
5 years ago 2 pizza cost 10k bitcoin. now 2 pizza cost 0.1bitcoin. meaning to can get 200,000 pizza's for the same 10k bitcoins

learn about what inflation really is, and dont worry about the small day to day price changes, much like economists dont worry about day to day special offers of 50c off bread, or 'happy hour' in bars. or buy one get one free on pepsi.. the big picture long term is that bitcoin is DEFLATIONARY and legal tender is INFLATIONARY.

as for your unadoption.
lets say you only had 1BTC and now have cashed out
i dare you to hold your bank notes for just 2 years. and on that piece of paper write out a shopping list of things that you can buy with it. ($400 shopping list).

and in 2 years lets see how many of those items on your shopping list you can buy. and compare it to purchases using bitcoin.

goodluck with your FIAT savings  

For once you are correct.

10 years ago I could buy a lot of things with the same amount of money I use today to buy only a few. Even bread costs twice as much as before.

[CoinRocka]

BTC is being issued, so there is high inflation. But if you compare it against USD, it is deflationary.

which is untrue

3600 new bitcoins a day in 365 days = 1.3 million
Currently in circulation: around 13 million

10% inflation - insane

USD hold value better with its 5% inflation annualy and they are not in a negative feedbackloop yet.
Gold never will experience these negative feedbackloops

negative feedbackloop: people sell and sell, miners keep selling, others don't buy in, more selling, panic, more selling, selling, inflation, selling, another panic and more selling, no adoption, more selling, miners keep selling until finally: stagnation

Let's assume all 21 million bitcoin were created/mined on day 0.  Who would get them?  Gold had an insane inflation rate in 1848.

[achimsmile]

the point i am making: the logic is flawed. The inflation does benefit nobody. Maybe the miners. Otherwise: nobody. Also not the latecomers.

Bitcoins design is stupid. It can't hold value by design. Therefor it can't be adopted. At least not until 2016 or 2020.

You should check out non-inflationary PoS coins, such as Nxt or BitsharesX.

[CoinRocka]

My thoughts are that your research is lacking the big picture. and you need to do more research.

5 years ago bread was $2 now its $2.50
pick ANY item in the world you want to buy and then look at the price now.
beef, oil, car fuel, pepsi, beer.

now for another example, using bitcoin this time:
5 years ago 2 pizza cost 10k bitcoin. now 2 pizza cost 0.1bitcoin. meaning to can get 200,000 pizza's for the same 10k bitcoins

learn about what inflation really is, and dont worry about the small day to day price changes, much like economists dont worry about day to day special offers of 50c off bread, or 'happy hour' in bars. or buy one get one free on pepsi.. the big picture long term is that bitcoin is DEFLATIONARY and legal tender is INFLATIONARY.

as for your unadoption.
lets say you only had 1BTC and now have cashed out
i dare you to hold your bank notes for just 2 years. and on that piece of paper write out a shopping list of things that you can buy with it. ($400 shopping list).

and in 2 years lets see how many of those items on your shopping list you can buy. and compare it to purchases using bitcoin.

goodluck with your FIAT savings  

For once you are correct.

10 years ago I could buy a lot of things with the same amount of money I use today to buy only a few. Even bread costs twice as much as before.

And Entenmann's donuts are half the size   

[Beliathon]

Some helpful visual aids:



The red line below is Bitcoin's inflation rate. Notice how it decreases to nearly zero very quickly. Consider, dear reader, how this decrease in inflation might affect the price of BTC in the years to come, especially 2013-2021.



By 2021, reality will have set in. No one will be able to afford to live in denial of this new reality by then. On the outside, we've all got about ten years to accept reality. Anyone who hasn't figured it out by then, is going to get fucked hard, right in the wallet. With no lube.

[Envrin]

I hold bitcoins because it allows me to store and transfer value without the help of a middleman or the permission of an authority. In today's world of ever increasing capital controls, this power is priceless to me. I can deal with the volatility of Bitcoin's early years to have this kind of control over my asset. Some people may not care about this feature (they don't mind paying middlemen and trust the authorities), in which case Bitcoin may not be for them.

Couldn't have said it better myself.

[polynesia]

People talk about inflation measured in USD terms.
You should check out the inflation rates in countries like India. 

[Eotnak]

This is false, gold has the same "negative feedbackloops". Gold is also more dangerous from the aspect that the mining or "inflation" amount isn't fixed or known. There will only be 21 million bitcoins. Who knows how much gold will be circulating in the future with asteroid mining , a large gold find on earth, ect...

I'd like an expert opinion from someone, please:  What is to stop let's say Paypal, Coinbase, etc. from practicing fractional reserve on bitcoins?  Has this been discussed before?  I know MTGox did it, but if it's done to a workable ratio of average/peak withdrawals, I think they can get away with it.  Especially if they get big enough, and mass adoption happens.  I don't think transparency solves this problem because sheople just don't care.  In 5 years, you'll hear "what is MtGox?"  If you don't think that is true, watch Jimmy Kimmel ask people on the street common sense questions.

[keithers]

Bitcoin is a hedge against fiat currency whether the prices are down or up.   If we were at an all time high right now, everyone and their mother would be saying how great of a hedge BTC is.   There is a just a ton of "the sky is falling" talk right now because prices are down, and we are approaching a 1 year mark where we would no longer be in the green. 

Regardless of if you are in the red right now, BTC is still a great hedge against inflation, and all of the recent adoption has not been etched into the pricing as of yet. 

The paypal news wasn't that much of a boost yet because it is such a limited release.  Once it is fully implemented, we should see a large shift...

[keithers]

This is false, gold has the same "negative feedbackloops". Gold is also more dangerous from the aspect that the mining or "inflation" amount isn't fixed or known. There will only be 21 million bitcoins. Who knows how much gold will be circulating in the future with asteroid mining , a large gold find on earth, ect...

I'd like an expert opinion from someone, please:  What is to stop let's say Paypal, Coinbase, etc. from practicing fractional reserve on bitcoins?  Has this been discussed before?  I know MTGox did it, but if it's done to a workable ratio of average/peak withdrawals, I think they can get away with it.  Especially if they get big enough, and mass adoption happens.  I don't think transparency solves this problem because sheople just don't care.  In 5 years, you'll hear "what is MtGox?"  If you don't think that is true, watch Jimmy Kimmel ask people on the street common sense questions.

