> Only in the presence of a Reserve Bank, which Bitcoin doesn't have. There's no ability for any authority to increase the number of Bitcoins possible, which means it's permanently deflationary.
Thank god there is no reserve bank. Markets do a far better job than individual people nearly every time.
Eventually, deflation in bitcoin will be very low and will be only down to people losing their private keys. In practice, I think this will become less common as people realize the importance of having redundant and secure storage of keys, perhaps involving several distinct parties.
If the human population begins to shrink, which is expected after a while based on observations from developed economies of reduced birth rates, then eventually bitcoin may have less demand and therefore lose purchasing power. Before then, we will see demand which far outpaces the rate of supply.
> Which is why ICOs are so popular. Why pay tribute to the original Bitcoin miners when you can just become you're own, recognizing that the only thing holding up the value is irrational in the first place (doesn't mean it's not a real way to get people to part with their money).
Yes, people want to get rich, and ICOs will continue to be a think for as long as people get away with it. I think many people have begun to realize the nature of them though, because they've had their gambles and been left holding useless bags. Some get rich, some lose money. You can't prevent greed, nor stupidity. Some people don't learn after repeated failure, as we see with gambling addicts all over. Those are fine, because they're throwing away their money at government sanctioned businesses. (Unlicensed gambling not OK of course!)
The desire to get rich is not the only usecase for bitcoin though - it is just a particularly prevalent attitude towards the currency because most people do not understand austrian economics and its practical use as a medium to enable free trade in a way that existing currencies do not.
Bitcoin also enables an economy of microtransactions which were previously not possible. People will be able to pay per article they read, per video they watch, in real time.
> Deflationary currency means the currency is worth more against everything in the economy with each passing day. So not only will I not buy a computer with it, I will also not put it in a bank (why risk it?), not buy stocks, bonds, or even really loan it to anyone. In fact the right thing to do (if there was anything pinning it's value) would be to first spend all my non-Bitcoin money on necessities, and acquire and sit on, in offline wallets, as much Bitcoin as possible. But Bitcoin is a currency - to even be useful people have to actually use it.
People will use Bitcoin when they want goods or services from people who accept it. They'll also hodl it, because most of them have a low time preference. Also, given they hold both bitcoin and fiat, they will typically spend the fiat before digging into their Bitcoin. This is Gresham's Law - bitcoin is the better money.
As I've mentioned. People will still pay for goods and services which are useful and valuable to them. They will be more reluctant to spend if deflation is high. If deflation is low, they will probably not pay much attention similar to how people generally pay little attention to low inflation.
Bitcoin is currently volatile and moving between inflation and deflation. It is inflationary when demand is not meeting the supply, which is still increasing. It is deflationary when demand exceeds the rate of supply, as was the case throughout 2017. We will see many more such cycles, because the demand for economic freedom exists, and other currencies are not able to provide a solution to it.
> So why don't people do this? For the aforementioned reasons - no one can actually require me to hold Bitcoin to pay taxes or extinguish debts. So just sitting on it is foolish since there's no real way to predict when the irrational market will end - except over the long term, I do know the price must crash since every Bitcoin market participant must eventually cash-out to pay taxes and electricity bills and what have you. So in fact there's nothing holding it up. The only actual reason anyone has to hold Bitcoins is when they get ramsomware'd.
It is that nobody is requiring you to hold bitcoin which is its main selling point. It is voluntary. There is a high demand for voluntary trade, and it is not being provided by governments. This might be mainly black markets or grey markets right now, but those terms are whatever the government wants to label them, which changes all the time. This can be seen for example in Toronto, where not long ago, the narrative was "drugs are bad." Now it's "cannabis good!" (As long as you buy it from a licensed seller so we can collect some of the money, and if you dare try to sell it without a license, we'll send in the guns).
People are fed up of being told what they can and can't do. If they want drugs, they'll get drugs, and they'll acquire the currency the drug sellers take if they have to. The same thing applies to many markets which the government does not allow because of stupid laws, or because they hold the monopoly which they can only maintain with the use of force.