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Zack Morris's avatar

Thanks Ram. I wouldn't even say Bitcoin is deflationary - it's actually inflationary until the year 2140, when inflation becomes 0. In practice, if you assume some coins get lost over time beyond 2140, then it will be deflationary.

Even though Bitcoin itself is inflationary until 2140, and then neutral, inflation or deflation (i.e. change in the aggregate price level) can still happen depending on whether the economy is growing or shrinking.

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Tobias Mark Jensen's avatar

A good read, and I think that you raised some valid points.

I would argue however, that Bitcoin's attribute of being scare (that only 21 million BTC can ever exist) IS a basic Bitcoin thesis although not explicitly mentioned in the Bitcoin white paper. Bitcoin have the same properties that makes gold valuable, 1) scarcity, 2) takes time and large amounts of ressources to mine. If there were no limited cap supply on BTC, they would not be valuable, since they would not be scare. I have to admit that I am not super strong in economic theory, but as far as I understand, the the higher demand, and the lower the supply = more valuable.

Cheers!

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