As of right now, I don't think there is anything to stop them from doing that if that is what they choose to do.   For that reason, most of the seasoned people here will tell you not to leave a significant amount of your holdings on any exchange or online wallet that you don't control the private keys.

I use Coinbase frequently to buy BTC (I never sell).  I leave a dinky portion of coins there (in case I HAVE TO SELL for some reason), the rest of the coins, I instantly move into another wallet that I am in full control of...  I recommend that everyone do the same...

[Eotnak]

This is false, gold has the same "negative feedbackloops". Gold is also more dangerous from the aspect that the mining or "inflation" amount isn't fixed or known. There will only be 21 million bitcoins. Who knows how much gold will be circulating in the future with asteroid mining , a large gold find on earth, ect...

I'd like an expert opinion from someone, please:  What is to stop let's say Paypal, Coinbase, etc. from practicing fractional reserve on bitcoins?  Has this been discussed before?  I know MTGox did it, but if it's done to a workable ratio of average/peak withdrawals, I think they can get away with it.  Especially if they get big enough, and mass adoption happens.  I don't think transparency solves this problem because sheople just don't care.  In 5 years, you'll hear "what is MtGox?"  If you don't think that is true, watch Jimmy Kimmel ask people on the street common sense questions.

As of right now, I don't think there is anything to stop them from doing that if that is what they choose to do.   For that reason, most of the seasoned people here will tell you not to leave a significant amount of your holdings on any exchange or online wallet that you don't control the private keys.

I use Coinbase frequently to buy BTC (I never sell).  I leave a dinky portion of coins there (in case I HAVE TO SELL for some reason), the rest of the coins, I instantly move into another wallet that I am in full control of...  I recommend that everyone do the same...

Yup I do the same and have next to nothing in any online wallet or exchange.  That protects me, but my question is to all this talk about Bitcoin eventually becoming deflationary.  When the sheople are holding their BTC in online wallets (and they will) the bigger the company the more they can pretend that they have.  How does that affect Bitcoin inflationary rate?  With my limited knowledge, I see private companies "minting/printing" currency instead of governments.  It's fiat all over again.

[yayayo]

People like to call it 'hedge against fiat inflation' others said 'it's digital gold'

None of it is true. In fact it is misleading. Bitcoin inflates twice as heavy as fiatmoney until 2016 - after that it'll continue to inflate at the same rate as fiatmoney. So how can that be a hedge against inflation or compared to gold? It's a lie.

Bitcoin is inflating heavily with around 10% per year. This is causing negative feedbackloops like we see now and causes high volatility.
The high inflation in bitcoin also impacts adoption in a negative way. People will probably not adopt something that goes down 90% of the time to make a crazy rise (maybe) at one point for a few weeks and then starts declining again for ages.
Sane people will not adopt that.

Bitcoin's money supply increases - yes. But gold "money" supply also increases, because every day new gold is unearthed and put into circulation. The key for both being valuable is not zero increase in money supply, it is a predictable low increase in money supply. The essential point is, that neither Bitcoin nor gold can be deliberately inflated at will.

If you look into the future, you'll sure notice that Bitcoin's money supply will diminish over time and there will never be more than approx. 21 million coins in circulation. Around the year 2050 (or even earlier) you can be pretty sure that the number of new coins put into circulation will be outmatched by the number of lost coins. So by this time Bitcoin will be truly deflationary in regard to money supply.

High volatility will go away with growing market capitalization. Besides, volatility is currently measured compared to USD, which will be unimportant like any fiat currency in future (destruction through hyperinflation). It's possible that in future all goods and services will direcly be quoted in Bitcoin only.

ya.ya.yo!

[Eotnak]

Bitcoin's money supply increases - yes. But gold "money" supply also increases, because every day new gold is unearthed and put into circulation. The key for both being valuable is not zero increase in money supply, it is a predictable low increase in money supply. The essential point is, that neither Bitcoin nor gold can be deliberately inflated at will.

If you look into the future, you'll sure notice that Bitcoin's money supply will diminish over time and there will never be more than approx. 21 million coins in circulation. Around the year 2050 (or even earlier) you can be pretty sure that the number of new coins put into circulation will be outmatched by the number of lost coins. So by this time Bitcoin will be truly deflationary in regard to money supply.

High volatility will go away with growing market capitalization. Besides, volatility is currently measured compared to USD, which will be unimportant like any fiat currency in future (destruction through hyperinflation). It's possible that in future all goods and services will direcly be quoted in Bitcoin only.

ya.ya.yo!

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

[yayayo]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

Banks can use fractional reserve practice on any asset you deposit at their scam shops. But when they do it with Bitcoin or gold, you can clearly prove that whatever thing they emit for your deposit is a (fractionally reserve) IOU and not the same as Bitcoin or gold. That distinguishes Bitcoin and gold from fiat money.

Bitcoin even discourages handing over capital to banks, because if you own your private keys and can do transfers yourself you no longer need to trust a bank to hold your funds and do it for you.

ya.ya.yo!

[Eotnak]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

Banks can use fractional reserve practice on any asset you deposit at their scam shops. But when they do it with Bitcoin or gold, you can clearly prove that whatever thing they emit for your deposit is a (fractionally reserve) IOU and not the same as Bitcoin or gold. That distinguishes Bitcoin and gold from fiat money.

Bitcoin even discourages handing over capital to banks, because if you own your private keys and can do transfers yourself you no longer need to trust a bank to hold your funds and do it for you.

ya.ya.yo!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

[Cubic Earth]

I would be interested to see this chart with two correction factors applied:

1) Actual block frequency data used for 2009 - present, or at least a weekly average or monthly average.

2) A adjustment subtracting the supposed 'Zombie Bitcoins' from the supply.  The inflation rate would be: rate of new coins / (total coins - zombie coins to date)

These adjustments would suggest the current inflation rate to be higher than the graph indicates.  However, the new graph should also show the rate getting lower at a faster pace.

Does anyone know how the above graph was produced, or some good software to make something similar?  I tried to implement my proposed modifications on Excel, but decided there must be a better way.

[Keyser Soze]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

These BTC IOUs would not be able to replace real BTC, which is a very different property compared to traditional currencies.

