<p>Build in a reliable entropy function to take account of natural decrement in value over time. All value degrades in nature, and this is the fundamental problem with money in that it can be hoarded without cost.
Not sure how this would be implemented, it does dig at the root of the basic theory of money and value but that is what we are attempting to achieve so why not look at it.</p>

CC BY-SA 3.0
2013-01-27T19:37:47.330Z
IIRC, [Timecoin](http://www.timecoin.net/) has a feature like this.
Colin Dean
CC BY-SA 3.0
2013-03-23T19:24:07.660Z
I upvoted, bcz I am happy to see someone else understands that [money IS NOT capital](http://bitcoin.stackexchange.com/questions/408/does-hoarding-really-hurt-bitcoin/8533#8533). Most people can't grasp that concept.
Shelby Moore III
CC BY-SA 3.0
2013-03-24T21:56:07.020Z
@ColinDean None of the links on that page seem to go anywhere. Do you have a link to its source code or binaries?
Nick ODell
CC BY-SA 3.0
2013-03-25T02:45:37.420Z
I don't, unfortunately. I think there was mention of it on /r/bitcoin.
Colin Dean
CC BY-SA 3.0
2013-01-26T10:30:05.643Z
2013-01-26T10:30:05.643Z
Alastair McGowan
<p><strong>Key points in bold.</strong></p>

<p>Hoarding doesn't need to be prevented. At least, not yet. See this answer for a solid argument: <a href="https://bitcoin.stackexchange.com/a/414/516">How does hoarding hurt Bitcoin?</a></p>

<p><strong>Bitcoin attracts hoarding by design. To change that would turn it into something else.</strong></p>

<p>As Bitcoin matures, I expect that it will remain a problem that speculative trading brings  instability to the market, similar to the gold market. If you put your retirement savings into gold, you'll likely do quite nicely, but there's also a significant chance you'll lose most of it in a price crash. It's not a reliable store of value. Even if you have several years you can wait for the value to come back up, you may still lose out.</p>

<p>Even though bitcoins are more efficient to trade than gold and cheaper to store, it's subject to the same volatility when traders manipulate it. The more popularity Bitcoin has, the bigger the traders will be that take an interest in it, like they do in gold. This could mean that when Bitcoin is mature we still see the same level of volatility that we see today with Bitcoin (and gold).</p>

<p>To me, this says that <strong>Bitcoin is great for efficient online transactions, but in the long run (once the market has reached its saturation point) won't a completely reliable store of value. For that, a diversified portfolio of productive investments is better.</strong></p>

<p>If that becomes common knowledge, then <strong>people will eventually accept the volatility as a necessary risk in the use of Bitcoin. After all, on average it will still almost certainly cost less than credit card transactions and traditional international money transfers.</strong> Secondly, risk-reduction services (ie insurance) tend to fill gaps in the market like that for those who don't want to take the risk.</p>

<p>In the meantime, Bitcoin is doing a great job, but it doesn't mean something better won't come along.</p>

CC BY-SA 3.0
2013-03-23T19:45:57.033Z
You will do quite nicely in gold if you sell out before it peaks and declines again. Gold has never always gone up. And the gold cycle is very short, it was never a stable value for 1000 years. Please do some historical research to put some salve on your speculation blindness.
Shelby Moore III
CC BY-SA 3.0
2013-03-24T19:29:53.940Z
@ShelbyMooreIII, that's exactly my point! Did you read it too quickly? My comment says there's "a significant chance you'll lose most of it in a price crash"
Highly Irregular
CC BY-SA 3.0
2013-03-24T20:16:35.150Z
Apologies you are correct. I tried to remove my downvote, but you would need to edit your answer first, then remind me to come back. Happy to see we agree on that aspect. Yet I don't agree with you that people will accept the volatility or that this is the [best we can do with the design of a P2P currency](https://bitcointalk.org/index.php?topic=157493.msg1669104#msg1669104). Specifically Bitcoin has nothing in its protocol to encourage the transactional value and discourage EXCESSIVE dormancy. Appreciation yes, but excess to ponzi yellow brick road no. My AnonyCash design is that balance.
Shelby Moore III
CC BY-SA 3.0
2013-03-24T21:49:52.517Z
@ShelbyMooreIII, updated. I think the volatility will need to be accepted by those that want to use it unless something better arrives on the scene. I agree with you that it's not a perfect solution, but it does beat credit cards in a number of uses, despite its limitations.
Highly Irregular
CC BY-SA 3.0
2013-03-24T21:56:47.510Z
So let's try to make something better. If we fail, at least we tried. I believe in virtue. Like you probably do, I take pride in my work and try to create quality and help others prosper. [I am not hiding behind anonymity](http://bitcoin.stackexchange.com/questions/8671/any-counter-proof-that-satoshi-nakamoto-did-not-design-a-ponzi-scheme-on-purpose).
Shelby Moore III
CC BY-SA 3.0
2013-01-26T06:50:28.083Z
2013-03-24T21:46:46.003Z
2017-04-13T12:47:36.647Z
Highly Irregular
<p>I speak from the point of view as a middle-aged (Born 1968) investor; I think the answer to the question is quite simple. You cannot simply consider the start point and end point in asking the question. Along the way the price will gradually appreciate and most people have a price at which they will start to sell their Bitcoins. Currently I hold about 630 BTC. I acquired these over the past 18 months as I gradually poured about $6000 cash into the Bitcoin exchanges. At todays price I would get about $11000 if I sold them all.</p>

