Quote from: Dekshuduph on June 17, 2013, 08:56:59 PM

Quote from: sidhujag on June 17, 2013, 08:34:35 PM

Your point is taken on the psychological affects of using mBTC or uBTC and that is not really the issue here. Wolverine actaully made a good point in that deflation is always a good thing as it rewards those to innovate to eliminate waste, but we've seen from the past that deflation can lead to a halt in spending and either we would need to go all out, go through a bad recession and force people to look in the mirror, or we adapt our current situation to use something like DVC and slowly move towards a purely deflationary-hybrid scheme.

I'll make it more clear for you using our example of the apple and btc.

At 21 million the apple costs a certain amount. Now there are more and more people fighting for the same apple as population grows. Since there are no more coins available we divide them up as things become "cheaper"... the incentive is the hold money as it grows in value and then spend when you "need" to. That will drive the cost of the apple down to uBTC numbers from mBTC numbers. The Apple farmer wants to get more BTC so he innovates new ideas to make his apple grow cheaper yet doesn't sacrifice quality otherwise people won't buy from him at all. However, it is to be seen to see if this is feasible as my argument was that this may be well on paper but practically breaks down when spending grinds to a halt and noone will buy the apple, they will sacrifice to hold off until the apple farmer goes out of business and shuts down. There is a competitive cycle of driving prices down to a poitn where it is always less and less profit to build the same thing, and you will have less and less people willing to take risks to provide service to the industry whereas you can just hold your money and gain more "wealth". See where I'm going with this?

Yeah, I see where you're coming from. I understand this, and I'll change my stance. Let's bring up my point again with time: this will happen in over a hundred years. The main goal of Bitcoin is to overthrow fiat money. Now, going on the assumption that we are successful in this endeavor, Bitcoin could be a main currency for at least one country. If it begins to deflate rapidly, then although the apple farmer will want to charge less for his product, the resources he requires will begin to cost less aswell. Also, if Bitcoin is the only way you can buy an apple in some situations, farmers are going to want to up the price so they can get a more reasonable profit, and people are going to have to pay the higher price because of this. Technically this would make deflation and inflation into equilibrium, since there's always going to be an equal amount of Bitcoin. Yes, depending on population it will continue deflating anyways, but I don't think it will be as drastic as you're making it out to be.

You may be thinking that the economy will deflate rapidly due to the deflation trend it's going through now. If we were to hit the limit now, you'd be right, and then Bitcoin would become primarily an investment. However as long as the price keeps going up, people are going to begin to sell their bitcoins to get their profit before the drop in price that would come as soon as really anyone with a huge investment does just this. Everyone's going to sell their bitcoins for fiat and it will become worth nothing, essentially killing the system.

21 million bitcoins is a very high cap. Whether fiat currency has been overthrown will determine if Bitcoin will remain successful when the cap is reached.

This is what I hoped to see from you, good points! Yes there may be some sort of equilibrium once deflation hits because it may be a 0 sum game (never though of this)... however resources we know are not 0 sum for out intents and purposes, they will always seem like they are in abundance until we learn that we only have so much left (oil, water). The system needs to be able to cope with this in some way, and I'm not sure which method will help with this regard and provide a more smooth transition between running out of the resource and being replaced through innovation or something.

Yes no backing at all is not the way to go because of the mess we are in now, but no a total hard cap is also just as bad, this is why i'm a proponent of a no cap but controlled supply increase which will fight deflation issues but not introduce the same inflation problems. In 100 years there will be something like 200 billion dvc? compared to 21 million btc? Does it matter, in 100 years alot of things will have changed, and we have far more usd in our system than dvc would at that point, so the fact that it is uncapped should not hinder the viability of adaption as a medium of exchange. Infact I would say it would provide smoother responses to external pressures that we do not control, and a more stable currency rate over the long term.