<p>If people are worried about deflation they really need to distinguish what kind of deflation they are referring to.</p>

<p>Asset deflation or monetary deflation.  </p>

<p>The real issue with our economy right now is the fact we have asset deflation coupled with monetary inflation which is the worst of both worlds.  I believe asset deflation along with monetary deflation would be less problematic than most people think. Maybe lemonginger was right, it is a very big concept.  We are not even talking about the further implications bitcoin will bring into contract-commercial law.  All of which I believe are a positive personally.  This is a huge subject.</p>

CC BY-SA 3.0
2011-09-14T22:29:41.887Z
2011-09-14T22:29:41.887Z
Bi-Metal
<p>One thing often overlooked is that bitcoin is most useful in chaotic economies.  Bitcoin likely will not replace the Euro, Dollar, Yen, or Yuan for very long time (if ever).  However many economies suffer from poor economic planning and gross manipulation by central banks.</p>

<p>Take the Zimbabwe hyperinflation scenario.  If bitcoin existed and was easily used by 3rd world country as the Zimbabwe dollar collapsed due to rampant printing of money people would move to another store of value such as bitcoin.  While the Z dollar would still have collpased the material affect on the economy would be less significant.</p>

<p>Thus the first world (providing most of the hashing power) could provide a launch pad for more stable economies in developing nations and greatly increase the use and legitimacy of bitcoin. </p>

CC BY-SA 3.0
2012-02-19T03:07:22.260Z
I agree with your point, but AS IF the first world cared about the third world. I think efforts from governments and enterprises could be made to impose laws that restrict bitcoin exactly because it can help developing countries. Think about why ACTA is there, it's to keep few rich and many poor (there can only be rich people if there are poor people, under capitalism, actually it's the basis of capitalism I'd say).
Camilo Martin
CC BY-SA 3.0
2011-10-10T13:56:31.250Z
2011-10-10T13:56:31.250Z
DeathAndTaxes
<p>Bitcoins are economical to buy from many different currencies (ie the conversion fees are low), so they have the potential to make many financial &amp; retailing tools available to a much larger audience. This could include stocks, bonds, commodities as well as traditional retail.</p>

<p>Bitcoins also have the potential to change the way artists (in a very broad sense) earn their money. Imagine if the "Like" or "+1" button also donated 0.0001 bitcoins to the author of the content. </p>

<p>Have a look at <a href="http://www.humblebundle.com/" rel="nofollow">http://www.humblebundle.com/</a> (or get <a href="http://en.wikipedia.org/wiki/Humble_bundle" rel="nofollow">a summary of what it's about from wikipedia</a>) to see the power of voluntary donations.</p>

<p>Regardless of the effect on GDP, surely this has got to be beneficial for humanity, which is essentially what economists use changes in GDP try to measure anyway.</p>

CC BY-SA 3.0
2011-10-07T14:08:14.807Z
This is a really good answer!
David
CC BY-SA 3.0
2011-10-07T07:58:13.257Z
2011-10-07T07:58:13.257Z
Highly Irregular
<p>Given that economists cannot agree unanimously on the global effects of relatively small events like a change in interest rates or a stimulus package, I would say that a major event like mass adoption of Bitcoin is far beyond anybody's prediction horizon. The global economy is a complex dynamical system and we really don't understand such things as well as some would have you think. </p>

CC BY-SA 3.0
2011-09-16T13:05:33.777Z
That they do not agree does not mean that it is not important to try. A guess is often better than no guess. I agree, though, that the question might not be suited for this site.
David
CC BY-SA 3.0
2011-09-16T07:41:38.657Z
2011-09-16T07:41:38.657Z
jl6
<p>Bitcoin is made for transactions over the net and thus it is ideal for selling information and intellectual or informational services. How such an economy could look like is uncertain. My guess is that because bitcoin make decentral structures possible, it could support more equal power and opportunities.</p>

<p>I am quite confident it would give many many people which are smart, well educated and live in regions with low wages new opportunities - think of all the intellectuals in the Arab world. Bitcoin has the potential to create a worldwide information and service economy. As these are valuable things I think this could be very positive.</p>