<p>August 2012, I took most of my BTC and invested in a BTC mining fund that pays around 5 BTC a month dividends. At todays exchange rates I could convert this to $85.00 a month. Currently I convert none of this back to fiat because my goal is to save for retirement, and I believe in BTC so I let it ride.  At some point in the future as Bitcoin becomes more valuable, one BTC will be worth say $1000.00. My 5 BTC a month dividends would yield $5000 a month. At that point (actually probably before) I will be using some of that to fund retirement expenses. I will sell that portion on an exchange (or better yet directly trade with a merchant) to provide the real world products etc. that I need to live on.</p>

<p>Of coarse those BTC would be worth even more in the future, but we all need to live and we all have limited lifespans, so at some point we will sell to provide for our needs. Actually this is true of any investment that will appreciate at a level above inflation. For example stock investments on average pay around 8% a year in the long run and inflation averages around 3% in the long run. If you have a diversified portfolio, no matter what it will be worth more in the long term future. All the time though investors are selling in order to fund their basic needs. This will be true of Bitcoin as well.</p>

<p>If people simply hoarded BTC then there would be none available on the exchanges. 6 Blocks are created each hour X 24 hours X 25 BTC per block yields 3600 BTC created per day. 30 days X 3600 yields about 108,000 BTC mined per month. The current 30 day volume on Mt Gox is over a million BTC (<a href="http://www.bitcoincharts.com/markets/mtgoxUSD.html" rel="nofollow">http://www.bitcoincharts.com/markets/mtgoxUSD.html</a>), this would not be possible if people simply were hoarding them. </p>

<p>When one thinks about it, the actual value of BTC (or any currency) actually comes from the fact that people are willing to trade it for real world goods/services. Some people may hold larger amounts of BTC just like some people hold larger amounts of investments or cash in accounts. Hoarding will not be a problem as long as some people are willing to trade other items for BTC.</p>

CC BY-SA 3.0
2013-01-29T01:20:06.873Z
which market do you use for investing back into mining?
gesell
CC BY-SA 3.0
2013-03-23T19:40:15.463Z
You sound like one of those speculators "until dust do us part". You will likely hold all the way to the bottom when Bitcoin's bubble is finally popped for good because "you believe". Religion and speculation are a powerful dustbowl engine. Your answer to his question is that some speculators cash out. Actually the truth is that all speculators end up destitute, even the greatest ones who were temporarily very wealthy. Because a gambler can never stop trying his luck. Do some historical and [psychology research research](http://en.wikipedia.org/wiki/Gambler's_fallacy).
Shelby Moore III
CC BY-SA 3.0
2013-12-03T08:41:13.460Z
@ShelbyMooreIII speculation and savings are fundamentally the same thing (as is hoarding for that matter). not all savers end up destitute - far from it.
mulllhausen
CC BY-SA 3.0
2013-01-27T06:58:44.327Z
2013-01-27T06:58:44.327Z
Ron
<blockquote>
  <p>So I don't see how you could have viable loans in bitcoins until the system has settled down at least 30 years from now.</p>
</blockquote>

