Quote from: Sepp on March 28, 2011, 05:56:01 PM

Deflationary, inflationary, both are undesirable in a currency.

What is really best in a currency is predictability. The undesirable characteristics of deflation or inflation have to do with their unpredictable nature, and their magnitude. Either condition, in moderation, isn't really a problem. Bitcoin will be very stable in the future, because it's monetary base is entirely predictable out to decades. While the economy that it represents isn't nearly as stable as the monetary base, once the economy grows to something comparable to Paypal's, the voltility of the spot price will dampen on it's own. Even modern fiat currencies are unstable compared to one another, and float constantly on foreign currency exchanges. This is not really a problem. Bitcoin is actually inflating the monetary base at a rapid rate, running just under 50% APR right now, but will drop over the next two years to about 6.25% APR just after the drop in the block reward around Jan 2013. The rising value of a bitcoin over the past several months is a reflection of the rapid growth of the economy. (i.e. more people are getting into Bitcoin, and want a starting sum) We can see the effects of the changing economic size because the economy is still very small, but as the tech matures, which I predict will occur between 2013 and 2015, the economic growth rate will start to experience deminishing rates of ongoing growth. And even if it doesn't, the effects of the change in economic size will be dampened by it's much greater size. All things considered, the trade value of a bitcoin, as expressed in another currency or gold, silver, whatever; will settle down to something much more akin to the relative trade values of fiat currencies on the forex.