But even if bitcoins get lost at a certain rate, they are still divisible up to 8 decimal places so they would just rise in value as they became rarer.
As long as eventually they could become divisible by more than eight decimal places then they could continue to function effectively indefinitely.
That's not the issue.
The issue is if you have a permanently deflationary currency, it puts a permanent drag on the economy. As in if the scenario was that we would not let any new houses get built after 21 million, and sometimes old houses get destroyed for whatever reason, and at the same time more people are being born, and demand for housing will rise, then the obvious path for everyone to take is simply hoard (never sell there house, whenever possible), as as long as the system exists the value will forever rise (AFTER 21 Million), thus less reason to invest, or spend, which might sound good if you are in the hoarder class, but it will lead to a situation that does not look inviting to a new user. As in the market will not be as liquid as it would be if the system matched "housing demand" with "actual housing", which would not result in a defacto gain for simply holding assets.
However, once it dawns on people that there is no reason to not build more houses(bitcoins, or other currency), people will start building them in another system that is more sustainable. As increasing the currency(housing) is not bad, as long as it does not increase at a greater rate than additions into the economy. Bitcoin fails on that count. As it promotes hoarding from the inception, which is destructive to any economy.
Anyway, I like the general bitcoin concept but I've now looked into it for the Second Time, and feel it's flawed from inception, Maybe someone will take the code, and make another version that incorporates a rational mechanism for coin creation. As the current mechanism is less than ideal.
Of Course, that's all my opinion, just like it's everyones opinion on this subject.
But all you have to evaluate is the consequences of a currency that will become more rare all the time. It's seems obvious to me, but hazek will disagree, I'm sure, and not offer a reason why a currency that always dwindles in availability is good.
Or if this helps, imagine a currency backed by Gold, but the difference is in this alternate world, no new gold could ever be mined. What would the consequences of that be? They aren't good. Hoarding is the obvious consequence, and hoarding has a negative impact on investment activity, which has an negative effect on all those participating in the system, except for the hoarders.
Anyway, I'm done, but I think the system is broken, in a meaningful way, that will limit bitcoins from being anything more than a sideshow in the world of currencies. Maybe someone will take the source and tweak the method of coin introduction, to account for such things, but I can't see investing real money, and time, into what is designed to suck all the money in one direction.
If you could hold a dollar, and know 100% it would be worth(more purchasing power) more every year, would you be more likely or less likely to invest that dollar into a productive enterprise? The answer is for most less likely, as if the dollar just maintained value, then you want to chase profits to some degree, and under the current system, which is way bent to the inflationary side, you have to invest just to maintain your purchasing power. The idealized goal of a currency is to simply maintain purchasing power all things being equal over a period of time, then there is no extreme impetus to hoard, nor forced investment, which leads to bubbles and such.
I just see the 21 million limit as a bad idea,for the reasons above. And the only reason I'd participate in bitcoins is if I thought it could replace the current flawed system. As is it's trading one gross flaw for another.
Bitcoins 2.0 ?
