a) When I can earn Bitcoins I will be more likely to spend them. Dollars as inflationary but I’m not likely to spend the last dollar in my pocket on something I don’t actually need. Bitcoins are inflationary but I’m not likely to spend my last Bitcoin on something I don’t really need. It’s currently very hard to earn a significant amount of Bitcoins so no one is ready to spend them and at the same time there aren’t many places to spend them either. So while the deflation is good we need to be able to replace every Bitcoin we spent to make it spendable like a currency. When I can spend X amount a week based on an income of Y amount a week then why not spend Bitcoins in that scenario? I don’t lose any Bitcoins so there is no reason not to spend my profits. I’m not however going to spend my savings and who exactly would?
b) Volatility isn’t a problem. Bitspend and Bitpay can handle it. Better designed payment processors can handle it. Better designed exchanges can handle it. But for now volatility means increased profits for speculators and right now speculation is one of the only ways to turn 1 BTC into 2 BTC. So if that is the best source of income in the Bitcoin economy it’s going to create a natural incentive to pump and dump which drives volatility up.
c) Bitcoin does not have to replace the dollar to be a success it merely has to coexist. Alternative cryptocurrencies don’t have to replace Bitcoin but merely compete. Bitcoin is like the first web browser when no one knows how the web works but experts from other fields expect it to work like something else. Bitcoin is unique and we cannot base how it works around fiat currency, gold or anything else.
a) Bitcoins are deflationary in the sense that supply does not increase as fast as demand. If you have any bitcoins, your incentive is to hold onto them for dear life—unless your expenditure is a very safe strategy to net you more bitcoins. You can’t easily loan them because as the value increases over time the pressure to default will increase. Maybe this creates creative pressure to minimize risk or some other positive trait, but I’m cautious of labeling it good for the long term economy. The strategy I’ve outlined minimizes risk of losing your bitcoins by letting you loan them out in a form that will be worth the same later, which means defaulting on a loan has less severe consequences and less extreme incentives.
b) Volatility is a huge concern for contracts. If you can’t count on it being worth the same tomorrow, a given contract costing you so much makes it much harder to juggle long term financial gains and losses from holding many contracts with many different businesses and individuals. This imposes extra accounting costs that I would argue make it much harder to do complex business without incurring extreme risk.
c) I do agree that bitcoin does not need to replace the dollar to coexist with it. However, the case for it being a major financial instrument is better if we can define a niche that it fills better than the dollar. Also, if you are planning to hold long-term, it is important to distinguish whether its value is mainly fad/signaling based or not. Right now it seems like something geeks and hipsters use to buy each other coffee—which is neat, but could easily lose popularity when something else comes along.
Yes I know Bitcoins are deflationary and I think that is one of the best things about Bitcoin. I think demand should always increase faster than supply if you look at it holistically. We have a world where population growth is increasing faster than job growth can ever keep up, we have a sustainability problem with pollution and waste, and we have inflationary currencies, credit, and debt contributing to diminished liberty and justice for all. Spending isn’t always a good thing when we currently spend on stuff which destroys the planet, which isn’t necessary, which doesn’t make sense, it’s growth for growth sake and it’s as bad as economic cancer.
Volatility is bad for large contracts but this can be solved technologically. There are ways to make Bitcoin less volatile for use in contracts and colored coins, Ripple and smart contracts may be a part of the solution.
I think Bitcoin is in a niche, that niche being it is the best currency for the digital space and for digital content. If you’re offering digital content then it makes much more sense to exchange that content for Bitcoin because there is no micropayment structure which makes sense in fiat currency and there is no easy way to do it which would be obviously better than Bitcoin. I’m not going to tip you with my credit card number but I might with Bitcoin.
