Will deflation be the fatal weakness of bitcoin?

[viboracecata]

Till now, bitcoin seems the perfect currency in in the free world, it has many advantages as we can see. Such as convienence, decentralization, no worry of inflation, except for the boring blockchain file lay in system partition.

But to me, I think I treated it as gold as many others did, so maybe we will hardly to use them, just holding to see price up, obviously it will cause the deflation, and then the bitcoin will not be currency any more, but like treasure.

But it is not treasure, and let's consider this situation, one day, bitcoin has been granted, and suddenly a big catastrophe attacks somewhere in the world, and destroyes all, people die, bitcoins of those people then lose forever, so the price up, others will hold their bitcoins more tightly, and no bitcoins are in the circulation.

No curculation, so it can be called curreny?

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[jwzguy]

Nope.

[Serge]

there must be some graphs out there on amount of transactions...

[Shuai]

Till now, bitcoin seems the perfect currency in in the free world, it has many advantages as we can see. Such as convienence, decentralization, no worry of inflation, except for the boring blockchain file lay in system partition.

But to me, I think I treated it as gold as many others did, so maybe we will hardly to use them, just holding to see price up, obviously it will cause the deflation, and then the bitcoin will not be currency any more, but like treasure.

But it is not treasure, and let's consider this situation, one day, bitcoin has been granted, and suddenly a big catastrophe attacks somewhere in the world, and destroyes all, people die, bitcoins of those people then lose forever, so the price up, others will hold their bitcoins more tightly, and no bitcoins are in the circulation.

No curculation, so it can be called curreny?

You're an idiot and should learn how to read/search about a topic that has been discussed to death already.

The answer is no - Bitcoin is deflationary by design, it is not a weakness.

[Stephen Gornick]

But to me, I think I treated it as gold as many others did, so maybe we will hardly to use them, just holding to see price up, obviously it will cause the deflation, and then the bitcoin will not be currency any more, but like treasure.

Take a 1,000 people all with 1.0 bitcoin, and 900 are speculators and sit on their bitcoins.  Just 100 use it as currency, exchanging these 100 bitcoins back and forth.

Now imagine scenario 2: There are 100 people, each with 10 bitcoins and all 100 use bitcoin as a currency, exchanging them back and forth.

There's no difference between the two scenarios -- they both involve 1,000 bitcoins, and there's the same level of economic activity between the two of them. The difference is that the velocity of the 100 coins in scenario one is much higher than the velocity in scenario two.

Your hoarding does not take coins from anyone else.  If that's what you want to do with them, that's perfectly fine. Enjoy!

[FreeMoney]

An 'economist' I met while riding a bus saw my bitcoin logo and informed that while bitcoin was an awesome idea, it was going to completely fail because of deflation. I acted surprised to hear this and said "oh, does that mean it will be worth a lot more?" In case you are wondering, yes, yes it will, then it will be worth nothing because everyone wants it so much.

This fallacy is rampant. It's like schools and/or the media are giving everyone vaccinations against the idea of sound money.

[hazek]

It's truly astonishing to me how well the public education brainwashing takes hold of people's minds and makes them believe crazy stuff that no rational person would ever consider as logically valid and part of our reality.


This is basically what the OP claims:

So yea, umm hey guys, you can't have money that gets worth more over time making you richer! You know, because that will cause problems for the economy! You must have money that gets worth less and makes you poorer and it must get worth less by allowing this small gang of psychopaths to counterfeit and steal the productivity of the entire economy, it's only this way that you'll ever have a viable and healthy economy!!!11

W T F?  

[Graet]

It's truly astonishing to me how well the public education brainwashing takes hold of people's minds and makes them believe crazy stuff that no rational person would ever consider as logically valid and part of our reality.


This is basically what the OP claims:

So yea, umm hey guys, you can't have money that gets worth more over time making you richer! You know, because that will cause problems for the economy! You must have money that gets worth less and makes you poorer and it must get worth less by allowing this small gang of psychopaths to counterfeit and steal the productivity of the entire economy, it's only this way that you'll ever have a viable and healthy economy!!!11

W T F?  

nice translation

[DarkEmi]

hypothesis : Bitcoin will fail because of deflation
--
If bitcoin fails then price will go towards 0
If price goes to 0 then there is no deflation

Conclusion : Hypothesis is false

[sgravina]

Bitcoin as it exists today will fail.  Bitcoins are constantly being lost.  Yet there will never be more than 21,000,000 created.  Someday the last bitcoin will disappear and there will be none left.

For example, say Satoshi is dead and nobody knows about his bitcoin wallet.  Nobody knows Satoshi except his Mom.  And maybe his Mom doesn't know anything about Satoshi's cryptocurrency habit.   Whatever she does with Satoshi's computer probably destroys the bitcoins.