[franky1]

People talk about inflation measured in USD terms.
You should check out the inflation rates in countries like India. 

i find it easier to talk about inflation in regards to bread, milk , and baked beans..
when many people say that in 10 years time minimum wage would be $20k a week instead of $300 a week most think "great"
but saying right now you can buy 100 loaves of bread but in 10 years time todays wage value will only buy you 3 slices they soon realise that thier $20k still only gets them 100 loaves of bread(or less).

holding $300 in bank notes will not buy you much in 10 years.

but having 0.66btc will buy you ALOT more then 100 loaves of bread in 10 years

[AnswerQuestion]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

These BTC IOUs would not be able to replace real BTC, which is a very different property compared to traditional currencies.

As long as bitcoin is fungible and the entity issuing the BTC IOUs is reputable enough such that it is reasonably believed they can deliver 'real' bicoin upon request then there is no reason why a bitcoin IOU would have much less value then 'real' bitcoin

[sublime5447]

I hold bitcoins because it allows me to store and transfer value without the help of a middleman or the permission of an authority.

wrong. It doesn't allow you to store value

Did it have value in the past? Yes.

Does it still have value today? Yes.

Will it have value in the future. I'm obviously betting (if you want to call it that, I've done my homework) it will.

Just because a currency has a floating exchange rate does not mean that it can not store value.

Perhaps experimental currencies are not for you. Come back in twenty years when things have normalized a bit.

Currency doesn't have value it represents value, if bitcoin has value it is not a currency .
Saying that currency has value, is like saying an inch has length.

[polynesia]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

These BTC IOUs would not be able to replace real BTC, which is a very different property compared to traditional currencies.

As long as bitcoin is fungible and the entity issuing the BTC IOUs is reputable enough such that it is reasonably believed they can deliver 'real' bicoin upon request then there is no reason why a bitcoin IOU would have much less value then 'real' bitcoin

True. In fact, a bitcoin IOU might even pay interest on it.
In that sense, it could have more value.

[Willisius]

I'm afraid that you've been the victim of the rather toxic BTC hype, which tends to hinder Bitcoin much more than it helps. BTC isn't digital gold or a magical investment or what have you. It's an incredible thing, revolutionary even, but there's no reason to believe that it's a sound investment.

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

These BTC IOUs would not be able to replace real BTC, which is a very different property compared to traditional currencies.

As long as bitcoin is fungible and the entity issuing the BTC IOUs is reputable enough such that it is reasonably believed they can deliver 'real' bicoin upon request then there is no reason why a bitcoin IOU would have much less value then 'real' bitcoin

True. In fact, a bitcoin IOU might even pay interest on it.
In that sense, it could have more value.

The way that bitcoins are generated is called proof-of-work. A bitcoin is proof that an amount of work was done. An IOU is proof of nothing. Bitcoin is favorable because an IOU is only worth your trust in the issuer. Personally, I would never accept an IOU in lieu of bitcoin, that's a great way to get gox'd. It's a difficult thing, but we need to move away from the idea that a business like a bank can be trusted with your money, when its sole purpose is to make money for its owners.

[hhanh00]

Let's assume that we stick with the plan: no fractional reserve and no extra coins.
What we see is not inflation but distribution like someone said earlier.
We know the final number so this is as if some hidden entity is holding 21 million coins and is offering them for sale little by little. It is the same as if bitcoin was a private company and its owner starts giving shares.
The big difference with inflation is that the latter is unknown.
Whereas with bitcoin, you can factor the growth in your valuation. I take what I think the final market cap should be and you divide by the final number of coins.
obviously, I will be wrong but inflation is not the reason. in short, the current number of coins is not very useful

[RedhatCAT]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

These BTC IOUs would not be able to replace real BTC, which is a very different property compared to traditional currencies.

As long as bitcoin is fungible and the entity issuing the BTC IOUs is reputable enough such that it is reasonably believed they can deliver 'real' bicoin upon request then there is no reason why a bitcoin IOU would have much less value then 'real' bitcoin

True. In fact, a bitcoin IOU might even pay interest on it.
In that sense, it could have more value.

The way that bitcoins are generated is called proof-of-work. A bitcoin is proof that an amount of work was done. An IOU is proof of nothing. Bitcoin is favorable because an IOU is only worth your trust in the issuer. Personally, I would never accept an IOU in lieu of bitcoin, that's a great way to get gox'd. It's a difficult thing, but we need to move away from the idea that a business like a bank can be trusted with your money, when its sole purpose is to make money for its owners.
[/quote]I think the point is that the person (or business) that is issuing the IOUs is trustworthy enough so that proof is not necessary. This is similar to how people will give out unsecured loans because they trust the reputation of the person asking for the loan.

[CryptoCarmen]

Bitcoin would need inflation. But sadly is placed in it will never have it. What OP wanted to say was that bitcoin is not stable yet.

[Soros Shorts]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

These BTC IOUs would not be able to replace real BTC, which is a very different property compared to traditional currencies.

As long as bitcoin is fungible and the entity issuing the BTC IOUs is reputable enough such that it is reasonably believed they can deliver 'real' bicoin upon request then there is no reason why a bitcoin IOU would have much less value then 'real' bitcoin

I would assume that many people would want to redeem any bank IOUs immediately into their wallets where they control the private keys. I certainly would.

[spazzdla]

Bitcoin would need inflation. But sadly is placed in it will never have it. What OP wanted to say was that bitcoin is not stable yet.

I agree and.. DOGECOIN!!!! DDDDOGECOIN!

[yayayo]

Bitcoin would need inflation. But sadly is placed in it will never have it. What OP wanted to say was that bitcoin is not stable yet.

Why the hell does Bitcoin need inflation? Because some scam artists in the past designed fiat currencies that rely on inflation to enslave the masses?
There is no proof that inflation has any positive longterm effect. In fact history has frequently shown that inflation leads to destruction of wealth especially among the less wealthy and poor with devastating social implications.

OP (rightfully) fears inflation caused by fractional reserve practices. But Bitcoin like gold is immune to such practices, because a real Bitcoin can always be distinguished from a Bitcoin-IOU.

The purchasing power stability of Bitcoin (currently still measured by the USD/Bitcoin exchange ratio) is a different thing. Bitcoin is still a very tiny currency and relatively few people own it. Such volatility will decrease with adoption and usage.

ya.ya.yo!