Long term Bitcoin is probably going to be replaced by something better. It will last for 10 years, perhaps 15, but it’s dominance will mainly be in the next 5 years. How long did Netscape last? This is why it’s good to invest in alternative cryptocurrencies which promote innovative solutions. Rather than change Bitcoin’s protocol it’s important to help fuel competition for Bitcoin so we can find out from the market which alternatives are necessary. For certain niches Litecoin might be better, but for certain things Bitcoin may be best and for other things we might have other coins like PPcoin and anything which comes after it. The point is the more cryptocurrencies we have the more solutions we have and the more niche markets we fill. So if you want to encourage that then you should buy the alt-crypto currencies.
The main thing in my opinion is getting infrastructure built. I think once Bitcoin has infrastructure built then all the alt currencies will piggy back on Bitcoins infrastructure whether Bitcoin fails or is a success or falls into a niche does not matter as long as the infrastructure is built.
That there may be environmental advantages to deflation (and/or environmental harm from inflation) is not something I had deeply considered, but it makes a certain amount of sense. Thank you for pointing it out.
My long-term goals are to live as long as possible, to eventually establish residence off planet, and to minimize the number of people who die from preventable causes like (as I see it) aging. I think that can be done without harming the environment, but I much less sure deflation and an overall shrinking of the economy is beneficial to that goal. Stable currency that lets you send clear market signals about your desires in the form of expenditure and investment seems better.
Digital goods are already pretty popular in an inflationary economy, and I see this growing as they get better. Cleaner tech will tend to become more widespread as well, which is again a form of economic growth.
I think Bitcoin is in a niche, that niche being it is the best currency for the digital space and for digital content.
That’s an okay near term perspective. Bitcoin currently serves that niche, for people who have bitcoin and view it as spendable. It could get replaced in that niche fairly quickly by something viewed as more stable. But then, digital content has little investment cost so it is plausible that bitcoin could continue to dominate there due to lack of need to borrow money for this kind of production.
The main thing in my opinion is getting infrastructure built. I think once Bitcoin has infrastructure built then all the alt currencies will piggy back on Bitcoins infrastructure whether Bitcoin fails or is a success or falls into a niche does not matter as long as the infrastructure is built.
It’s a complicated question. But I think people may underestimate how well bitcoin has picked the low hanging technological fruit and/or how adaptable it is. Most of the cryptocurrency money is apparently in bitcoin form, and it has massive physical infrastructure in the form of mining FPGAs and ASICs supporting it.
a) When I can earn Bitcoins I will be more likely to spend them. Dollars as inflationary but I’m not likely to spend the last dollar in my pocket on something I don’t actually need. Bitcoins are inflationary but I’m not likely to spend my last Bitcoin on something I don’t really need. It’s currently very hard to earn a significant amount of Bitcoins so no one is ready to spend them and at the same time there aren’t many places to spend them either. So while the deflation is good we need to be able to replace every Bitcoin we spent to make it spendable like a currency. When I can spend X amount a week based on an income of Y amount a week then why not spend Bitcoins in that scenario? I don’t lose any Bitcoins so there is no reason not to spend my profits. I’m not however going to spend my savings and who exactly would?
b) Volatility isn’t a problem. Bitspend and Bitpay can handle it. Better designed payment processors can handle it. Better designed exchanges can handle it. But for now volatility means increased profits for speculators and right now speculation is one of the only ways to turn 1 BTC into 2 BTC. So if that is the best source of income in the Bitcoin economy it’s going to create a natural incentive to pump and dump which drives volatility up.
c) Bitcoin does not have to replace the dollar to be a success it merely has to coexist. Alternative cryptocurrencies don’t have to replace Bitcoin but merely compete. Bitcoin is like the first web browser when no one knows how the web works but experts from other fields expect it to work like something else. Bitcoin is unique and we cannot base how it works around fiat currency, gold or anything else.
a) Bitcoins are deflationary in the sense that supply does not increase as fast as demand. If you have any bitcoins, your incentive is to hold onto them for dear life—unless your expenditure is a very safe strategy to net you more bitcoins. You can’t easily loan them because as the value increases over time the pressure to default will increase. Maybe this creates creative pressure to minimize risk or some other positive trait, but I’m cautious of labeling it good for the long term economy. The strategy I’ve outlined minimizes risk of losing your bitcoins by letting you loan them out in a form that will be worth the same later, which means defaulting on a loan has less severe consequences and less extreme incentives.
