But the fact dogecoin is inflationary is interesting. A currency needs to be inflationary or people hoard it instead of spending it, see bitcoin for an excellent example.
After rereading the article, I now understand that you were referring to this quote in the article : "The circulation number is not enough".
You are right, the fact that it's divisible render this point moot. I thought you were saying that dividing coins somehow decreased scarcity (Yes, I've seen many people argue that, believe it or not).
Original comment below :
I find it really mind boggling that some people don't understand that dividing a pizza into 100M pieces does not give you more pizza.
The number only matters as long as it can subdivided sufficiently to buy the smallest priced thing.
You're thinking of it as a fixed sized pie and thinking dividing it doesn't make a bigger pie. But it's not fixed, the whole pie can grow as bitcoin increases in value. It's up to one trillion dollars now.
I'm not saying the price can't increase, I'm saying that dividing coins does not reduce scarcity.
Edit: Updated my original comment, turns out I'm the one who misunderstood your point. We actually agree.
The dollar point feels more like word play. In retail there is a lower bound limit for dollars and this is 0.01 dollars. Not so with Bitcoin transactions. If 0.00001 of bitcoin etc. Is viable tender then simply put the limited supply of bitcoin might be misleading.
In the US, fuel stations price in tenths of a cent.
Google Cloud's per-second billing prices resources with a millionth of a cent precision.
One troy ounce of gold consists of 3.36x10^27 atoms.
There is not an infinite supply of Bitcoin, dollars or gold just because you can divide them into arbitrarily small pieces.
Again (for the third time) are you aware if fractions of bitcoin can be sent from one account to another? Or does it have to be one whole bitcoin? Again I don't know.
I'm just thinking theoretically you could convert bitcoin into bitcoin_plus and these coins represent 0.0001 of a bitcoin. And tada you have 100 million coins in circulation etc.
Why would I even buy the smallest priced thing with deflationary bitcoin, when I could instead hoard it and wait for it to increase in value?
I think most people who have ever used bitcoin as a medium of exchange have kicked themselves when they realized how expensive that thing they bought was at current (very high) exchange rates.
Given the inflationary dollar, you probably wouldn't, but otherwise, you'd need to transact at some point.
Perpetual debt against assets is a common trope in tax avoidance. People do use/abuse this. If enough people abused it inflationary money would fail.
Deflationary money isn't bad, but the common belief says it is. One example that changed my mind was business investment.
Why would you loan money to a business if the money itself might be worth more later? Well you probably wouldn't. Instead, you'd buy a share of the business itself.
We've all live in a system of inflationary money and were educated by a system that teaches it's use. We should acknowledge our bias here and keep an open mind.
The problem with that is that deflationary money isn't exactly a new idea. It's been tried before, it's workable, but it has problems. However, it is an idea that favors people who already have lots of money over those who don't, which has fueled background level nostalgia (and nostalgic propaganda) for the idea.
Bitcoin had some genuine innovations, but that doesn't mean all the ideas that were baked into it were good ones.
Not arguing... Legitimately asking. Outside of gold or other materially limited resources, what are some examples?
> it is an idea that favors people who already have lots of money over those who don't
Please elaborate on this. Particularly in comparison to our current debt->create system that seems to benefit those with enough to loan.
The arguments surrounding deflation aren't necessarily wrong but it's hard to gauge the actual effects of it in practice at this stage where market forces are way more impactful.
This sounds sustainable. /s
It completely depends on if it finds a sufficiently broad use case or not. So far, not.
It matters a little in some hypothetical world where we're actually using crypto instead of fiat currency. If you replaced all USD cash reserves with bitcoin, a Satoshi would have the same spending power of around 1.3 present day dollars. That's a kind of course unit, especially if we want to subdivide it into transaction fees and whatnot.
If the supply increases in perpetuity, that is inflationary, just at an increasingly lesser rate.
No, not at all. All you need is a sufficiently high rate of interest. The higher the rate of interest, the more you miss out on if you hoard instead of lend.
In other words: You won't get high interest without high inflation.
Also, the correlation between a rising rate of interest and rising prices is much better than high interest/high inflation [1]. For example, from 1990 to 2000 we had relatively little inflation but the rate of interest was 5-8%.
(There are a bunch of studies for stock and property returns, or for treasuries like you linked, but that's something quite different).
I think it would be interesting to see the result, but I don’t have the data unfortunately.
Also if lending becomes more profitable than hoarding everyone offers to lend which obviously pushes lending returns down. So in the end there will be a balance between lending and hoarding but both will return profit so there is no reason to buy something today if you could buy it cheaper tomorrow. The effect for this is exactly the same with or without lending.
It wrecks the supply chains because it becomes financially acceptable to run out of stuff rather than buy reserves and any long term investment becomes high risk. Maintenance becomes irresponsible waste of money you'd rather wait until something breaks than pay upfront to keep it running. Essentially it slowly slows down and destroys the economy as we know it. All while people get "rich" and think it doesn't affect them because "money can buy you anything" until something essential can no longer be bought no matter how much money you have then the whole thing collapses because the money turn worthless if the real buying power turns out to be zero.
At some point people will spend it, it just won't be the artificially early spending that fiat forces us into.
That would cause the aforementioned economic collapse not to happen at all...
In such scenario the smart person is not the one who postpones gratification by storing the marshmallow, but the one who eats it now because there is no future
It's really interesting, BTC moves the analysis from balance sheets to people's psyche.
Correct, although also incorrect because both of these limits are arbitrary and human made and can be changed any time. Its an absurd belief that this is somehow "set in stone" its not, its written in code, code that humans can update whenever they want. Absolutely nothing stops people form making something smaller than a satoshi. We just dont know if the majority of the miners will accept the change to the code. If not it can only be applied to a fork which the majority then will declare as "not the real bitcoin". But every time bitcoin forks, the number of "bitcoins" grow whether an individual declares the forks as not real doesn't really matter.
I don't think people are going to starve to death because they know their coins will buy more food next week. But if it stops people spending on unnecessary things, is that such a bad thing?
you're missing the demand curve. As fees increase, transaction volumes go down, until there's an equilibrium. The opposite occurs as well: if transaction volume dries up, the demand for block space will decrease and eventually the fees will drop.
If bitcoin was to be the dominant currency, it needs a lot of mining to secure the network, otherwise attacks would be very appealing. But a lot of mining means a high transaction fee.
1. Have liquid cash for spending 2. Emergency money where you're willing to pay the interim exchange for security