[seriouscoin]

I hold bitcoins because it allows me to store and transfer value without the help of a middleman or the permission of an authority.

wrong. It doesn't allow you to store value

Did it have value in the past? Yes.

Does it still have value today? Yes.

Will it have value in the future. I'm obviously betting (if you want to call it that, I've done my homework) it will.

Just because a currency has a floating exchange rate does not mean that it can not store value.

Perhaps experimental currencies are not for you. Come back in twenty years when things have normalized a bit.

Currency doesn't have value it represents value, if bitcoin has value it is not a currency .
Saying that currency has value, is like saying an inch has length.

well dumb fck, define value then? because i'm sure as hell you think value is price in USD.

[johnyj]

Currency doesn't have value it represents value, if bitcoin has value it is not a currency .
Saying that currency has value, is like saying an inch has length.

Value is decided by supply and demand together, as long as there is demand for it, the value can be decided by the supply divided by demand

The statement "currency does not have value" is a lie from the banks to force people to believe their valueless currency can be used to trade. But this trick works and most of the people fall for it

[johnyj]

People like to call it 'hedge against fiat inflation' others said 'it's digital gold'

None of it is true. In fact it is misleading. Bitcoin inflates twice as heavy as fiatmoney until 2016 - after that it'll continue to inflate at the same rate as fiatmoney. So how can that be a hedge against inflation or compared to gold? It's a lie.

Bitcoin is inflating heavily with around 10% per year. This is causing negative feedbackloops like we see now and causes high volatility.
The high inflation in bitcoin also impacts adoption in a negative way. People will probably not adopt something that goes down 90% of the time to make a crazy rise (maybe) at one point for a few weeks and then starts declining again for ages.
Sane people will not adopt that.

So, can i ask. Why was it again we are having that inflation? What sense does it make? Why do we need it?
Is Bitcoin maybe just a plot to make big miners rich?

I myself unadopted bitcoin again for that reason.
I refuse to invest in inflationary coins.

your thoughts?

OP, money supply has nothing to do with inflation

Take QE for example, since 2008 the base money supply has increased by more than 400%, while the annual inflation rate is less than 5%. Why? Because majority of those newly created money are sitting in bank's pocket, being not in circulation, they won't create any inflation

This is the same for bitcoin, although the annual money supply increase by 10%, most of the coins are hoarded, so those 4000 coins per day won't create any significant sell pressure on market, maximum couple of hundred coins per day were added daily on the market

Bitcoin's exchange rate has been falling for almost a year, but that is from a overshoot high due to extremely illiquid market condition, it's real valuation is closely related to its cost, which is about $300 to $400 per coin, it is still falling, that means the capital are still flowing into mining business instead of exchange. Until the profit of mining further dropped, this trend will continue, but very soon many miners will be just exchange electricity for coins

[johnyj]

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

IOUs are not real money, they are just numbers in bank's database, just like your btc holdings in an exchange. When you withdraw bitcoin to your wallet, they will get a bank run if they don't have enough real bitcoin

Banks are quickly pushing out full-electronic money in order to avoid the bank run totally (Withdraw from bank X will always land in bank Y, and bank X just borrow it back from bank Y to face more withdraw pressure), but with bitcoin they can not do it, means much less risk in the whole financial system

[venlo]

i think bitcoins logic is flawed. The 10% inflation keep dragging it down.
People around here say: 'we need the inflation to support network and stuff'.
Sure, but if miners would mine less coins the price would be higher and the mining would bring them about the same money if not more.
I think bitcoin adoption is choked off by falling prices and inflation.

If it wouldn't inflate this heavy, prices would be higher, bearmarket would be shorter, upside would be higher, adoption would be faster, miners would make the same money, network would still be secured with the same hashpower.

Does that makes sense?

I think the high inflation and clumsy rewarddecrease is total bullshit and flawed logic.
You don't support adoption with high inflation, quite the opposite. You kill adoption with high inflation. The miners gain nothing from it.

Lower inflation would mean higher prices, better charts, more investement (who wants to buy into a decline?), higher adoption, higher prices.
Bitcoin is in a death-spiral due to its inflation. The logic is flawed.


what difference does it make for the miner if he mines 25 coins for 200$ or 12.5 coins for 400$ or more ?

That inflation is too high. There is no need to discuss it. That's a fact.

The high inflation doesn't serve its purpose, it just scares investors away.

There is absolutely no need to devalue the coins for this long time at this heavy rate.
Low prices don't serve networksecurity either.

[sublime5447]

I hold bitcoins because it allows me to store and transfer value without the help of a middleman or the permission of an authority.

wrong. It doesn't allow you to store value

Did it have value in the past? Yes.

Does it still have value today? Yes.

Will it have value in the future. I'm obviously betting (if you want to call it that, I've done my homework) it will.

Just because a currency has a floating exchange rate does not mean that it can not store value.

Perhaps experimental currencies are not for you. Come back in twenty years when things have normalized a bit.

Currency doesn't have value it represents value, if bitcoin has value it is not a currency .
Saying that currency has value, is like saying an inch has length.

You can keep harping about "units of account" until you are blue in the face. Bitcoin functions. I can trade it for other things. It has properties unlike any other asset on the planet and those properties are useful and valuable to me. I personally don't care how you or anyone else classifies it.

Bitcoin functions as a digital collectible not currency.

So bitcoin is an asset not a currency. But what kind of asset is it? Can you eat it? live under it? drink it? can bitcoin keep you warm at night? how does it compare to other asset classes? and is there any compelling reason to collect a digital collectible? 

[inBitweTrust]

i think bitcoins logic is flawed. The 10% inflation keep dragging it down.

You sound like a broken record and conveniently fail to respond to many of the answers given.
Let me guess, this post was an indirect way to pump an alt with less inflation than Bitcoin, right?

We heard the message, we are all doomed, please migrate over to your alt forum or at least pump your shitcoin here:

https://bitcointalk.org/index.php?board=67.0

[inBitweTrust]

So bitcoin is an asset not a currency. But what kind of asset is it? Can you eat it? live under it? drink it? can bitcoin keep you warm at night? how does it compare to other asset classes? and is there any compelling reason to collect a digital collectible? 

Certainly, I can do all sorts of things with Bitcoin that I cannot do with any other asset or currency. Other alts may be able to replicate some of the features of bitcoin but not do so securely, or as conveniently.

