Bitcoin is undergoing deflation, not inflation.

...as was clear to anyone with any vague understanding of the definitions for deflation and inflation.

> as a result I noticed that a lot of people seem to think that bitcoin is undergoing massive inflation

Really? Bitcoin was designed to be a deflationary currency from the get-go. This is very, very common knowledge. How did this get voted up on HN?

Bitcoin is most similar to gold, so it's not surprising. Gold based economies also underwent severe deflation [1]. This is definitely a good thing for bitcoin as a store of currency (that is what it was designed for anyway), but it would be a bad thing to have an economy actually based on bitcoin as everyone would just hang onto their bitcoins as long as possible without utilizing them for growth as there would be little point.

Bitcoin is still a dubious store of currency as it could completely crash (or skyrocket) in the next few months with no prior warning. If bitcoin does survive, it will eventually settle as some kind of new age gold, but for now it's more of a slot machine. Whether bitcoin survives or not depends on how hard governments try to force regulation on it in the short term, I'd think. Long term doesn't matter because if it survives it will be entrenched and regulation will be far harder to implement if businesses are using it en-mass.

If you're up for gambling, I'd say bitcoin has much better odds than slot machines, so roll the dice.

[1] http://en.wikipedia.org/wiki/Gold_standard#Depression_and_Wo...

That's an oversimplification.

The words 'inflate/inflation' have several senses depending on domain, and even within the economic domain, shades of meaning based on whether you're referring to price level or money supply.

All of the following statements are true, when considered in their likely context:

"The price of Bitcoin [in dollars] is inflating."

"The Bitcoin supply is currently in an inflationary phase, as dictated by an algorithmic 'mining' schedule set at its creation, but will reach an eventual fixed maximum."

"Since the permanent supply of Bitcoin is capped, economists would classify it as a deflationary medium of exchange."

"Prices of other things as denominated in Bitcoin have been undergoing extreme deflation during the run-up in the Bitcoin/USD exchange rate."

The words are confusing enough in traditional colloquial and economic usage... and Bitcoin is weird enough, straddling a number of the categories that were devised before its creation, that it's even harder to describe. Entirely new categories and words may be necessary.

Inflation is an increase in money supply which is what is happening today with the number of Bitcoins in production. Eventually it will be deflationary because coins get lost.

Inflation has nothing to do with price volatility. Something that cost 10 Bitcoins yesterday might cost 1 Bitcoin today and 2 Bitcoins tomorrow. It doesn't mean that Bitcoin is deflationary today and inflationary tomorrow.

(Good job removing all comments on your blog that don't agree with your flawed definitions)