[espadrine]

Yanis was talking of lending.

Lending in Bitcoin can happen in two ways: the first is through imaginary Bitcoin (“borrowed from future installments”) in a layer 2, which is what he was describing, although I agree that, unless the government mandates accepting money from that layer, it is hard to make it systemically used.

The second one is to only lend coins that you have. In a deflationary monetary policy, lending is strongly disincentivized, as it would need to beat both the rate you would gain from the value of your coins increasing, and the default risk.

Much of monetary policy is about finding a balance where financial institutions will be incentivized to lend despite the risk (which is already a hard sell even under inflation!) without nudging prices.

It is plausible that a Bitcoin economy in stablestate (once coinbase transactions are no longer) would have very little lending. Is it outside of the realm of possibilities that, in such a world, innovation may decrease, and legacy becomes a more relevant factor for wealth?

[tphyahoo2]

I think a bitcoin economy in stablestate would have about the same amount of lending as a gold economy under the gold standard. There is enough history during gold standard periods to have some idea how this would be.

https://en.wikipedia.org/wiki/Gold_standard

These times weren't perfect, but no time ever is.

In short there would be less lending than under fiat with MMT, but certainly not zero lending. On the plus side, much more stability, and no hyperinflations, ever.

Seems worth it to me.

[espadrine]

> [Bitcoin will have] much more stability [than fiat]

Why would it reach more stability?

Historically, cryptocurrencies have been significantly more volatile, not less. Arguments were made back in 2013[0] that:

> this volatility will decrease as Bitcoin markets and the technology matures

But volatility has remained consistent over the past 10 years[1], seemingly uncorrelated to its adoption, market cap, and coin supply. In the same period, USD was an order of magnitude better[2].

[0]: https://web.archive.org/web/20130916231759/https://bitcoin.o...

[1]: https://vlab.stern.nyu.edu/volatility/VOL.BTCUSD%3AFOREX-R.G...

[2]: https://vlab.stern.nyu.edu/volatility/VOL.DXY%3AFOREX-R.GARC...