What good is a PoS or DPoS coin if no one uses it or accepts it. It is important to me to be able to make purchases and pay employees in Bitcoin.

[johnyj]

Just saw this 

[blatchcorn]

Bitcoin unadopted you    Only those with above average intelligence and patience will be the ones to benefit from Bitcoin at the moment.  Your gains from Bitcoin will be limited to saving wire fees using Circle once Bitcoin becomes mainstream and you have no option than to use Bitcoin again, or look silly paying extortionate fees.

[hhanh00]

That inflation is too high. There is no need to discuss it. That's a fact.

The high inflation doesn't serve its purpose, it just scares investors away.

Sorry, but the fact is that you don't know what inflation is. However, you are free to invest in anything you want.

[btcbug]

sure, sure, but am i not better off not using it and to just jump in every 4 years 2 weeks before the halving, ride the wave and leave again? I don't see a reason to hold it during times of low adoption at least until 2020 when the inflationrate is at a reasonable level. I think for me it'll make more sense just to stay out until 2020.

I think my gold bullion will do a better job in protecting me against a collapse of the dollar.

We had 9 months of a bearmarket, adoption is not picking up and now the thing tanks on good news. No, thank you. You can have it.

Google trends shows declining interest in it. Not a good investement with that inflationrate, i guess. It is not designed to hold value or to be adopted at this point in time.

You could try and play it that way, but you'd also be trying to time the market, which imo is too risky if you were a very early adopter.

According to this chart transaction volume is increasing. https://blockchain.info/charts/n-transactions-excluding-popular?showDataPoints=false&timespan=&show_header=true&daysAverageString=7&scale=0&address=

Shouldn't you also be considering that the total BTC will only ever be 21 Million? What I mean is that with such a tiny total supply any inflation should be more than offset. It's just simple math that it doesn't take much adoption to move the price up significantly. I'm not arguing that the price has been going down lately, but nothing moves up in a straight line. Why would you expect different?

[polynesia]

That inflation is too high. There is no need to discuss it. That's a fact.

The high inflation doesn't serve its purpose, it just scares investors away.

High inflation can be factored in. Unexpected/unknown inflation is a problem.

[sublime5447]

Bitcoin functions as a digital collectible not currency.

So bitcoin is an asset not a currency. But what kind of asset is it? Can you eat it? live under it? drink it? can bitcoin keep you warm at night? how does it compare to other asset classes? and is there any compelling reason to collect a digital collectible? 

It's an asset that I have complete control over. It can not be seized without my permission, and I can transfer it to whomever I want without anyone preventing that from occurring. If you don't understand the value in that, then I don't know what to say.

I have complete control over the dump I took earlier today, no one is gonna seize it without my permission and I can transfer it to whom ever I want and there is a limited supply, guaranteed to less than 21 million in circulation, It is a deflationary dump and you are an idiot if you cant see the value in my dumps. I dont know what to tell you if you dont see the value in investing in my bowel movements, I can even make a digital representation of my dumps each day. My dumps have POS mining (proof of shit) It proves work was done in the production of each of my dumps. I add or remove laxatives to keep them produced at a steady rate. Invest in my digital collectible dumps if you dont you hate free markets! 

[shanem]

Bitcoin is never a hedge for inflation.
What you want to be is to become an early adopter and be rich when its value increases

[Q7]

Inflation will cause your purchasing power to decline. The same 10 buck that can get you tons of grocery 10 years ago has shrunk. So do you see the same to bitcoin? Put that under wider perspective by comparing against 5 years ago.

[fathur01]

Bitcoin is never a hedge for inflation.
What you want to be is to become an early adopter and be rich when its value increases

Sucks people think that way.. Just use it as a currency!

[sublime5447]

Bitcoin functions as a digital collectible not currency.

So bitcoin is an asset not a currency. But what kind of asset is it? Can you eat it? live under it? drink it? can bitcoin keep you warm at night? how does it compare to other asset classes? and is there any compelling reason to collect a digital collectible? 

It's an asset that I have complete control over. It can not be seized without my permission, and I can transfer it to whomever I want without anyone preventing that from occurring. If you don't understand the value in that, then I don't know what to say.

I have complete control over the dump I took earlier today, no one is gonna seize it without my permission and I can transfer it to whom ever I want and there is a limited supply, guaranteed to less than 21 million in circulation, It is a deflationary dump and you are an idiot if you cant see the value in my dumps. I dont know what to tell you if you dont see the value in investing in my bowel movements, I can even make a digital representation of my dumps each day. My dumps have POS mining (proof of shit) It proves work was done in the production of each of my dumps. I add or remove laxatives to keep them produced at a steady rate. Invest in my digital collectible dumps if you dont you hate free markets! 

Resorting to nonsense due to lack of a good argument is pretty childish. I'm regretting taking you off my ignore list. I had hoped that there might be some value in having a conversation with you, but apparently not.

Its not nonsense shitcoin and my dumps have a lot in common.. point is that it's an asset not a currency and that it is a shitty asset. I would much rather grains or oil to bitcoin.

[halfawake]

I think a lot of people don't really understand inflation because of how interwoven it is with modern society.

Small amounts (2 - 3%) of inflation are actively promoted by central banks for one reason: to promote spending.  If you stick your money (let's say US Dollars, but the principle will work with any fiat currency), in a bank and leave it there for a year, you'll be pretty much guaranteed to be able to buy less at the end of the year than you could at the beginning.  Maybe not a huge amount less, but multiply that over the course of 5 - 10 years and it makes a huge difference.

Economists don't like deflation, and this is precisely why.  Deflation (and deflationary currencies like bitcoin) promote saving.  How many bitcoiners have a stash of bitcoins that they're holding for when they're worth more?  I'd bet most people on this site do, and if they don't, they'd like to most of the time.  The long term trend for bitcoin is for the fiat value to increase in value.  Yes, it's gone down a fair amount over the past year, but compare how the current price now to the price in August of 2013.   

I'll save you looking it up - the price then was around $90.  Still think the current $380 price looks bad?  It all depends on how long term your vantage point is.  If you're here to make a quick buck, well, you picked the wrong time to invest.  If you're here for the long haul, enjoy the rollercoaster ride of bitcoin and ignore the price for the next several months.  Check back in a year or two and I'll be the price will be back up again.

