Quote from: teukon on December 11, 2013, 11:42:47 AM

Quote from: temp1029 on December 10, 2013, 02:54:42 AM

I am not concerned with an individual's loss of currecny, but the loss to the system as a whole and over time.

Here's your problem. You concern yourself with one side of an equation while dismissing the other side.

The reward of monetary deflation is neatly countered by the risk of coin loss. This is a truer stability, the stability of the average purchasing power of a position in Bitcoin.

"Bitcoin hoarder greedily increases holding as others lose keys. Loses key."

But wouldn't the purchasing power of Bitcoins be increased by the loss of some Bitcoins (i.e. deflation)? Since Bitcoin is designed to be deflationary, even if no-one ever loses a single coin, then loss of every coin increases that deflationary bias.

Again, I don't seek to find a perfect equilibrium, as I'm fairly certain that isn't possible, but instead to offset the deflationary effect of lost Bitcoins. For me, the best way to do this seems to be via predictable inflation.

I see three scenarios:
1) Fewer Bitcoins are lost than are produced through inflation, so the newly created currency drives prices up at a rate people can account for, since they know the maximum it could be.
2) The amount of new currency produced is equal to the amount lost then no inflationary or deflationary effects ensue directly (for me this would be the ideal), people who accounted for inflation come out on top since the currency they have has retained its value.
3) More coins are lost than are produced via inflation, prices are driven down, people who counted on inflation are even better off than they would be in either of the two scenarios.

In scenarios 2 and 3, the spending of the "extra currency" (as people now have greater purchasing power than they expected) would create inflation, as pent up demand (from the purchases forgone to accont for inflation) is released. Additionally, for number 3, this would also serve to offset the deflationary effects of the additional lost coins.