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Comment by arcticbull | Hacker News Reader

The loss of coins means it will likely be massively deflationary over time. I don't have the numbers for ETH but off hand I believe 20% of all BTC has been lost already, since just 2009. That's an annualized 1.55% effective supply deflation rate during a period where new supply was quickly generated.

Basically every random walk down the timeline leads to 100% of coins lost in the course of time.

This is of course separate from the decrease in rate of supply creation.

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Arguably, Ethereum's even more prone to this of loss than BTC, because of the complexity of broken smart contracts with permanently locked funds.

I think it evens out though because of a lot of early people with lots of bitcoin just lost interest and lost the wallet. This was sadly the case for me as well as a few other people i know.

By time eth came out though everyone was much better about backing up wallets you thought would be worth nothing.

But that was a one-time effect. It affects the current money supply, but does not affect inflation/deflation over time.

> Basically every random walk down the timeline leads to 100% of coins lost in the course of time.

Rather, I believe it will result in the remaining 20% being held by a few exchanges, whose endgame will be to still charge the fees but just balance them internally without actually costing anything.

> loss of coins means it will likely be massively deflationary

Friendly note that money supply is only correlated to whether a currency is inflationary or deflationary. Over the past weeks, for instance, Bitcoin has been inflationary--its purchasing power dropped.

Bitcoin proponents argue that bitcoin is deflationary based on a misinterpretation of the Quantity Theory of Money. At any rate, QTM is a theory of money, and as such it only applies to money. It doesn't apply to random assets, such as bitcoin. And, no, the fact that bitcoin has been declared "legal tender" in this or that country doesn't mean bitcoin is money in the context of QTM.

Thank you for calling that out, I agree, which is why I mentioned "supply inflation" and "supply deflation." To your point, that's only 'inflation' in the Austrian sense which I personally couldn't disagree with more. After all the M2 supply grew 15X since the 1970s but inflation only decreased the buying power to 1/7th so the fact they're equal seems trivially disprovable.

Dogecoin, on the other hand, has a static issue rate in the reward schedule. I believe it was totally accidental and not at all by design, but it is plausible that it will reach an equilibrium with coin loss in the next few years.

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