Bitcoin may not inflate vertically, but thanks to artificial intelligence the inflation might happen horizontally
Yes, the increasing complexity for the calculation of new crypto currency units (may that be Bitcoin or others) is limited and will stay limited. At least as long the technological progress is slower than the increase of complexity of the calculations. And that remains just a theoretic possibility that this might change.
A classic inflation - defined as the creation of over-proportionally more currency units than are needed to keep the prices stable - is therefore impossible.
What is not impossible on the other hand is the forking of digital currencies, as we have seen it with Bitcoin. Both new Bitcoin currencies are still there and they have a value of more than zero. If the original Bitcoin still existed, its value would be the sum of the two new ones. Which means that we have just recently experienced a phenomenon that I would call horizontal inflation.
Today as it looks like this horizontal inflation may not occur too often since it is not really necessary and also too costly. But there is no guarantee that this will be so in the future.
Especially the fact that both Bitcoins are still having a value indicates the profitability of more forkings. Another new Bitcoin currency does not necessarily need much value, it's enough to cover the forking costs plus profit margin plus the currency's administration for enough time to sell enough units to refinance the forking . It is undoubtedly possible to meet all those requirements.
In terms of necessity it may currently look like as if Bitcoin's adaption with a larger stack may be sufficient for the upcoming time. But what if the crypoto currency market goes on winning new users? And what if those users are high volume AIs? On todays stock markets the high frequency trading computers are already dominating everything with a volume of millions of transactions per seconds. With improved technology this will only increase. The question is: What will Bitcoin do, when this point has been reached?
The current number of transaction still is quite limited and that is the reason, why it will have to change its programming again and possibly fork once more.
If you now combine the above elements
- of the possibility for forkings generally
- of marginal profits when creating a new crypto currency
- of AI systems capable of millions of transactions per second
- of the necessity for future forkings
... you end up with the conclusion that at one point - since you can make a profit with it - there will be a horizontal inflation of digital currencies and that means, Bitcoin too will inflate. It's just not going to be in the classic way. The result on the other hand will be the same as always: The stored value in crypto currencies will thin out over time.
So, what do you think? Could horizontal inflation be a long-term problem for crypto-currencies as value storage? Let me know in the comments and don't forget to vote up and resteem!!!
Horizontal inflation seems half right but not totally apples to apples because each branch brings new innovations. Bitcoin Cash offers a different block size that might change merchant adoption in a way inflating Bitcoin might not.
I think your argument boils down to the fact that anyone can create a new (Bit)coin or fork the 'core' Bitcoin chain, leading to some kind of dilution.
Well, I think this is true but there are reasons that this will not happen a million times, just like not everyone starts a bakery (although theoretically possible. In a nutshell, I think market forces would prevent this. See a more thorough description of my thoughts on this point here: http://www.devtome.com/doku.php?id=altcoins_-_nothing_to_worry_about
The problem I see is that AIs could do it on their own respectively force it with their sheer transaction power. Using your bakery example my thoughts are: If creating a whole new bakery costs less than the price of one bread, then there will be an infinite number of bakeries, which produce one bread and sell that. If you consider the power of AIs and todays high frequency trading, this might be the consequence for crypto currencies as well.
But will there be an infinity number of humans using these infinite number of coins then (AI-systems in the end serve a master, a human)? By analogy, there isn't an infinite number of Facebooks either. The free market will sort this out just fine.
I'm still new to cryptocurrency, so forgive me if this is a gumby thing to ask, but is forking positive or negative for the currency as a whole? From what I've heard cryptos like NEO have come along as 'superior' because forking is less likely to occur. It is hard for me to tell at the moment what is hype, what is speculation, and what is genuinely true with regards to what will keep cryptos sustainable, so any clarification would be greatly appreciated.
Crypto currencies are new to all of us - and I am too a newby here. I guess it depends on the reason for a forking. Generally there are two options for a forking: A) because it is necessary or B) because it is profitable. There is also C) it's fun and/or possible, but in the long run that is less important.
Both (A&B) have already apllied. A) was the case in the forking of Bitcoin, since the rebels of Bitcoin Cash deemed the new stack as insufficient and other digital currencies have different features so they can be used differently (that's the market niche thing). B) was for example the creation of Steem, the platform that we are using right now, since its creators surely don't do this for altruistic reasons.
So, the tendency is to say that the forking is more positive, although the phenomenon of horizontal inflation as I described it is a negative one that could destroy cryptos, because it might destroy their value and it could become impossible for humans to keep up with AIs when doing transactions in cryptos.
I guess at the end it comes down to the question if it is possible to create a currency with a long-term stable set of qualities that is also a stable quality brand (like e.g. Swiss Francs). Then you can expect a solid long term value. In case that isn't possible, the market will eventually fracture too much and go wild that it comes down to a self-destruction.
But so far no one knows how that will end. It could be that everything goes on and in 10 years every Bitcoin will be worth 1 million. Or it could turn out that the only valuable thing that stays alive is the idea of block chains. That would mean, their development and implementation into the WWW will have cost all the value that is currently embedded in cryptos and that's around 100bn Dollar.
If I had to guess, I'd say it's 95% hype. But even if it is 99,9% hype, then the outlook of Bitcoins trading at 1 million is enough to take part with a small amount. The calculation goes:
0,1%*1million dollar in 10 years - 4000 dollar today = 6000 dollar
That would make it a very profitable investment. At the end it's all up to you.
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STOPjuhuuu thanks!!