Quote from: Kleptoid on November 29, 2013, 08:40:54 PM

Quote from: jonat3 on November 29, 2013, 08:17:22 PM

People tend to forget that money is all in the mind. It's entirely a psychological concept.

I agree completely, money isn't real, it's a tool for allocating goods and services, nothing more.

Let's take a very simple example. Let's say there are only two equal sized countries in the world and they both use the same currency (and only that currency) which has a fixed supply of 1 trillion units. Each of those units represents one trillionth of the total wealth of the world. One day one of the two countries decides that it will create it's own currency, also with a fixed supply of one trillion units. There are now twice the amount of currency units in the world, but the real wealth of the world hasn't doubled. Each currency unit now only represents a two-trillionth of the total wealth of the world, the original currency has been devalued by 50%. How this is perceived by people makes no difference, you can't perceive a new loaf of bread into existence when you only have one (without getting lost in metaphysics at least). Having an exchange to barter the two currencies with each other makes no difference, you have still doubled the total number of currency units, and thereby halved their value.

Of course the situation in the real world is infinitely more complex, and while crypto remains a tiny fraction of the world's money it's easy to imagine that there is the capacity for unlimited growth, but in reality the world is finite, the universe is finite, I think my fundamental point stands. If I'm missing something then I'd love to be enlightened.

Ah, now I uderstand your viewpoint. If your example were actually played out in the real world, I would agree that price inflation would occur, even if the currencies were seen as essentially being two seperate currencies. However, this would occur, because these two currencies would be seen as having SIMILAR properties. They would still be seen as two different currencies, but their exchange rates would exhibit similar behaviour. They wouldn't neccesarily have the same exchange rate, but they would react to situations similarly.

However, I must add a few caveats to this situation. Even though price inflation would indeed occur, the fact that these would be seen as different currencies would still remain. Having 100 different currencies with the same properties would lead people to believe that there would be more wealth in the economy and would thus lead them to raise their prices. But CONFIDENCE would still remain in these coins, because they are still seen as being seperate coins. A person must actually believe that the supply has been abnormally expanded for a person to lose faith in a currency. Thus having 100 different currencies with the same properties would indeed lead to price inflation, but the slight differences between the coins would be enough for the average person to believe that a single currency's supply has not been abnormally expanded (yes, belief is everything).

In case of BTC and its altcoins, I would say the benefits of competition outweigh the negatives of the inflation. The market tends to have only a few succesful competitors anyways, so even if the market is flooded with altcoins, only a few would actually be moderately succesful, thus limiting the extent of price inflation. Not to mention that BTC and its altcoins are deflationary currencies and are seen as that way. Because of that, any price inflation that occurs will likely be negated by its deflationary aspects. A person must BELIEVE that the supply of a currency has been abnormally expanded, for that currency to collapse. I say such a scenario only occurs if we actually allow BTC and altcoins to be printed like dollars. The existence of altcoins does not create this belief in the people.

And keep in mind that it´s good for the market to have alternatives. There is no one size fits all solution to everything. The market has niches. Not to mention that we need proper backups in case BTC gets hacked. It serves nobody if there´s no proper coin after BTC that can take up the scepter.