<p>Err.. For a home loan, that would be paid down after 25 years or so; I think you're underestimating. Let's look at the most popular non-governmental currency, gold. According to <a href="http://www.nma.org/pdf/gold/his_gold_prices.pdf" rel="nofollow">this</a>, the price of gold (in US dollars) <em>quintupled</em> between 2001 and 2011. Keep in mind that gold has been used as a currency for <em>thousands of years</em>.</p>

<blockquote>
  <p>And if you have 1 bitcoin today, it could become worth 100 million dollars purchasing power in 10 to 20 years. One inexpensive coin worth an hour's labor.</p>
</blockquote>

<p>It could also be worthless. Perhaps the various governments of the world will see Bitcoin as a threat to their ability to tax. The Bitcoin community can come up with a solution to any technical countermeasure, but that doesn't stop a crackdown against businesses that accept it.</p>

<p>It's not realistic to assume that <em>everybody</em> in the world will start using Bitcoin. It requires a computer/internet connection to even validate a transfer.</p>

<blockquote>
  <p>How is hoarding to be prevented?</p>
</blockquote>

<p>People hoard their money because they believe it will be more valuable in the future. To stop that, you print money.</p>

CC BY-SA 3.0
2013-01-27T23:39:27.257Z
Yes, it is realistic to think everyone on Earth may adopt bitcoin. The worldwide web is creating a one-world culture and this level of communications means that people will want a common currency. The Euro and the US dollar are currently being ruined by excess printing and general lack of understanding of basic economics principles. The world seeks an alternative. Gold is reliable but you can't send actual gold over the web, so you're back to paper. bitcoin is a real alternative and may well succeed.
user2733
CC BY-SA 3.0
2013-03-23T19:29:58.827Z
I wish I had enough rep power to downvote this. Nearly everything you wrote is factually unsupportable. 1) gold has not been used as a currency for 1000s of years. Most of the time it is not used and sits in vaults. 2) Bitcoin is not at all like gold for many reasons, and one major one is that the deceleration of debasement is over a decade or so, not millennia. 3) It is factually false that Bitcoin can technically adjust to any technical attack. If the attacker has a majority control of mining, upgrading the minority doesn't help— you must upgrade millions of owner's clients too. Chaos!
Shelby Moore III
CC BY-SA 3.0
2013-01-26T06:36:41.247Z
2013-01-26T06:36:41.247Z
Nick ODell
<p>If all humans used bitcoins now (Jan 2013) for most of their transactions, then a dollar would be worth about a billionth of a bitcoin (1/10 Satoshi).</p>

<p>If bitcoins take ten years to catch on that fully, and population rises only a little while worldwide productivity doubles, then you could buy 5 candy bars for a Satoshi (1/10^8 BTC).</p>

<p>A house today, starter home might be worth 10 000 bitcoins or so. Paying a 30 year loan payment in Bitcoins would require a payment of a billion dollars a month at some point.</p>

<p>So I don't see how you could have viable loans in bitcoins until the system has settled down at least 30 years from now.</p>

<p>And if you have 1 bitcoin today, it could become worth 100 million dollars purchasing power in 10 to 20 years. One inexpensive coin worth an hour's labor. </p>

<p>So the system has an enormous potential reward for hoarding--far beyond working for a living, or any remotely normal successful investment.</p>

<p>How is hoarding to be prevented?</p>

<p>And I think this system is even more unsound than fiat money, albeit in a very different direction. But it IS likely to lead to drastically improved money in the long run.</p>

