Quote from: Holliday on January 20, 2013, 04:11:50 AM

This is because they realize they will lose value to inflation if they simply put it in a safe. With strong money you are safe from such loss and don't need to risk your money in such a fashion.

The money thus will not make it back into the economy until the person hoarding/saving sees something (s)he wants to spend said hoard on. There's no incentive to invest, and there's no incentive to borrow money to put it to work either since debts rise while prices go down. If this is allowed to run away it turns into hyper deflation.

Then - even if the market adjusts to the money taken out of it, and the currency unit is infinitely divisible - there's the risk that some of the saved-up money suddenly floods the market. If the GDP of a country is 1 BTC, after some incidents of lost wallets, and Satoshi suddenly decides to cash in 2 BTC - what happens then? You might dream that you'll be that person - and if there are many such persons the risk will even out as the fatcats cash out gradually - but where except for some kind of Objectivist or Feudal utopia would people accept that state of affairs?

Quote from: sounds on January 16, 2013, 05:51:58 PM

However, such a process does not affect the market: purchases made yesterday for $14/BTC1 were fair, and purchases today for $14/BTC0.01 are also fair.

That only holds true if you only use BTC as a transfer method for relatively stable currency such as USD, and transactions lasted less than a day. It would not hold true if anyone had a contract, a loan, a price list, a mortgage, or held any other instrument or document denominated in BTC that had an impact on their lives. BTC could be infinitely divisible, but with that kind of volatility it could not be a serious currency. It couldn't even be used for transactions that you immediately convert to another currency, since the value could have changed between the customer making the order and the product going out the door. (Well, that could be months in some cases we know, but it could be true even for groceries.)

From reading this thread, it indeed seems that most of you consider Bitcoin to be simply vehicle for speculation rather than an actual currency. And if it gets too volatile it won't even work as a temporary intermediary currency.

As a thought experiment, what happens if one person has collected - say - 80% of the money as some sort of dragon of Norse myth, and the rest of the economy decides "we don't want to be subject to that guy's whims - we'll make a new currency". Unlike the dragon's hoard of gold Bitcoin has no value as raw material, unlike fiat it has no backing from the government and courts, and unlike physical money has no numismatic value (the blockchain is public anyway) - so there's nothing to stop the rest of the market to decide that they don't want anything more to do with the Bitcoin currency.

If the dragon lost the purchasing power of his gold, he could at least swim around in it, and maybe earn some new money for food by charging admissions.