[Cryptography] Cryptocurrency Exchange without a trusted third party (Ron Garret

[Arnold Reinhold]

On Sun, 2017-01-15 at 21:49 +0100, Dominik Zynis wrote:
> 
> Some consider inflation created by a TTP (i.e., a central bank) a
> form of theft.


The implication is that BitCoin, unlike fiat currency, is immune from inflation. That is only true if you ignore the risk of deflation, which is just inflation with a negative sign in the exponent. There is a cap on the amount of BitCoin that can be generated (21,000,000 vs. ~16,000,000 now in circulation), so were BitCoin to become much more popular, the value of each BitCoin would increase relative other measures of value, such as market baskets of fiat currencies, consumer goods, or stocks. If you consider BitCoin a currency, that constitutes deflation.

Inflation of a currency takes from holders of assets denominated in that currency; deflation takes from people who owe debts denominated in that currency.  Economies depend on the ability to borrow money long term and make other arrangements for future payments, such as employment contracts. Unexpected inflation or deflation could be considered theft from the losing party. Neither the debtor nor the creditor is more worthy of protection. 

Would you take out a mortgage with payments denominated in BitCoin? Yes, there are adjustable rate mortgages, but they rely on some index created by a trusted third party. If you hired someone with a salary in BitCoin, how happy would they be when you lowered their pay check periodically to account for deflation? (No one complains about cost-of-iving raises, not is their absence as galling as a periodic pay cut.)

Arnold Reinhold