CC BY-SA 3.0
2013-01-26T06:53:02.250Z
For downvoters, I say this: the key question here is "How is hoarding to be prevented?", so I've edited the title to this. This is something that is probably on the minds of MANY bitcoin users, and is worth an answer. I'd like to see what feedback I get on my answer to this...
Highly Irregular
CC BY-SA 3.0
2013-01-27T23:21:35.020Z
Actually my concern is not really that bitcoins would be hoarded--people have a right to save and to invest. Rather, that hugely disproportionate rewards harm the global economy. Early adopters are helping to solve the planet's current Dollars/Euros currency agonies. This is true even if bitcoin ultimately fails or is replaced by a similar alternative. Early adopters deserve a reward--but do they deserve the production power of a million people for a hundred years?
user2733
CC BY-SA 3.0
2013-03-23T19:34:58.487Z
I upvoted you. Your question is very astute and valid. Unfortunately you were downvoted, because there are some unsophisticated thinkers here who have the typical goldbug [delusion about gold](http://anonymint.org/#Bitcoins_Hyper-Accelerated_Gold_Flaw) and [inflation](http://bitcoin.stackexchange.com/questions/4172/are-bitcoins-really-immune-to-inflation/8643#8643).
Shelby Moore III
CC BY-SA 3.0
2013-03-25T10:16:57.943Z
possible duplicate of [Does hoarding really hurt Bitcoin?](http://bitcoin.stackexchange.com/questions/408/does-hoarding-really-hurt-bitcoin)
Stephen Gornick
CC BY-SA 3.0
2017-08-21T22:57:14.707Z
Why would you want to prevent hoarding? Hoarding is when a person gives something of value and gets nothing in return. That sounds like a pretty good deal for everyone else.
David Schwartz
<economic-theory><exchange-rate><money-supply><investing><deflation>
How is hoarding to be prevented?
user2733
# How is hoarding to be prevented?

(Asked by: username_0 on 2013-01-26)

If all humans used bitcoins now (Jan 2013) for most of their transactions, then a dollar would be worth about a billionth of a bitcoin (1/10 Satoshi).

If bitcoins take ten years to catch on that fully, and population rises only a little while worldwide productivity doubles, then you could buy 5 candy bars for a Satoshi (1/10^8 BTC).

A house today, starter home might be worth 10 000 bitcoins or so. Paying a 30 year loan payment in Bitcoins would require a payment of a billion dollars a month at some point.

So I don't see how you could have viable loans in bitcoins until the system has settled down at least 30 years from now.

And if you have 1 bitcoin today, it could become worth 100 million dollars purchasing power in 10 to 20 years. One inexpensive coin worth an hour's labor.

So the system has an enormous potential reward for hoarding--far beyond working for a living, or any remotely normal successful investment.

How is hoarding to be prevented?

And I think this system is even more unsound than fiat money, albeit in a very different direction. But it IS likely to lead to drastically improved money in the long run.

**Tags:** economic-theory, exchange-rate, money-supply, investing, deflation

> **Comments:**
> **username_1**: For downvoters, I say this: the key question here is "How is hoarding to be prevented?", so I've edited the title to this. This is something that is probably on the minds of MANY bitcoin users, and is worth an answer. I'd like to see what feedback I get on my answer to this...  
> **username_0**: Actually my concern is not really that bitcoins would be hoarded--people have a right to save and to invest. Rather, that hugely disproportionate rewards harm the global economy. Early adopters are helping to solve the planet's current Dollars/Euros currency agonies. This is true even if bitcoin ultimately fails or is replaced by a similar alternative. Early adopters deserve a reward--but do they deserve the production power of a million people for a hundred years?  
> **username_2**: I upvoted you. Your question is very astute and valid. Unfortunately you were downvoted, because there are some unsophisticated thinkers here who have the typical goldbug [delusion about gold](http://anonymint.org/#Bitcoins_Hyper-Accelerated_Gold_Flaw) and [inflation](http://bitcoin.stackexchange.com/questions/4172/are-bitcoins-really-immune-to-inflation/8643#8643).  
> **username_3**: possible duplicate of [Does hoarding really hurt Bitcoin?](http://bitcoin.stackexchange.com/questions/408/does-hoarding-really-hurt-bitcoin)  
> **username_4**: Why would you want to prevent hoarding? Hoarding is when a person gives something of value and gets nothing in return. That sounds like a pretty good deal for everyone else.  

---

## 4 answers

### Answer by username_5 on 2013-01-26. Score: 4

Build in a reliable entropy function to take account of natural decrement in value over time. All value degrades in nature, and this is the fundamental problem with money in that it can be hoarded without cost.
Not sure how this would be implemented, it does dig at the root of the basic theory of money and value but that is what we are attempting to achieve so why not look at it.

