Quote from: heatstroke on August 30, 2012, 03:34:11 PM

Quote from: Kazimir on August 30, 2012, 02:01:50 PM

And unlike gold, which can only be divided up to individual atoms (which would be impossible to handle in practice), bitcoins can be divided with unlimited precision, and paying 2 nanoBTC is exactly as convenient as paying 2 BTC)

So, forget the 21 million limit. There might have been just as well 800 trillion coins, or just 5. By definition, there is an infinite amount of units available.

So at the point where bitcoin is supposed to become deflationary and reward hoarders and early adopters, it can easily stagnate or even inflate?

No a change in the discrete units won't change the value of the base unit.

USD have traditionally only had coins for one penny or larger. We consider dollar to have 2 discrete units. Yes it gets "fuzzy" because digital dollars can use smaller units but for the sake of this excercise lets ignore it.

Say today you can buy a candy bar for $1.00. If tomorrow the treasury announced they are going to make 1/10th cent coins and the store changed the price tag from $1.00 to $1.000 did you lose any purchasing power due to inflation?

Of course not.

If on the other hand if the Treasury announced they doubled the money supply and the store changed the price tag from $1.00 to $2.00 you would have lost purchasing power.

Bitcoin has 21M bitcoins. If you own 210,000 BTC you own 1% of all Bitcoins in the system. Let say a video game costs 2.1 BTC. If the number of decimal places is increased from 8 to 12 how many BTC do you own? Still 210,000. What % of the Bitcoin money supply do you have? Still 1%. How many BTC are available? Still 21M. How many video games can you buy? Still 100,000.

Lets compare that to what happens if the number of Bitcoins was doubled to 42M. You still have 210,000 BTC but you now only have 0.5% of the total money supply and the price of the game will likely inflate to 4.2 BTC meaning you can now only buy 50,000 copies.

When a central bank ADD money to the money supply they make all the existing units less valuable. If you break existing units of money into tinier and tinier pieces you don't change the value of the base unit.