Bitcoin is no hedge against inflation - i unadopted it.

[polynesia]

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

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[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.