
Bitcoin is undergoing deflation, not inflation. - aosmith
http://blog.alexsmith.io/?p=43
======
corin_
...as was clear to anyone with any vague understanding of the definitions for
deflation and inflation.

~~~
aosmith
You would really be surprised... Then again maybe HN was just a little tipsy
last night.

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maaku
> 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?

~~~
aosmith
I know, I mean they are confused about fairly basic terminology.

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RyanZAG
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...](http://en.wikipedia.org/wiki/Gold_standard#Depression_and_World_War_II)

~~~
aosmith
Couldn't agree more. I think litecoin actually has the makings of a better day
to day currency:

[http://blog.alexsmith.io/?p=59](http://blog.alexsmith.io/?p=59)

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gojomo
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.

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sidko
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)

~~~
aosmith
Sorry if I removed a comment of yours -- wasn't intentional. I only removed
comments stating that bitcoin was undergoing inflation to help avoid
confusion.

