| A 50% emission rate is incredibly high. Any linear emission rate will tend towards 0% as the number of coins in circulation gets larger and larger (assuming none are accidentally lost). Deflationary money can theoretically work, its just that instead of having the vendor adjust menu prices every year for inflation, consumers would have to discount their purchases. For instance, during the 2017 boom, I noticed friends often paid each other for dinner with Ethereum at large discounts. Obviously this isn't price efficient, and the mental calculus isn't a great user experience, but it can work. We would just live in a much more frugal society which saved a little more. We could have lower defaults as we underconsume. A credit system probably wouldn't work however as we're destroyed the concept of time value of money. Imagine a thirsty tourist in a desert might be unwilling to part with his Bitcoin for a meal, but willing to do so for a bottle of water as his instantaneous discount rate for water is far higher at that point in time and state. Whether a coin is inflationary or deflationary is a little more nuanced than simple changes in money supply, and has to do with whether these changes are unanticipated and how users form inflation expectations. Imagine if Satoshi's account suddenly awoke and moved, only to burn those coins in another address. There would be momentary hysteria and selloffs, before inflation expectations readjusted back to before. You'll see that price levels are relatively indeterminate without strong commitments to target inflation rates. In that sense a bank may be better than a non-sovereign currency at maintaining price stability. |
This is spot on and is the main problem. This destroys all lending, which prevents various forms of capital investment - the cornerstone of economic growth.
Like it or not, inflation is a key component to any currency. ...and as you said, increasing the money supply doesn't even guarentee inflation - but contracting it absolutely spells deflation - which is death.
Ideally a "better" cryptocurrency would detect the velocity of money within its own blockchain, and calculate the appropriate amount of inflation (or even deflation) to keep the scarcity of currency stable.
If you imagine that a currency is like blood in a body, then as the body grows (or shrinks), the blood volume must adjust accordingly. Fundamentally, the function of currency is not to save - it is to spend.