Oddbean

I’m not questioning the philosophy of Bitcoin…I’m asking a math question (more or less). How does Bitcoin not inflate when used as a medium of exchange (beyond there will never be more than 21M tokens…)?

Because there is only so much Pure Human Empathy to be exchanged and Satoshi's can cope with that. However, if the number of decimal places need increasing, beyond Satoshi's to Finney's or beyond, then that's an easy fix within Bitcoin at it's Core

For reference Andreas Antonopoulos has covered this, it's worth watching his stuff. With the understanding that a lot of his output was growing with Bitcoin and in his words, paraphrasing, 'in a kids playground in the wild west. Which is apt because back in 2013 he was speaking to chairs and tumbleweeds.

Thanks for the replies. I’m not understanding or otherwise connecting the dots on this idea of “pure human empathy” as it pertains to price and value; or even barter. Perhaps it’s becasue empathy is something I have to work hard at…but I don’t make many or any emotional purchases nor adjust price per se based upon the way I feel towards a customer… So what is meant by and what evidence is there if “pure human empathy” as it pertains to price and value or a product or service (and therefore medium of exchange)?

I have done a few lengthy notes on this, they are in numbered title order. So far I have done 7, from 00 to 06. I will continue to expand upon this, in order. So this one I feel will make you start to see the meaning. nostr:nevent1qqsq0vqxamw7wy8v4ahrkwnrlmm7lfamrkgrmhpmhrupvy7usaa37xcpz4mhxue69uhhyetvv9ujumrwv96jumn9wshsygpr8cgwrj8fajsyrqa7s6mdxynx4l7uxazhqyzr5fey5wsaghpmhqpsgqqqqqqsqjfyn2

I have not used them, I will have to have a look, thanks for the heads-up. Here's a table that explains the Empathy breakdown of a Barter exchange. https://image.nostr.build/8269ab8951456dfafc2cb60d6a583c0ab612711f791e80473bd4ee4613757426.jpgb I've just posted another note, 07 Title: Barter: Empathy and the Magic Wrapping that Money Cannot Buy. It's got a pretty good analogy in there, if I say so myself 😃 and you may find it interesting.

You have a key fundamental flaw in your reasoning. If Bitcoin goes from $100k to $200k the price of the apple in sats will be cut in half. Unless the seller of the apple leaves the price of his apple the same in sats. However, because prices fall to the marginal cost of production, that apple seller will rapidly be starved out of the market by all other apple sellers who adjusted their prices downward accordingly. I could price my house at 8 Bitcoin forever, but no one would buy my house when the price of Bitcoin went up. They’d find a different home seller that repriced their home accordingly. Bottom line, priced in sats, the cost of items go down because we become better at producing them and there is a finite supply (21 million) of the money that everything will be priced in.

My suspicion is that most don’t understand negative interest rates: A Porsche costs 2 #BTC this year, will cost 1 #BTC next year, and 0.5 #BTC the following year. So logically I would just wait 2 years buy a newer Porsche and have 1.5 #BTC left over. Of course it might be 0.25 #BTC the following year so I might just wait. So if I borrow 1 #BTC at -50% interest rate I could wait 2 years but the Porsche for 0.5 #BTC pay the bank back 0.25 #BTC , and put 0.25 #BTC in my pocket. #BTC #HODL #bitcoinstr

This is why I think lending will largely go away, and most everything will be equity investing. I know you used an extreme number to illustrate your point, but the negative rate would trend toward the inverse of productivity minus storage costs. Something like -2 or 3%. Just give me the equity upside to part with my sats.

I disagree. Because (modern) equity requires governance control. Most modern “entrepreneurs” are cucked by their equity investors. Public and private and venture equity…they all control the entrepreneur. A good entrepreneur worth a damn won’t part with the equity. Which means most entrepreneurs will seek debt funding (priority claims) vs. giving up control and upside of their ventures.

Equity and debt instruments are going to look completely different on a fixed money supply. Almost all projects were financed with equity in the past. It was this fact that was the impetus for the formation of the federal reserve. To force people to fund with debt instead. The old system of capital investment will return when the money can’t be printed into existence.

I don’t think that is accurate. A lot of rich people who had gold reserves collateralized their gold for bank loans which were in turn invested in “guaranteed” priority debt claims on projects … which also included yields on projects. Debt (priority) claims are very attractive for numerous reason on a sound money standard.

It is exciting times we live in because only time will tell how this really pans out. #BTC is a much harder asset than gold. Keep in mind they’re digging 54,000,000 ounces of gold / year out of the Earth and if the price of gold goes up, that number goes up, but it doesn’t matter how high the price of bitcoin goes #BTC will only be 450 tokens / day. And that number will be reduced by two in about 3 1/2 years. #HODL #BTC #bitcoinstr

But that wasn’t the general trend. Society was moving to equity investments as capital. Also, more importantly, that bank was fractionally reserving their gold deposits. They created some portion of the loan out of thin air. There eventually will be no dollars to create out of thin air.

This is essentially what happened (and happens) in deflationary environments. Example being WW1. People were hoarding cash because it would buy more later. Of course back then the USD was backed by Gold.

If you want a deeper dive into this question, check out - Murray Rothbard, [The Mystery of Banking](https://mises.org/library/book/mystery-banking); or - Ludwig von Mises, [The Theory of Money and Credit](https://mises.org/library/book/theory-money-and-credit)

Think of it this way: every new dollar printed makes existing dollars less valuable (inflation), so eventually it takes more dollars to buy the same stuff as before (increased prices). Another major aspect of inflation is artificial credit expansion by the fractional reserve banking system--which increases massively when the Fed lowers interest rate targets. There's a great video series by Mike Maloney on YouTube called The Hidden Secrets of Money (just skip the one on Hedera hashgraph). 🤙

Re: “eventually it takes more dollars to buy the same stuff as before” That is the heart of my question and OP… If price in dollars goes up; why wouldn’t I as a business owner just also raise the number of Sats required to purchase said “Apple” (thing)? (As I continued to type I think I unlocked the answer) A business owner could do this and some might, but savvy customers will choose other suppliers because the two currencies (fiat and BTC) are moving counter to one another. Therefore if the store owner raises sats required alongside fiat price; they are doing themselves a disservice as they will ultimately lose market share, or the customer will just pay in fiat while (potentially) getting the Apple for free in fiat terms becasue BTC price has increased asymmetrically to the decline of fiat value