My bet on why the price keeps going down: people are spending their bitcoins, and merchants (understandably) aren't wanting to hold them and carry exchange rate risk, so they're immediately cashing out.  There aren't enough people buying bitcoins to replace the downward price pressure of these merchants cashing out, so these purchases mean that the price is going down.  So here's my advice.  Want to help keep the price from dropping any further?  Any time you buy something in bitcoins, buy an equal amount of bitcoins right after you buy whatever it is you're looking at.  That'll counteract the downward price pressure from the merchant most likely immediately cashing out the bitcoin sale.

These days, if you do that, you'll be getting your new batch of bitcoins on sale because for now, well, the price keeps dropping.  It's truly a free market currency, unlike most currencies, there's no army or government behind bitcoin saying "This bitcoin is backed by the full force of x government" - rather, it's backed by the full faith and credit of us - everyone who invests in bitcoins, everyone who spends bitcoins, and everyone who buys bitcoins. 

Bear in mind that I'm saying this as someone who bought bitcoins a couple months ago when the price was around $650.  It's not fun watching the price plummet, but I'm sure as hell not cashing out now.  If it drops to $100, I may regret this decision, but I'd be surprised if it goes down that far.

[needFREElunch]

Bitcoin functions as a digital collectible not currency.

So bitcoin is an asset not a currency. But what kind of asset is it? Can you eat it? live under it? drink it? can bitcoin keep you warm at night? how does it compare to other asset classes? and is there any compelling reason to collect a digital collectible? 

It's an asset that I have complete control over. It can not be seized without my permission, and I can transfer it to whomever I want without anyone preventing that from occurring. If you don't understand the value in that, then I don't know what to say.

I have complete control over the dump I took earlier today, no one is gonna seize it without my permission and I can transfer it to whom ever I want and there is a limited supply, guaranteed to less than 21 million in circulation, It is a deflationary dump and you are an idiot if you cant see the value in my dumps. I dont know what to tell you if you dont see the value in investing in my bowel movements, I can even make a digital representation of my dumps each day. My dumps have POS mining (proof of shit) It proves work was done in the production of each of my dumps. I add or remove laxatives to keep them produced at a steady rate. Invest in my digital collectible dumps if you dont you hate free markets! 

This is a very immature argument, however it is not even true. You really do not have control when you need to move your bowels this is something that is handled by your body that you do not have control over (even with laxatives). It would also be very difficult to transfer your fecal matter to others, and it could easily be seized the same way that any other physical item can be seized. No one else would likely assign any value to your fecal matter while people to assign value to bitcoin

[hgerson]

This is a very immature argument (...)

Do you really think so? 

Why do we need it?

We need it to be independent of banks.

I don't think most people is ready for it though.

[Eotnak]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

Banks can use fractional reserve practice on any asset you deposit at their scam shops. But when they do it with Bitcoin or gold, you can clearly prove that whatever thing they emit for your deposit is a (fractionally reserve) IOU and not the same as Bitcoin or gold. That distinguishes Bitcoin and gold from fiat money.

Bitcoin even discourages handing over capital to banks, because if you own your private keys and can do transfers yourself you no longer need to trust a bank to hold your funds and do it for you.

ya.ya.yo!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

Well, since no one can answer my question, I assume that I am right.  The 21 million cap on Bitcoin is for true Bitcoin.  Sheople, after mass adoption happens, will probably not want to be bothered with keeping their own private keys, and will keep their BTC in online services.  The bigger the service, the more BTC IOU's they can use, hence increasing Bitcoin supply past 21 million.  It'll be fun to watch! 

even still $380 per BTC is insanely cheap.

[galbros]

Bitcoin is not inflationary, it has a fixed number of coins.  The rate of generation may result in transitory inflation but we all know where this is going to end, 21 million bitcoins minus however many are lost along the way.

Just like the price of gold fluctuates so will bitcoin's price.  Speaking of which, more gold gets mined every year as well, still it's a decent inflation hedge.

The bigger issue may be that there isn't a lot of inflation to worry about in most developed countries now, so less need of a hedge rather than bitcoin not being a potential hedge.

[colinistheman]

People like to call it 'hedge against fiat inflation' others said 'it's digital gold'

None of it is true. In fact it is misleading. Bitcoin inflates twice as heavy as fiatmoney until 2016 - after that it'll continue to inflate at the same rate as fiatmoney. So how can that be a hedge against inflation or compared to gold? It's a lie.

Bitcoin is inflating heavily with around 10% per year. This is causing negative feedbackloops like we see now and causes high volatility.
The high inflation in bitcoin also impacts adoption in a negative way. People will probably not adopt something that goes down 90% of the time to make a crazy rise (maybe) at one point for a few weeks and then starts declining again for ages.
Sane people will not adopt that.

So, can i ask. Why was it again we are having that inflation? What sense does it make? Why do we need it?
Is Bitcoin maybe just a plot to make big miners rich?

I myself unadopted bitcoin again for that reason.
I refuse to invest in inflationary coins.

your thoughts?

Interestingly the inflation in the number of coins mined (even with this creation being greater at the beginning with 50btc and 25btc per block), is still having a generally uptrending value if you take it on a span of years. So the price is still deflating even though the supply is inflating. Tell that to the dollar.

This year we can buy MORE things with 1 BTC than last year, and the year before. (take it on an average, and not the spikes)

The US dollar can buy you LESS this year than last year and the year before.

[a447513372]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

Banks can use fractional reserve practice on any asset you deposit at their scam shops. But when they do it with Bitcoin or gold, you can clearly prove that whatever thing they emit for your deposit is a (fractionally reserve) IOU and not the same as Bitcoin or gold. That distinguishes Bitcoin and gold from fiat money.

Bitcoin even discourages handing over capital to banks, because if you own your private keys and can do transfers yourself you no longer need to trust a bank to hold your funds and do it for you.

ya.ya.yo!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

Well, since no one can answer my question, I assume that I am right.  The 21 million cap on Bitcoin is for true Bitcoin.  Sheople, after mass adoption happens, will probably not want to be bothered with keeping their own private keys, and will keep their BTC in online services.  The bigger the service, the more BTC IOU's they can use, hence increasing Bitcoin supply past 21 million.  It'll be fun to watch! 

even still $380 per BTC is insanely cheap.

