| This is an elementary mistake. Bitcoins can be subdivided almost indefinitely. OK, it is fine for a random person to make a serious argument that a professional economist is making a mistake - if you do that, I suggest you back it up. But before someone accuses a professional of an "elementary mistake", that someone ought to do some substantial research into the field (I'm not a professional but I did do my undergraduate work in it). The problem with deflation is NOT that bitcoins can't be subdivided. NOT what you're saying. Got it? The problem with a deflating currency is that when a currency holder has a strong belief that their currency will be worth more tomorrow than today, they have a strong incentive to hold that currency rather than spend it. This only sounds good. In reality, it, deflation, is severe drag on demand in the economy - we saw this in 1930's America. Money has two uses - medium of exchange and store-of-value. If bitcoins err too much on the store of value side, this interferes with their medium of exchange function. A functioning economy requires its currency to circulate constantly as Goods and labor circulate constant. Interrupt the circulation of currency and real production processes get interrupted - a bad thing. Of course, bitcoins are terrible as long term store of value also for the #5 reason in the link - when people are buying and holding bitcoin 'cause they expect them to increase in value (store of value "component") and at some point bitcoins go down, their value will be hit hard and permanently because nothing backs them other than people's optimism (even fiat currency is back by a state). IE, if confidence is lost in Bitcoins, someone could issuing Bitcoin2.0's and then how to you decide what is real? (Certainly following the rules defines current bitcoins but people follow these rules because they have confidence in the entire setup. If an event which caused people to lose their bitcoin confidence, like bitcoins suddenly losing value, then people willingness to accept the particular bitcoins will decline concomitantly). |