b) Volatility is a huge concern for contracts. If you can’t count on it being worth the same tomorrow, a given contract costing you so much makes it much harder to juggle long term financial gains and losses from holding many contracts with many different businesses and individuals. This imposes extra accounting costs that I would argue make it much harder to do complex business without incurring extreme risk.
c) I do agree that bitcoin does not need to replace the dollar to coexist with it. However, the case for it being a major financial instrument is better if we can define a niche that it fills better than the dollar. Also, if you are planning to hold long-term, it is important to distinguish whether its value is mainly fad/signaling based or not. Right now it seems like something geeks and hipsters use to buy each other coffee—which is neat, but could easily lose popularity when something else comes along.
Yes I know Bitcoins are deflationary and I think that is one of the best things about Bitcoin. I think demand should always increase faster than supply if you look at it holistically. We have a world where population growth is increasing faster than job growth can ever keep up, we have a sustainability problem with pollution and waste, and we have inflationary currencies, credit, and debt contributing to diminished liberty and justice for all. Spending isn’t always a good thing when we currently spend on stuff which destroys the planet, which isn’t necessary, which doesn’t make sense, it’s growth for growth sake and it’s as bad as economic cancer.
Volatility is bad for large contracts but this can be solved technologically. There are ways to make Bitcoin less volatile for use in contracts and colored coins, Ripple and smart contracts may be a part of the solution.
I think Bitcoin is in a niche, that niche being it is the best currency for the digital space and for digital content. If you’re offering digital content then it makes much more sense to exchange that content for Bitcoin because there is no micropayment structure which makes sense in fiat currency and there is no easy way to do it which would be obviously better than Bitcoin. I’m not going to tip you with my credit card number but I might with Bitcoin.
Long term Bitcoin is probably going to be replaced by something better. It will last for 10 years, perhaps 15, but it’s dominance will mainly be in the next 5 years. How long did Netscape last? This is why it’s good to invest in alternative cryptocurrencies which promote innovative solutions. Rather than change Bitcoin’s protocol it’s important to help fuel competition for Bitcoin so we can find out from the market which alternatives are necessary. For certain niches Litecoin might be better, but for certain things Bitcoin may be best and for other things we might have other coins like PPcoin and anything which comes after it. The point is the more cryptocurrencies we have the more solutions we have and the more niche markets we fill. So if you want to encourage that then you should buy the alt-crypto currencies.
The main thing in my opinion is getting infrastructure built. I think once Bitcoin has infrastructure built then all the alt currencies will piggy back on Bitcoins infrastructure whether Bitcoin fails or is a success or falls into a niche does not matter as long as the infrastructure is built.
That there may be environmental advantages to deflation (and/or environmental harm from inflation) is not something I had deeply considered, but it makes a certain amount of sense. Thank you for pointing it out.
My long-term goals are to live as long as possible, to eventually establish residence off planet, and to minimize the number of people who die from preventable causes like (as I see it) aging. I think that can be done without harming the environment, but I much less sure deflation and an overall shrinking of the economy is beneficial to that goal. Stable currency that lets you send clear market signals about your desires in the form of expenditure and investment seems better.
Digital goods are already pretty popular in an inflationary economy, and I see this growing as they get better. Cleaner tech will tend to become more widespread as well, which is again a form of economic growth.
That’s an okay near term perspective. Bitcoin currently serves that niche, for people who have bitcoin and view it as spendable. It could get replaced in that niche fairly quickly by something viewed as more stable. But then, digital content has little investment cost so it is plausible that bitcoin could continue to dominate there due to lack of need to borrow money for this kind of production.
It’s a complicated question. But I think people may underestimate how well bitcoin has picked the low hanging technological fruit and/or how adaptable it is. Most of the cryptocurrency money is apparently in bitcoin form, and it has massive physical infrastructure in the form of mining FPGAs and ASICs supporting it.