144 sats \ 8 replies \ @grayruby 13 Jul 2023 \ on: Opinion: Why BTC can't become the reserve currency bitcoin
Firstly, Bitcoin is technically not deflationary. It's supply issuance is disinflationary as it drops programmatically with every halving. The net result of this may be price deflation when using bitcoin as a unit of account but that doesn't make the asset deflationary.
Now, as you correctly point out, if a lot of people lose their Bitcoin and it is unrecoverable it would be deflationary if lost supply was exceeding new issuance. I don't see lost bitcoin as a huge issue in the future though, we may have another wave of it as mass adoption hits, especially if people need to rush in, but the tech and tools and knowledge we have now is far superior to the early days when maybe 10% of supply was lost. There will always be some lost coins and I suppose at some point that might exceed the new issuance (isn't block reward 1 sat 76 years from now or something). But that crossroads seems so far in the future I don't think it's worth worrying about. If bitcoin is successful and hyperbitcoinization happens and bitcoin is the world's reserve asset, all these potential problems will get sorted out along the way. It's similar to the security budget debate. Sure, it's interesting to consider but if bitcoin is important to the world, it sorts itself out (maybe not in the way we like but it does).
As for the mortgage example you bring up. It's a fair one. Fiat is great at extinguishing debt over time via inflation, thus incentivizing more debt issuance which spurs economic activity, and that can be great in the short run but it's a trade off as it is disastrous in the long run. Jeff Booth has articulated this argument much better than I ever could why the deflationary forces of tech will require a non inflationary currency to offset them. I don't know if I totally agree with all his arguments but they are worth consideration and I also think you might be overthinking it from a fiat world view. If Bitcoin is the world's reserve asset, thinking about the value of a house over 30 years in fiat terms and Bitcoin value increase in fiat terms is the wrong way to look at it. Bitcoin would be much less volatile at that point, as the unit of account the only factors that should affect it's value would be issuance, participants in the network (population growth), and productivity, Who knows but if productivity grows at 2% and population grows at 2% and issuance is very little, maybe the cost of the house in bitcoin terms doesn't differ much over 30 years. Also you will be earning in bitcoin over that time. It's all hard to fathom when we live in this fiat paradigm. I think these are fair questions and maybe ultimately we do need a more elastic money with bitcoin playing the role of gold as a forcing function to keep people from abusing the elasticity.
It's a good thought experiment but again, if bitcoin succeeds, it likely sorts itself out.
After the halvings are over, 0 BTC is mined and the supply can only go down, making it deflationary.
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At what rate. I mean if we don't know how to not lose our bitcoin in 2140 we have bigger problems and definitely the AI singularity has all our bitcoin anyways. But sure there will always will be some lost sats. I expect much to happen between now and 2140 and don't care to speculate on the state of the world or the global economy at that time.
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Right, but I like to theorize.
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The questions you’re asking just seem responsible. In comparison, @grayruby seems like they like to take risks and gamble with money
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Oh yeah. I am such a gambler. I am practically a shitcoin degen trader I take so many risks. What are you going on about?
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It does seem that way.
But that crossroads seems so far in the future I don't think it's worth worrying about. If bitcoin is successful and hyperbitcoinization happens and bitcoin is the world's reserve asset, all these potential problems will get sorted out along the way. It's similar to the security budget debate. Sure, it's interesting to consider but if bitcoin is important to the world, it sorts itself out (maybe not in the way we like but it does).
We don’t need to consider these questions. If we believe hard enough, we’ll all be rich!
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Clearly you have a reading comprehension problem if that's what you extract from that statement. I made no assertion to the effect of "If we believe hard enough, we'll all be rich", I didn't mention wealth generation at all. I simply stated "if" bitcoin has risen to that level of adoption and importance to the world problems will be solved as they arise. I also said "it is interesting to consider" which you interpreted as "we don't need to consider these questions".
If you want to spend an inordinate amount of time pondering the potential flaws of hyperbitcoinization 50-100 and so on years from now. Feel free. I would prefer to focus on supporting the bitcoin ecosystem and helping educate non bitcoiners.
In future, I am happy to clarify what I meant or debate something I said without the implication I am just a gambler or having intentionality of my words assigned to them by you.
Appreciated.
GR
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Well put! You’ve also exemplified why I love bitcoin and this community (and stacker.news), the ability to discuss weighty issues without the toxicity of the bird app when someone wants to discuss the finer points of a new economic paradigm.
I agree we figure it out. I think there will always be multiple currencies. I can’t see a way around bitcoin NOT being the place to park wealth, it’s absolutely perfect in that aspect. I just have a stinging concern about how my neighbor can increase his net worth by ending me (making my bitcoin forever inaccessible).
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