> **Comments:**
> **username_6**: IIRC, [Timecoin](http://www.timecoin.net/) has a feature like this.  
> **username_2**: I upvoted, bcz I am happy to see someone else understands that [money IS NOT capital](http://bitcoin.stackexchange.com/questions/408/does-hoarding-really-hurt-bitcoin/8533#8533). Most people can't grasp that concept.  
> **username_7**: @username_6 None of the links on that page seem to go anywhere. Do you have a link to its source code or binaries?  
> **username_6**: I don't, unfortunately. I think there was mention of it on /r/bitcoin.  

---

### Answer by username_1 on 2013-01-26. Score: 4

**Key points in bold.**

Hoarding doesn't need to be prevented. At least, not yet. See this answer for a solid argument: [How does hoarding hurt Bitcoin?](https://bitcoin.stackexchange.com/a/414/516)

**Bitcoin attracts hoarding by design. To change that would turn it into something else.**

As Bitcoin matures, I expect that it will remain a problem that speculative trading brings instability to the market, similar to the gold market. If you put your retirement savings into gold, you'll likely do quite nicely, but there's also a significant chance you'll lose most of it in a price crash. It's not a reliable store of value. Even if you have several years you can wait for the value to come back up, you may still lose out.

Even though bitcoins are more efficient to trade than gold and cheaper to store, it's subject to the same volatility when traders manipulate it. The more popularity Bitcoin has, the bigger the traders will be that take an interest in it, like they do in gold. This could mean that when Bitcoin is mature we still see the same level of volatility that we see today with Bitcoin (and gold).

To me, this says that **Bitcoin is great for efficient online transactions, but in the long run (once the market has reached its saturation point) won't a completely reliable store of value. For that, a diversified portfolio of productive investments is better.**

If that becomes common knowledge, then **people will eventually accept the volatility as a necessary risk in the use of Bitcoin. After all, on average it will still almost certainly cost less than credit card transactions and traditional international money transfers.** Secondly, risk-reduction services (ie insurance) tend to fill gaps in the market like that for those who don't want to take the risk.

In the meantime, Bitcoin is doing a great job, but it doesn't mean something better won't come along.

> **Comments:**
> **username_2**: You will do quite nicely in gold if you sell out before it peaks and declines again. Gold has never always gone up. And the gold cycle is very short, it was never a stable value for 1000 years. Please do some historical research to put some salve on your speculation blindness.  
> **username_1**: @username_2, that's exactly my point! Did you read it too quickly? My comment says there's "a significant chance you'll lose most of it in a price crash"  
> **username_2**: Apologies you are correct. I tried to remove my downvote, but you would need to edit your answer first, then remind me to come back. Happy to see we agree on that aspect. Yet I don't agree with you that people will accept the volatility or that this is the [best we can do with the design of a P2P currency](https://bitcointalk.org/index.php?topic=157493.msg1669104#msg1669104). Specifically Bitcoin has nothing in its protocol to encourage the transactional value and discourage EXCESSIVE dormancy. Appreciation yes, but excess to ponzi yellow brick road no. My AnonyCash design is that balance.  
> **username_1**: @username_2, updated. I think the volatility will need to be accepted by those that want to use it unless something better arrives on the scene. I agree with you that it's not a perfect solution, but it does beat credit cards in a number of uses, despite its limitations.  
> **username_2**: So let's try to make something better. If we fail, at least we tried. I believe in virtue. Like you probably do, I take pride in my work and try to create quality and help others prosper. [I am not hiding behind anonymity](http://bitcoin.stackexchange.com/questions/8671/any-counter-proof-that-satoshi-nakamoto-did-not-design-a-ponzi-scheme-on-purpose).  

---

### Answer by username_8 on 2013-01-27. Score: 4

I speak from the point of view as a middle-aged (Born 1968) investor; I think the answer to the question is quite simple. You cannot simply consider the start point and end point in asking the question. Along the way the price will gradually appreciate and most people have a price at which they will start to sell their Bitcoins. Currently I hold about 630 BTC. I acquired these over the past 18 months as I gradually poured about $6000 cash into the Bitcoin exchanges. At todays price I would get about $11000 if I sold them all.

