Quote from: Dai on March 23, 2011, 12:16:18 AM

Think of bitcoin as a cake you keep splitting the cake till you end up with crumbs but, at the same time more and more people are taking a piece or crumbs as they come into the system so your crumbs have to grow in value to be able to buy what you bought before if your crumbs don't gain value and prices remain the same your up the creek without a paddle.

You're on the right track, but you keep getting derailed at important points.

Yes, the size of the crumbs will get smaller. But crumbs are a poor analogy, because you need a fixed number of crumbs to be satisfied. As Bitcoins become more and more in demand, a smaller fraction of a bitcoin will go further.

You remind me of when I was in grade 5. Canada was using the Imperial system at the time, and in the process of converting to Metric. My teacher was trying to get me to understand the basics - 10 decimetres to a metre, 10 centimetres to a decimetre, 10 millimetres to a centimetre. "But how much is that in INCHES?" I kept asking. Then it dawned on me - it doesn't matter. It's an independent system, and does not need other systems to be understood.

You have to stop thinking in terms of the existing economic models. Set aside for a moment everything you know about economics, and look at Bitcoin with a fresh eye. Bitcoin flips the whole economic model around. Instead of more and more money being created, and each dollar becoming less and less valuable, the amount of money will be fixed and each Bitcoin will become more and more valuable. It's a deflationary model, instead of an inflationary model.

To be honest, I think you represent the biggest challenge Bitcoin will face gaining general acceptance. I don't mean you personally, of course, being a challenge, I mean that you are representative of a lot of people. Many people will have the same reaction you do. Switching your thinking from an inflationary model to a deflationary one, and realizing "yes, the value of bitcoins will go down, your salary will decrease, but that's a good thing" is damned hard. I'm not entirely convinced of it myself, but I'm willing to explore this crazy system