There is a cap on the 21 million BTC that can ever be mined. This is part of the protocol. It is not possible for there to be more then this many bitcoin on the public ledger (blockchain), however you are correct to say that banks could "create" additional bitcoin via fractional reserve lending. This however is very risky and I don't think will ever catch on because of banks inability to seize bitcoin that is not "on deposit" with them

[jbreher]

Small amounts (2 - 3%) of inflation are actively promoted by central banks for one reason: to promote spending. 

You state that as if it is the only reason. That would be a false assertion. There is another reason, and it is undoubtedly the most important reason to the banking class.

This reason is that inflation steals the wealth of the populace at large, and transfers that wealth to the banking class.

[halfawake]

You state that as if it is the only reason. That would be a false assertion. There is another reason, and it is undoubtedly the most important reason to the banking class.

This reason is that inflation steals the wealth of the populace at large, and transfers that wealth to the banking class.

Well, yes.  Arguably, that's true as well, but...the reason I stated is at least the public version that all economists would agree with.

[Eotnak]

Again, I respectfully disagree.  I think banks will take it upon themselves to practice BTC fractional reserve and "mint" coins for their users.  21 million cap: poof!

Banks can use fractional reserve practice on any asset you deposit at their scam shops. But when they do it with Bitcoin or gold, you can clearly prove that whatever thing they emit for your deposit is a (fractionally reserve) IOU and not the same as Bitcoin or gold. That distinguishes Bitcoin and gold from fiat money.

Bitcoin even discourages handing over capital to banks, because if you own your private keys and can do transfers yourself you no longer need to trust a bank to hold your funds and do it for you.

ya.ya.yo!

I'm not an economist, so explain it to me like I'm a mechanic.  Bank A sends Bank B BTC IOU.  Presently, bank A sends bank B fiat IOU as well, no?  I don't see the difference.  Only that I as a consumer have the option of saving and transacting without a bank at all.

Well, since no one can answer my question, I assume that I am right.  The 21 million cap on Bitcoin is for true Bitcoin.  Sheople, after mass adoption happens, will probably not want to be bothered with keeping their own private keys, and will keep their BTC in online services.  The bigger the service, the more BTC IOU's they can use, hence increasing Bitcoin supply past 21 million.  It'll be fun to watch! 

even still $380 per BTC is insanely cheap.

There is a cap on the 21 million BTC that can ever be mined. This is part of the protocol. It is not possible for there to be more then this many bitcoin on the public ledger (blockchain), however you are correct to say that banks could "create" additional bitcoin via fractional reserve lending. This however is very risky and I don't think will ever catch on because of banks inability to seize bitcoin that is not "on deposit" with them

Thanks for addressing my question!  I'm not sure I understand what you wrote, though.  How do today's banks seize dollars that are not on deposit?  Sorry if that's a stupid question, but I never studied any of this stuff in school.

[jbreher]

Thanks for addressing my question!  I'm not sure I understand what you wrote, though.  How do today's banks seize dollars that are not on deposit?  Sorry if that's a stupid question, but I never studied any of this stuff in school.

It is not a hard concept to grasp. Indeed, it is so astonishingly simple that the mind recoils from considering that the system would ever be thusly structured.

Today's banks seize dollars by simply zapping them into existence, where no dollars were before.

[Eotnak]

Thanks for addressing my question!  I'm not sure I understand what you wrote, though.  How do today's banks seize dollars that are not on deposit?  Sorry if that's a stupid question, but I never studied any of this stuff in school.

It is not a hard concept to grasp. Indeed, it is so astonishingly simple that the mind recoils from considering that the system would ever be thusly structured.

Today's banks seize dollars by simply zapping them into existence, where no dollars were before.

I thought it was the government that did that.  Printing new bills.  The question was how do banks seize dollars that actually exist, not fractional reserve...I'm trying to nail down whether or not the possibility exists that Bitcoin will suffer from fractional reserve banking.

[yayayo]

Thanks for addressing my question!  I'm not sure I understand what you wrote, though.  How do today's banks seize dollars that are not on deposit?  Sorry if that's a stupid question, but I never studied any of this stuff in school.

It is not a hard concept to grasp. Indeed, it is so astonishingly simple that the mind recoils from considering that the system would ever be thusly structured.

Today's banks seize dollars by simply zapping them into existence, where no dollars were before.

I thought it was the government that did that.  Printing new bills.  The question was how do banks seize dollars that actually exist, not fractional reserve...I'm trying to nail down whether or not the possibility exists that Bitcoin will suffer from fractional reserve banking.

Both do it. The FED prints physical fiat money that is put into circulation via banks. People deposit this physical fiat money into a savings account at a bank. The bank in turn can use the seized deposits as security to create a certain amount of nonphysical bank money (at a factor of about 1:10). That's fractional reserve banking.

ya.ya.yo!

[jbreher]

Thanks for addressing my question!  I'm not sure I understand what you wrote, though.  How do today's banks seize dollars that are not on deposit?  Sorry if that's a stupid question, but I never studied any of this stuff in school.

It is not a hard concept to grasp. Indeed, it is so astonishingly simple that the mind recoils from considering that the system would ever be thusly structured.

Today's banks seize dollars by simply zapping them into existence, where no dollars were before.

I thought it was the government that did that.  Printing new bills. 

I don't know where you are from. Here in the USA, 'dollars' are zapped into being by the banks - up to and including the FED.

The question was how do banks seize dollars that actually exist, not fractional reserve...I'm trying to nail down whether or not the possibility exists that Bitcoin will suffer from fractional reserve banking.

The dollars that the banks zap into being exist in the same sense that those notes in your pocket exist.

The possibility of fractional reserve bitcoin banking clearly exists. It is up to us -- those that understand -- to spread the certainty that a bitcoin and a bitcoinIOU are two different things. And to never accept a bitcoinIOU in lieu of a bitcoin. Only if this knowledge becomes universal, can we stave off the threat of fractional reserve bitcoin banking.