August 2012, I took most of my BTC and invested in a BTC mining fund that pays around 5 BTC a month dividends. At todays exchange rates I could convert this to $85.00 a month. Currently I convert none of this back to fiat because my goal is to save for retirement, and I believe in BTC so I let it ride. At some point in the future as Bitcoin becomes more valuable, one BTC will be worth say $1000.00. My 5 BTC a month dividends would yield $5000 a month. At that point (actually probably before) I will be using some of that to fund retirement expenses. I will sell that portion on an exchange (or better yet directly trade with a merchant) to provide the real world products etc. that I need to live on.

Of coarse those BTC would be worth even more in the future, but we all need to live and we all have limited lifespans, so at some point we will sell to provide for our needs. Actually this is true of any investment that will appreciate at a level above inflation. For example stock investments on average pay around 8% a year in the long run and inflation averages around 3% in the long run. If you have a diversified portfolio, no matter what it will be worth more in the long term future. All the time though investors are selling in order to fund their basic needs. This will be true of Bitcoin as well.

If people simply hoarded BTC then there would be none available on the exchanges. 6 Blocks are created each hour X 24 hours X 25 BTC per block yields 3600 BTC created per day. 30 days X 3600 yields about 108,000 BTC mined per month. The current 30 day volume on Mt Gox is over a million BTC (<http://www.bitcoincharts.com/markets/mtgoxUSD.html>), this would not be possible if people simply were hoarding them.

When one thinks about it, the actual value of BTC (or any currency) actually comes from the fact that people are willing to trade it for real world goods/services. Some people may hold larger amounts of BTC just like some people hold larger amounts of investments or cash in accounts. Hoarding will not be a problem as long as some people are willing to trade other items for BTC.

> **Comments:**
> **username_9**: which market do you use for investing back into mining?  
> **username_2**: You sound like one of those speculators "until dust do us part". You will likely hold all the way to the bottom when Bitcoin's bubble is finally popped for good because "you believe". Religion and speculation are a powerful dustbowl engine. Your answer to his question is that some speculators cash out. Actually the truth is that all speculators end up destitute, even the greatest ones who were temporarily very wealthy. Because a gambler can never stop trying his luck. Do some historical and [psychology research research](http://en.wikipedia.org/wiki/Gambler's_fallacy).  
> **username_10**: @username_2 speculation and savings are fundamentally the same thing (as is hoarding for that matter). not all savers end up destitute - far from it.  

---

### Answer by username_7 on 2013-01-26. Score: 2

> So I don't see how you could have viable loans in bitcoins until the system has settled down at least 30 years from now.

Err.. For a home loan, that would be paid down after 25 years or so; I think you're underestimating. Let's look at the most popular non-governmental currency, gold. According to [this](http://www.nma.org/pdf/gold/his_gold_prices.pdf), the price of gold (in US dollars) *quintupled* between 2001 and 2011. Keep in mind that gold has been used as a currency for *thousands of years*.

> And if you have 1 bitcoin today, it could become worth 100 million dollars purchasing power in 10 to 20 years. One inexpensive coin worth an hour's labor.

It could also be worthless. Perhaps the various governments of the world will see Bitcoin as a threat to their ability to tax. The Bitcoin community can come up with a solution to any technical countermeasure, but that doesn't stop a crackdown against businesses that accept it.

It's not realistic to assume that *everybody* in the world will start using Bitcoin. It requires a computer/internet connection to even validate a transfer.

> How is hoarding to be prevented?

People hoard their money because they believe it will be more valuable in the future. To stop that, you print money.

> **Comments:**
> **username_0**: Yes, it is realistic to think everyone on Earth may adopt bitcoin. The worldwide web is creating a one-world culture and this level of communications means that people will want a common currency. The Euro and the US dollar are currently being ruined by excess printing and general lack of understanding of basic economics principles. The world seeks an alternative. Gold is reliable but you can't send actual gold over the web, so you're back to paper. bitcoin is a real alternative and may well succeed.  
> **username_2**: I wish I had enough rep power to downvote this. Nearly everything you wrote is factually unsupportable. 1) gold has not been used as a currency for 1000s of years. Most of the time it is not used and sits in vaults. 2) Bitcoin is not at all like gold for many reasons, and one major one is that the deceleration of debasement is over a decade or so, not millennia. 3) It is factually false that Bitcoin can technically adjust to any technical attack. If the attacker has a majority control of mining, upgrading the minority doesn't help— you must upgrade millions of owner's clients too. Chaos!  

---

