[evilos]

The pool of valuable stuff and services grows over time, in general. There is a fixed amount of bitcoin to represent the value of all valuable things. Therefore in a world with only bitcoin, a bitcoin grows in value over time and is more like an investment than currency. This is like if interest rates were always stupidly high, because why lend out your precious automatically appreciating asset when it makes you money just by sitting there? If people struggle to get credit (by borrowing) it becomes super hard to buy cars, houses, educations, etc. Imagine paying a mortgage but with credit card rates. It would be very bad.

[ahnick]

For the same reason that people don't just leave all their money tied up in ETFs or indexed mutual funds. If you really want or really need something, then you are willing to give up on the opportunity cost of your asset appreciating.

In a pure BTC environment, the borrower is employed and being paid a salary in BTC. Loans would work just like in an inflationary environment, except now the overall deflation rate of BTC would be taken into account during loan origination.

Bitcoin is not a good asset to do loans in right now as it has high volatility, but as ownership of Bitcoin becomes more and more dispersed, then the volatility will reduce. Once the volatility of the asset is stabilized, then the depreciation rate could be factored into loans.

https://bitcoin.stackexchange.com/questions/1899/if-the-econ...