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Comment by tsmarsh | Hacker News Reader

If it ever becomes successful, we will marvel that individuals could ever afford a bitcoin. 21 million is a tiny number for a currency when compared to $40 trillion in global currency ($6000 per person).

~$1.25 billion spend on Cyber Monday ~$8 billion are traded for oil every day ~$150 billion NYSE daily

If bitcoin became the trusted currency for any of these activities what would it be worth?

If bitcoin became the global currency we all get 0.003 each, making the upper limit on a bitcoin around $1->2m depending on inflation.

Of course wars will be fought before bitcoin becomes a global currency. I'm also not sure that people really want an inflation proof currency. But it is fun to speculate.

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This is the fundamental characteristic of bitcoin that puzzles me. Most currencies are inflationary, which in low doses is a good thing: it disincentivizes keeping the money under the mattress, maintaining a healthy flow of currency. Bitcoin is by design deflationary: it's value increases over time.

Deflation is destructive to the economy, so if bitcoin is deflationary by design, it can't ever be a primary currency, and thus it's expansion in usage is constrained from the get go.

Now, if you assume the market is smart, then there must be some other motive, other than usage, for appreciation. I suspect an artificial bubble.

"This is the fundamental characteristic of bitcoin that puzzles me. Most currencies are inflationary, which in low doses is a good thing: it disincentivizes keeping the money under the mattress, maintaining a healthy flow of currency. Bitcoin is by design deflationary: it's value increases over time."

Thank you for this. I constantly try to explain this to bitcoin fanatics and they don't get it.

No one is disputing that Bitcoin is deflationary.

What's less clear is how damaging that actually is. If you are looking for a way to preserve value, then being deflationary might even be beneficial. There are plenty of things that are deflationary (i.e. limited in supply), such as gold, stocks of a growing company, or real estate in Manhatten. Does that make these things worthless?

To the person who just wants to save for retirement and doesn't want to invest in the rollercoaster stock market, the best thing that money could do is to at least retain its current purchasing power.

You can talk about "maintaining a healthy flow of currency", but to some people it's more like "use your dollar coupons before they expire" and they don't like playing that game.

Just keep dividing it, that's one of the key designs. Work in mini bitcoin, or micro bitcoin, or even single satoshi. There's nothing saying that you have to use full units.

That doesn't actually solve the underlying problem, which is, why would I spend my bitcoin today when it will be worth more tomorrow?

Now, if bitcoin merchants agreed on the expectation that bitcoin will continually rise, it would be rational to price things at a discounted rate. But that is a lot of risk to take considering bitcoin's volatility. In the end I think BTC speculation will do the most to harm its actual economic utility.

Of course, there is absolutely nothing that says this will ever happen.

as someone who has been mining since mid 2011 on a 450 dollar PC...this would make me very happy. I have already done very well on that investment.

And again: electricity was free?

yes...thank you air force!

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