Post
Topic
Board Speculation
Re: "A currency that increases in value is a terrible thing"
by
Zapffe
on 24/03/2014, 13:49:47 UTC
You're stuck in the mode of
Don't make assumptions. Instead try reading the WORDS in your screen. I specifically discuss bitcoin as a currency here. So I ask you, specifically: Why would you be upset that your purchasing power keeps increasing (assume for the sake of discussion that it does)?


It's because price stability is THE quality aspect of every currency. Low quality currencies are those of high volatility.
The reason is simple, you can't use low quality currencies to do business. When your company gets billed X amount of bitcoins, but you have a 3 weeks to pay that bill, then it's a lottery if that bill increases in value or decreases. You can't run a business where most of the liquid asset prognosis are based on a lottery.

Currency stability is created by complex calculations, based on the relation of current available resources and money in circulation. This calculation will decide if it's necessary to add or remove money from the circulation, so available resources and circulating money is in constant balance. The better the balance is kept, the higher is the currencies quality and more stable the prices.
Bitcoin has a fixed coin supply, without any consideration given to available resources. Bitcoin can never be a quality currency because it just lacks the necessary complexity to keep the balance. If anyone wants to do business with bitcoin, then it's only possible through services like Bitpay, who offer fiat stability to support bitcoin.
There is a chance that we will see a new open sourced monetary system in the future, that could handle all the necessary complexities to create an real quality transparent currency. I certainly hope we do. But right now, bitcoin seems like a quality currency only to those, who have learned about finance from youtube videos.