"I don't think it is possible to create an inflationary currency except through central banks."
I don't see why that would be the case. Would not "Bitcoin, but the mining rewards don't decrease" be an inflationary currency?
I don't see why that would be the case. Would not "Bitcoin, but the mining rewards don't decrease" be an inflationary currency?
The main problem is that by its competitive nature, mining rewards are actually deadweight loss. Every dollar value of bitcoin that is given to a miner is value that is destroyed. To see this, imagine that a Chinese bitcoin mining farm is making a profit mining bitcoins, gaining $10 of bitcoins for every $8 of operating expenses. Then another farm could start up with an even lower profit margin. This would continue until the economic profit was zero, i.e. every dollar's worth of bitcoin mined cost a dollar in operating expenses, which are deadweight loss to the economy.
However, none of this implies that a constant inflation rate is not possible. As long as a dollar's worth of bitcoin generates more than $1 of value to the economy, the system should be stable, and the higher this number, the less wasteful bitcoin would be. Given the various figures for velocity[0][1] I've seen, it's not clear whether this system would be prohibitively wasteful or not.
[0] https://en.wikipedia.org/wiki/Velocity_of_money
[1] Note that velocity is the ratio of total money to nominal GDP but since one is a stock and the other is a flow, this doesn't measure how much economic activity a single dollar generates/supports.
The harder problem is that without a central bank you can't track changes in the size of the economy. The more you want to avoid deflationary periods, the more you have to inflate "just in case". And high constant inflation has its own problems.
So it's better to say that it's extremely hard to create a mildly-inflationary currency without a central authority.
Why not, if you have the total list of transactions being made - ie., the blockchain? Seems to me like it wouldn't be hard to measure the "Bitcoin GDP" and adjust accordingly.
Really, if we wanted to stabilize a coin, I think we'd want to be measuring how it's moving relative to other things, which is definitely external info. It would be a challenge to come up with a means of folding these observations into the system in a secure (and ideally trustless) way.