Quote from: rayt5 on April 16, 2013, 01:41:55 PM

According to me, it's because Bitcoins have been designed to increase greatly in value over time, which encourages hoarding... This currency would be designed to be very nonvolatile in value, or to perhaps deflate at a slow and predictable rate over time.

The fixed supply may be making things worse, but I don't think it's the only problem. If it was you could solve it with an alt chain designed to keep on issuing money forever, but you can't. The core of it is that the value of all the Bitcoins in the world is just incredibly uncertain, depending on the extent of adoption and all kinds of other assumptions. So even if Bitcoin had a formula where the block reward gradually increased, there would still be a huge variation in plausible valuations of any single Bitcoin. And combined with speculative greed / fear, that's going to mean bubbles and crashes.

In theory there may be a possible world where the extent of Bitcoin use has leveled out and become predictable, and we all have contracts and salary expectations denominated in Bitcoins, so it behaves more like a regular currency even without a central bank, but it's hard to see how we get from here to there, and there's a lot of instability in between.

In practice if you want price stability you need information about prices (whether denominated in another currency or in terms of stuff we buy) to somehow feed back into the money supply, so that if prices drop you get more money put into circulation and if they rise you get money taken out. That in turn requires some information about the real world - you can't just capture it in advance in an algorithm. And once you need information about the real world, you get into issues of how to trust whoever is providing that information and prevent them from gaming it.