I have a hard time getting excited about a currency when the main reasons given for it's existence are for online gambling and Wikileak donations. I would be excited about a dollar alternative that allowed the common person to protect themselves from the inflationary rot that the US Congress is hell-bent on subjecting us to.
I feel the same way, but there is a much more lucrative reason to use bitcoins: The lack of transaction fees. I don't know about you, but it really bothers me that you have to give up ≈3% of your revenue to the credit card companies if you want to do business online.
Those are the first uses because online gamblers and muckraking NGOs are the ones most desperate for an alternative to a government-issued currency. If the average person was unable to function with inflationary currencies, they'd find an alternative.
Currencies linked to physical goods of limited quantities wouldn't inflate. For example, I could make a currency that represented shares of Picasso paintings. Since there are only a limited number of Picasso paintings, my currency wouldn't inflate.
Commodity-linked currencies (e.g. those that are gold/silver based) don't inflate much in a practical sense, since the amount of gold/silver being mined each year is usually much less than the amount of gold and silver already being used for exchange. That said, the US did experience a pretty huge bout of inflation after the California gold rush, as all that new currency increased the money supply.
Hrm. My understanding is that inflation can affect anything we attach value to (and that broadly speaking "value" is also an abstract concept).
Suppose the price of oil (or any other primary resource) jumps 50%, increasing the nominal cost of everything that has been made from it. Your gold backed dollar now can be exchanged for less things than before, irrespective of the total supply of gold in the world.
Does that make sense? I'm woefully under read in economics.
The word "inflation" has several different meanings. You're talking about consumer price inflation. There is also monetary inflation, which is the supply of money plus debt (marked to market). Those are really completely different things with only a very loose relationship.
Bitcoin is resistant to centralized inflation due to currency supply increases because CPU power votes on new currency entering the system.
If I make a block that gives me a 100 BTC bounty instead of the current 50 BTC, no other nodes will make blocks dependent on mine, meaning that it didn't happen.
