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by kragen
2817 days ago
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Yes, if you measure inflation by the increase in the amount of money in existence, the first block mined represented an infinite amount of inflation, the second block mined created 100% inflation over 10 minutes, the third block created 50% inflation, and so on. But, if the system functions as designed, this rate asymptotes to zero fairly quickly. You are of course correct that the system may not function as designed. However, it is more common to measure inflation by the increase in nominal prices of goods, as I did above with gold. And, by this measure, Bitcoin is deflating. It's hard to measure the deflation rate with precision because it's so volatile, but at the beginning of 2011, it was worth 10ยข, and now it's US$6600. It's oscillated wildly around the exponential trend line by about a factor of 3 on each side, but the trend line itself is a deflation by about 75% per year (or of 300% per year, if you look at deflation that way.) Presumably this won't continue forever, as it's more appropriate to tulip bulbs than to a usable currency, but it is certainly quite far from inflation in the usual sense. |
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The vast majority of the supply is owned by a very small oligarch.
The chances of Bitcoin becoming obsolete or failing catastrphically due to a glitch or bug in the protocol software - like what just happened a few days ago (luckily by someone who desired to fix it, if the bug was found by a malicious actor they would have destroyed the entire Bitcoin ecosystem), the cryptocoin software can not be guaranteed as a safe store of value.
Anyone who "invested" in Bitcoin at the start of this year has lost upwards of 50%, so that would qualify as inflation in your terms. Other cryptocoins have seen losses exceeding 80%-90%.
The way cryptocoins work is by early users dumping their supply onto new users to exit and extract real value from the suckers who then become bag holders, the new users hope to do the same but are at a severe disadvantage to early users who own the vast majority of the supply.