El Salvador makes bitcoin legal tender

[El_Machinae]

Oh geez, yes. If it was used as a currency it would be deflationary AF. Or it would be until it drove out all incentive to update the blockchain and then a single actor could do a forcehack.

 

[warpus]

@warpus

First, deflation is a general fall of prices (or conversely, a general appreciation of the value of money in terms of goods and services). Whether there is deflation or inflation and their size depend amongst others on the quantity of money relative to the level of economic activity (the output of goods and services). When the quantity of money rises more quickly than output there are inflationary pressures, when it rises more slowly deflationary pressures. The quantity of bitcoin is unconnected to the level of economic activity and from I know of it it gets harder to make them and as there are more of them. Hence, should it be adopted as currency, it's probable that the quantity of money would not keep up with the size of a growing economy (this was also a big problem with gold in the 19th century). Hence it could be deflationary.

It's not so much an asset that's deflationary, it's that if it's used as money and the supply doesn't keep up with economic activity that it could be deflationary.

All of which is very academic, because the much bigger practical problem with bitcoin is that its value seesaws like crazy.

Listen, we are getting way off track here. The only reason I brought up Bitcoin's limited supply is that it's one of the many advantages it has over other cryptocurrencies El Salvador might have considered for their currency. If I did not use the proper technical term for this, then that's my fault, but it literally doesn't matter.

That's the only reason this ever came up. It doesn't make sense to pick.. oh i don't know, some random currency named after a dog let's say.. if it's designed to be mintable forever. You don't want that as your currency. I mean, you don't want it as a currency because it's named after a dog, BUT you also don't want to use it because it continues getting minted forever.

I never said that it was a good idea to pick bitcoin as a currency, I was trying to explain why it was picked out of all the potential cryptocurrencies that exist. Does that make sense? K cool

 

[Colon]

Listen, we are getting way off track here. The only reason I brought up Bitcoin's limited supply is that it's one of the many advantages it has over other cryptocurrencies El Salvador might have considered for their currency. If I did not use the proper technical term for this, then that's my fault, but it literally doesn't matter.

That's the only reason this ever came up. It doesn't make sense to pick.. oh i don't know, some random currency named after a dog let's say.. if it's designed to be mintable forever. You don't want that as your currency. I mean, you don't want it as a currency because it's named after a dog, BUT you also don't want to use it because it continues getting minted forever.

I never said that it was a good idea to pick bitcoin as a currency, I was trying to explain why it was picked out of all the potential cryptocurrencies that exist. Does that make sense? K cool

No, it doesn't make sense, for all the reasons I explained. Perhaps you should just stop talking about bitcoin and deflation.

 

[warpus]

Which part doesn't make sense to you? I am willing to try to educate you again, if you think you are capable of comprehending my post

 

[uppi]

That's the only reason this ever came up. It doesn't make sense to pick.. oh i don't know, some random currency named after a dog let's say.. if it's designed to be mintable forever. You don't want that as your currency. I mean, you don't want it as a currency because it's named after a dog, BUT you also don't want to use it because it continues getting minted forever.

I don't think so. If you really want to use it as a currency, you want it to be mintable forever. A shrinking money supply is not a good thing.

Ideally, you want there to be as much money as is necessary, not less, not much more. This is a real problem for any cryptographic attempt at a currency.

 

[warpus]

I don't think so. If you really want to use it as a currency, you want it to be mintable forever. A shrinking money supply is not a good thing.

Ideally, you want there to be as much money as is necessary, not less, not much more. This is a real problem for any cryptographic attempt at a currency.

Do you have a citation for that? I was/am under the impression that one of the main reasons the gold standard was so good was because there's a limited supply and that invites stability in an economy built up around that asset class being used to back the currency. But I am not an economist and would invite an academic look at this in the form of an article setting me straight and allowing me to educate myself further

Either way though, what other cryptocurrency could you theoretically use as your currency? Bitcoin is simply the least risk averse option right now, and that's why they went with it. The fact that there's a limited supply is really a minor reason thrown into the mix. I shouldn't even have mentioned it

 

[Hygro]

If you’re wondering how someone on this forum can even think that after all these years here, warpus has a sizeable ignore roster.

 

[EnglishEdward]

If the supply of a currency is limited, then its adoption by countries as a mandatory currency will have the effect
of benefiting the pre-existing holders of that currency at the expense of those who did not already possess it.

I can not see why BitCoin is any different from any other fixed supply currency in that respect.

As such statutory adoption confiscates wealth from the many, transferring it to BitCoin speculators.

 

[Lexicus]

one of the main reasons the gold standard was so good

[Narrator]: the gold standard was not good

 

[uppi]

Do you have a citation for that? I was/am under the impression that one of the main reasons the gold standard was so good was because there's a limited supply and that invites stability in an economy built up around that asset class being used to back the currency. But I am not an economist and would invite an academic look at this in the form of an article setting me straight and allowing me to educate myself further

Try this for example https://www.nber.org/system/files/chapters/c6739/c6739.pdf?

According to them, the gold standard provided long term stability (on a 50 year scale), but was worse when it came to short-term stability (there is no way to react to a financial crisis). And that is not even considering all the other disadvantages a gold standard has.

In any case, gold is actually a counterpoint to your argument that the money supply should be decreasing. A considerable amount of gold is mined every year and enters circulation.

Either way though, what other cryptocurrency could you theoretically use as your currency? Bitcoin is simply the least risk averse option right now, and that's why they went with it. The fact that there's a limited supply is really a minor reason thrown into the mix. I shouldn't even have mentioned it

None. As a state, you would be better off going back to some kind of gold standard than going for any cryptocurrency. Mind you, going back to the gold standard would be a bad idea, but still better.

 

[warpus]

Yeah so basically the thought process was:

"We don't have access to enough gold or silver or anything else like that.. so we're going with the only blockchain tech that makes sense at this time, i.e. bitcoin"

Which is what I've been trying to say this whole time and nothing else, but it's not always easy to articulate yourself, etc.

 

[El_Machinae]

If the supply of a currency is limited, then its adoption by countries as a mandatory currency will have the effect
of benefiting the pre-existing holders of that currency at the expense of those who did not already possess it.

I can not see why BitCoin is any different from any other fixed supply currency in that respect.

As such statutory adoption confiscates wealth from the many, transferring it to BitCoin speculators.

This explanation shouldn't be ignored by people. It's literally the dream of every gold-bug that countries are forced to 'buy them out'. Looking back in history, gold standards often had to be initiated with forceful seizure of gold against which to write currency. The gold-bugs even have the value-creation process backwards.

Also: it took all my willpower to not chain my comments in order to reply to the ignored while making it look like I was replying to someone else.

 

[Aiken_Drumn]

How low does bitcoin have to go for this to be declared an unmitigated disaster?

 

[Aiken_Drumn]

government's plan to take advantage of the abundant geothermal energy in the country to implement massive state-owned bitcoin mines

This seems incredibly dumb. Surely their country would fare a lot better if its people and industries had cheap energy?