Quote from: deisik on June 28, 2020, 03:08:43 PM

I went and checked that thread

To sum it up, Bitcoin could only destroy fiat in "your own imagination".

That’s true. The described scenario is a thought experiment that can unlikely occur in practice, as it is based on a number of unrealistic assumptions. Bitcoin will unlikely go this far to compete with national currencies. I needed a model that neglected all other Bitcoin’s flaws and assumed that Bitcoin is equally liquid to a national currency to show that the scarce supply alone was reason enough not to try to adopt such an asset as money.

Quote from: deisik on June 28, 2020, 03:08:43 PM

You basically assume that the fiat currency would depreciate due to increases in money velocity, but how can it increase if people won't be spending their bitcoins? In other words, you set up mutually exclusive initial conditions, i.e. explicitly asserting that people will hoard bitcoins and implicitly assuming that they are going to spend them. Then you proceed to draw an impossible conclusion, which is Bitcoin destroying fiat. However, in that case you wouldn't even need Bitcoin as any fiat should quickly deteriorate on its own for just being inflationary. You see, there are huge holes in your reasoning

No, you just didn’t get it right. I did’t not refer to the overall “money velocity.” We have two separate monetary supplies: fiat and BTC, each with its own metrics. Currencies are exchanged at a market rate (there is no legal tender law setting a hard ratio.) Under such conditions, the demand for the fiat currency will tend to the spending side, while the demand for BTC will tend to the saving side. This disproportion will lead to the increase in velocity of fiat’s circulation, which will start a hyperinflation feedback loop ultimately leading to the extermination of the fiat currency.

I can’t say for sure what will happen to the velocity of Bitcoin meanwhile. It would be reasonable to say that it should decrease, as BTC tends to be hoarded, but spending cannot be cut to zero. As the hyperinflating fiat currency will lose the ability to satisfy the transactional demand, more and more Bitcoins will be transacted. We can assume that Bitcoin’s velocity may be low initially, but then will slowly increase until BTC completely substitutes the fiat currency. This depends on multiple conditions (mostly, the behavior of the aggregate demand), so I don’t find it safe to make any strict presumptions, which, anyway, are unnecessary.

Quote from: deisik on June 28, 2020, 03:08:43 PM

It's utterly ironic that you yourself appeal to "good old" Gresham’s Law in your first post in exactly the same sense I used it here. How come?

Ironic is a relevant word here. I was aware of the erroneous application of Gresham’s law to cryptocurrencies within the community, so I left a little sarcastic reference. It shouldn’t be taken seriously. I also stated that it wouldn't work in that situation, just didn't want to delve deeper and extend an already long post.