[Eotnak]

The possibility of fractional reserve bitcoin banking clearly exists. It is up to us -- those that understand -- to spread the certainty that a bitcoin and a bitcoinIOU are two different things. And to never accept a bitcoinIOU in lieu of a bitcoin. Only if this knowledge becomes universal, can we stave off the threat of fractional reserve bitcoin banking.

ahh, thank you.  That's what I've been trying to get at.  I'm from USA, and from what I've seen people do in the past and present, I've determined that we can spread word all we want and care to.  Do it until the day we die, and all the experts will warn against keeping Bitcoin online and accepting Bitcoin IOU's.  And it will amount to nothing because Bank of America can give out free ipad's with a new minimum BTC deposit account, and people will want to avoid paying transaction fees by keeping their transactions off the blockchain when demand soars past hundreds and thousands of transactions per second.

For that reason, I believe that the 21 million coin cap is a technicality, and the supply of Bitcoins in use will go beyond that very soon (by comparison) thus making the currency less inflationary compared to fiat, but not truly deflationary indefinitely as per the protocol.  The market will determine the supply.

[jbreher]

The possibility of fractional reserve bitcoin banking clearly exists. It is up to us -- those that understand -- to spread the certainty that a bitcoin and a bitcoinIOU are two different things. And to never accept a bitcoinIOU in lieu of a bitcoin. Only if this knowledge becomes universal, can we stave off the threat of fractional reserve bitcoin banking.

ahh, thank you.  That's what I've been trying to get at.  I'm from USA, and from what I've seen people do in the past and present, I've determined that we can spread word all we want and care to.  Do it until the day we die, and all the experts will warn against keeping Bitcoin online and accepting Bitcoin IOU's.  And it will amount to nothing because Bank of America can give out free ipad's with a new minimum BTC deposit account, and people will want to avoid paying transaction fees by keeping their transactions off the blockchain when demand soars past hundreds and thousands of transactions per second.

For that reason, I believe that the 21 million coin cap is a technicality, and the supply of Bitcoins in use will go beyond that very soon (by comparison) thus making the currency less inflationary compared to fiat, but not truly deflationary indefinitely as per the protocol.  The market will determine the supply.

Perhaps. However, our current system has grown up through generations understanding that, should a bank become insolvent, the FED (through the FDIC) will make all depositors whole. And in the case of a systemic issue, again, the FED (through massive 'printing' of new 'dollars') will make depositors 'whole'. Though this 'whole-ness' will be in terms of dollars only -- not wealth or purchasing power.

It will be interesting to see how BoA's bitcoin dealings might evolve in the case where there is no central bank to backstop such operations.

Ten years ago, pretty much nobody understood the fraud of central banking. Today, an increasing percentage does.

Let us cling to our principles and our hope, and endeavor to pull the blinders off the next group of the people.

[galbros]

The dollars that the banks zap into being exist in the same sense that those notes in your pocket exist.

The possibility of fractional reserve bitcoin banking clearly exists. It is up to us -- those that understand -- to spread the certainty that a bitcoin and a bitcoinIOU are two different things. And to never accept a bitcoinIOU in lieu of a bitcoin. Only if this knowledge becomes universal, can we stave off the threat of fractional reserve bitcoin banking.

This is the key insight.  Just like banks can't create more gold, they can't create more bitcoin.  All they can create is bitcoinIOUs and that is a very different thing.  If you don't hold the private key you don't really hold the bitcoin is the key idea to get across to newbies.

[Rishblitz]

Every currency has inflation that's the nature of economics.

[jbreher]

Every currency has inflation that's the nature of economics.

Ha. Haha. Hahahahahahaha.

Care to clarify your statement? What is your definition of inflation in use here?

[blumangroup]

Thanks for addressing my question!  I'm not sure I understand what you wrote, though.  How do today's banks seize dollars that are not on deposit?  Sorry if that's a stupid question, but I never studied any of this stuff in school.

It is not a hard concept to grasp. Indeed, it is so astonishingly simple that the mind recoils from considering that the system would ever be thusly structured.

Today's banks seize dollars by simply zapping them into existence, where no dollars were before.

I thought it was the government that did that.  Printing new bills.  The question was how do banks seize dollars that actually exist, not fractional reserve...I'm trying to nail down whether or not the possibility exists that Bitcoin will suffer from fractional reserve banking.

Seize is really not a good word to use. They give people an incentive to keep their money on deposit by paying interest and charging fees to take money out of CDs.

[Eotnak]

The possibility of fractional reserve bitcoin banking clearly exists. It is up to us -- those that understand -- to spread the certainty that a bitcoin and a bitcoinIOU are two different things. And to never accept a bitcoinIOU in lieu of a bitcoin. Only if this knowledge becomes universal, can we stave off the threat of fractional reserve bitcoin banking.

ahh, thank you.  That's what I've been trying to get at.  I'm from USA, and from what I've seen people do in the past and present, I've determined that we can spread word all we want and care to.  Do it until the day we die, and all the experts will warn against keeping Bitcoin online and accepting Bitcoin IOU's.  And it will amount to nothing because Bank of America can give out free ipad's with a new minimum BTC deposit account, and people will want to avoid paying transaction fees by keeping their transactions off the blockchain when demand soars past hundreds and thousands of transactions per second.

For that reason, I believe that the 21 million coin cap is a technicality, and the supply of Bitcoins in use will go beyond that very soon (by comparison) thus making the currency less inflationary compared to fiat, but not truly deflationary indefinitely as per the protocol.  The market will determine the supply.

Perhaps. However, our current system has grown up through generations understanding that, should a bank become insolvent, the FED (through the FDIC) will make all depositors whole. And in the case of a systemic issue, again, the FED (through massive 'printing' of new 'dollars') will make depositors 'whole'. Though this 'whole-ness' will be in terms of dollars only -- not wealth or purchasing power.

It will be interesting to see how BoA's bitcoin dealings might evolve in the case where there is no central bank to backstop such operations.

Ten years ago, pretty much nobody understood the fraud of central banking. Today, an increasing percentage does.

Let us cling to our principles and our hope, and endeavor to pull the blinders off the next group of the people.

All true, thanks for the insight!  I'll do my part.

[BlindMayorBitcorn]

This is starting to remind me of a 24 hour PoW shitcoin. How long will it be before the market can absorb 3600 btc a day. These miner dumps will last a crypto-eternity

[ivanovasmd]

wait for when USD collapses or move to a country where inflation is 30% per year like Argentina 

I've been hearing about the collapse of USD for ages, decades now. It never happens, and I think it will not happen during our lifetimes. We will all be dead before the USD empires ever collapses. Sad but true.