Gold is different.   It too is constantly being lost but it can be found again.  There was just a story about a ceiling full of gold being found in a house in France.  Gold never disappears.

When government fiat fails the people left just create a new fiat.  Because people still want to trade whatever they use for trade is currency.  Similarly bitcoin will eventually be replace with something else, something people like better.

[Ferroh]

Bitcoin as it exists today will fail.  Bitcoins are constantly being lost.  Yet there will never be more than 21,000,000 created.  Someday the last bitcoin will disappear and there will be none left.

A sufficient solution may be to raise the number of digits used. Then mining can continue for a while (since mining stops before 21 million coins due to rounding issues, but could continue when precision is increased). As long as we have a few satoshis, we have enough for everyone in the world due to infinite divisibility.

[Bitcoin Oz]

People need somewhere to stash their wealth thats safe from government interference and inflation. As long as that exists bitcoin will never die.

[Topazan]

There is one weakness of it, which I hope someone can invalidate. Suppose I'm a car-dealer and I buy 1 car for 100 BTC from my supplier. By the time I can sell it to a customer, I can only ask 95 BTC for it, because of deflation. Now everyone argues that isn't a problem, because the prices at my supplier also have dropped with the same amount, so I can buy a new one there for 95 BTC, and again have 1 car in stock, and don't suffer any losses. But if I did absolutely nothing I would still have 100 BTC, so why should I work hard as a car-dealer instead of hoarding?

I can't see why this would be good for Bitcoin. People said that it's good because it forces merchants to keep their stocks low, or produce goods only on-demand. But then you're asking merchants to change the way they have been doing business for decades, which seems unlikely to happen.

So how can Bitcoin solve this problem for merchants?

I don't see why that seems unlikely.  The car-dealer will realize that buying stock he can't sell at a profit is a bad investment, and will adjust his practice accordingly.

Besides, if the merchants are more comfortable doing business in more traditional currencies, no one's going to force them to use bitcoin.  It seems to me that most of the talk about inflation/deflation becomes irrelevant as soon as we let go of the idea that currency has to be a monopoly.

[paraipan]

People need somewhere to stash their wealth thats safe from government interference and inflation. As long as that exists bitcoin will never die.

^this, don't mind the gov shills guys, they will keep doing their shitty and worthless jobs while getting paid with the "monopoly" money.

[Clipse]

People tend to spend shitload of funnymoney($$$) on useless crap they dont need.

What we will start to see with bitcoins is that people will start spending bitcoins on stuff they really need rather than pure impulsive buying which is exactly why we are all in this shitstorm economy due to creditcards and impulsive buying of useless crap.

[AbsoluteZero]

The deflation is not a problem

Once the price is High enough to Support the economy of people trading In It, ”deflation” or rise In price will be very slow.

Now the price has risen very fast, From 0 to 11 In a couple of years.

Lets say price one day reaches 10,000 price will rise much slower From there.

[Clipse]

The deflation is not a problem

Once the price is High enough to Support the economy of people trading In It, ”deflation” or rise In price will be very slow.

Now the price has risen very fast, From 0 to 11 In a couple of years.

Lets say price one day reaches 10,000 price will rise much slower From there.

Yep, exponential growth wont be linear and there will be a cutoff point where bitcoin will start to represent small percentage gains/losses.

Right now its in the exponential growing stage and totally understandable that people want to hold on during the growth.

[hazek]

But then you're asking merchants to change the way they have been doing business for decades, which seems unlikely to happen.

Why does it seem unlikely to happen? I think it's very likely, almost certain to happen.

So how can Bitcoin solve this problem for merchants?

Bitcoin doesn't need to solve anything.

[Clipse]

The main goal about bitcoin in case it had no other goal is to put a end to freely printing money whenever you want more ie. every country right now. If there is other great things about bitcoin, and we all know there is, then thats just part of the bonus.

[Come-from-Beyond]

Till now, bitcoin seems the perfect currency in in the free world, it has many advantages as we can see. Such as convienence, decentralization, no worry of inflation, except for the boring blockchain file lay in system partition.

But to me, I think I treated it as gold as many others did, so maybe we will hardly to use them, just holding to see price up, obviously it will cause the deflation, and then the bitcoin will not be currency any more, but like treasure.

But it is not treasure, and let's consider this situation, one day, bitcoin has been granted, and suddenly a big catastrophe attacks somewhere in the world, and destroyes all, people die, bitcoins of those people then lose forever, so the price up, others will hold their bitcoins more tightly, and no bitcoins are in the circulation.

No curculation, so it can be called curreny?

The only true point why deflation was chosen as a feature of Bitcoin is to make early adopters (and Satoshi) rich. If Bitcoin succeeds in the future it will be just a side effect. Unfortunately, probability of such event is very low. So deflation will rather be fatal.