One of the weird things about our world is that money is central to everything, but it’s hard to understand how it works. There’s a great deal of handwaving around how, for example, dollars are created, much of which is, in fact, not correct at all (most dollars are created not by the government, or even the Federal Reserve, but by private banks, via a mechanism which I will not pretend to fully understand).
The big flaw of Bitcoin, to my mind, is that it is an inherently deflationary currency. Deflation is one of those things that seems great on the surface: prices go down, not up, but when that happens it ends up creating an economic incentive to avoid spending since why buy something today if it will be cheaper tomorrow, and this ends up causing economic activity to slow down or stop entirely. A small amount of inflation, on the other hand creates an incentive to either spend money or invest it in something that will provide a better than inflation return, whether that’s putting it in a high-yield savings vehicle or making capital or financial investments. With deflation, you can just leave your funds in cash (where they will not provoke any economic growth) and get a return.
The big flaw of Bitcoin, to my mind, is that it is an inherently deflationary currency. Deflation is one of those things that seems great on the surface: prices go down, not up, but when that happens it ends up creating an economic incentive to avoid spending since why buy something today if it will be cheaper tomorrow, and this ends up causing economic activity to slow down or stop entirely. A small amount of inflation, on the other hand creates an incentive to either spend money or invest it in something that will provide a better than inflation return, whether that’s putting it in a high-yield savings vehicle or making capital or financial investments. With deflation, you can just leave your funds in cash (where they will not provoke any economic growth) and get a return.