Why can’t Bit-Coin work?

Question

The concept of Bit-Coin, as I understand it, is to provide a fixed number of monetary units. The purpose is to make it impossible to create more and thereby prevent inflation. 
Since the economy is not fixed, that scheme would backfire. 
To gain more assets you must produce more products or services to exchange and as you do that, and make those exchanges you create more value, but more bit-coin will be created to represent those new valuable assets. That would cause deflation. Each coin would become more valuable as time passes because the coins would be few and the amount of product would become so great each coin could buy a lot of product. Population increases would also become a problem over time.
Eventually no one would have enough coin to pay for what you produce.
A system is needed where the value of money does not change relative to the value of the total of real assets.  At this point in time, no such system I know of exists.

Bad Things Happen · Accepted Answer

You are absolutely correct if bitcoins were finite.  This is the same type of argument against the Gold Standard. There is a finite amount of Gold so as we grow the amount of products and services the value of Gold necessarily has to rise.  That is why the currency was pegged to Gold instead of Gold being the currency.  The potential to increase or decrease the amount of currency per unit of Gold was essential to the stability of the system.  The problem was that once a nation ran out of Gold the gig was up and they had no more currency to consume with.  

The truth about bit-coins is because they are exchanged online the potential for fraud is increased.  Furthermore, the potential for illicit activity is increased.  The currency is increased by miners who trade and increase the number of bit-coins.  The currency unit, bit-coin is tied to the Software, Bit-coin.  The currency only exists in a digital universe.  The real problem is what happens when the access to Bit-coins is limited by those who own all the Bit-coins?  The market will collapse or can be manipulated.  In other words, currently, bit-coins can only be increased by selling a product or adding another resource or currency.  If someone built a monopoly of products, resources or currency, they could manipulate the value of bit-coins by causing a shortage.

The best example that I can give is with Stock.  When there is a limited amount of Stock available the stock can be manipulate by those who hold great amounts of the stock.  If the stock was made liquid and was traded by many people then the market can become efficient.

Wise Guy (Account #3) · Answer

It can work. Statist fascists will ridicule you for using it. Little do they remember that when the US dollar first came out it had the same problem of speculation and rapid inflation. When people stop speculating on it to try to make a quick buck and actually start to use it more and more, you will start to see more stability with it.

Hoopy Frood · Answer

Bitcoin can work, and it does work.

My reasoning: It works!

Deflation and inflation are problems all currencies have.  Just because Bitcoin faces these problems doesn't mean it "doesn't work", it means it works just as well as other currencies in this area, and better in others.

? · Answer

its like any currency the value fluctuates so it doesn't protect from inflation

spot the cat · Answer

There is no central bank that recognizes it as currency

smkeller · Answer

There are people  that say it is the next great thing.

Anonymous · Answer

It can in the right conditions.

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Why can’t Bit-Coin work?

7 Answers