<p>Bitcoin could make it also much easier to live from things like art and music.</p>

CC BY-SA 3.0
2012-01-14T21:03:07.967Z
2012-01-14T21:03:07.967Z
Zafolo
<p>Well, the GDP measured in bitcoins probably wouldn't grow at all, most likely it will shrink. However, that doesn't mean the economy shrinks, just that the bitcoins are increasing in worth.</p>

<p>In deflation adjusted bitcoins, I think that the GDP will grow, and if only because micro- and international transactions are vastly simplified. However, I expect that it would also lead to a collapse of the traditional banking system, since those are superficial now.</p>

<p>Next, note that a growing economy isn't necessarily positive. If you take into account that resources on earth are not infinite but limited, it becomes obvious that a stable, not growing economy (I think that's what you mean by GDP) is preferable.</p>

CC BY-SA 3.0
2012-02-19T03:13:00.427Z
We are already mining the hell out of Earth's resources, and we have been much before Bitcoin. In a "good" economy, people would recycle as much as possible, and growing GDP *will be a good thing*. Now this does does have anything to do with Bitcoin. It has to do with what we, humans, do.
Camilo Martin
CC BY-SA 3.0
2011-08-30T21:42:16.840Z
The debate of whether a growing economy is positive is outside the scope of my question.
David
CC BY-SA 3.0
2011-08-30T21:43:51.203Z
But it is essential to it - how could you judge whether bitcoin was positive or negative without that assumption?
Mononofu
CC BY-SA 3.0
2011-08-30T21:51:16.747Z
You are right, I am assuming that, so your answer is relevant. I do believe that your are wrong in assuming that an economy cannot grow without using more resources, though, but let's leave that debate.
David
CC BY-SA 3.0
2011-08-30T21:53:32.327Z
Yes, that debate should go somewhere else. Overall, I think you should support the bitcoin system, and if it's just because it reduces inefficiencies.
Mononofu
CC BY-SA 3.0
2011-08-30T21:58:06.580Z
Economics are complicated, so reducing inefficiencies alone is not enough to judge it as something positive. One thing I am especially worried about is inflation or deflation during the cycle, when the government would have reduced it's influence
David
CC BY-SA 3.0
2011-08-30T21:36:32.900Z
2011-08-30T21:45:53.947Z
2011-08-30T21:45:53.947Z
Mononofu
<p>As one who has tackled the issue of transaction fees with the intent of lowering them I have to say that the way Bitcoin shifts all transaction costs to the buyers and sellers (separate currency, peer to peer, mining) is brilliant.</p>

<p>As some of the comments have pointed out the real system resource use and cost Bitcoin incurs
needs to be rightly quantified in relation to alternatives. Where Bitcoin fails the alternative would need to be adapted. </p>

<p>In any case Bitcoin has certainly set the stage for the future of "money".</p>

CC BY-SA 3.0
2012-03-07T10:46:42.217Z
2012-03-07T10:54:03.753Z
2012-03-07T10:54:03.753Z
Steve Paesani
<p>Millions of dollars every day will be spent on keeping the bitcoin network up.  After all, it has to use 51% or more of all GPU power in existence - or else risk the entire economic system collapsing.</p>

CC BY-SA 3.0
2011-09-16T08:59:00.900Z
Why do you think it has to use 51% or more of all GPU power in existence? If Bitcoin uses say 10% of the power, and the rest 90% is used for gaming / SETI@Home / whatnot, does this mean the network is insecure?
ripper234
CC BY-SA 3.0
2011-10-10T13:52:41.220Z
Not only is the answer incorrect I think that IF bitcoin was widely adopted people would devote their computers to an "as needed basis". If the network noticed a single entity gaining significant fraction of hashing power it could notify these idle nodes which would spring into action dumping terashashes of additional power into the network). 
It is entirely possible in some future bitcoin economy that the number of idle but ready nodes greatly exceeds the active nodes providing a second layer of defense.
DeathAndTaxes
CC BY-SA 3.0
2011-11-28T20:59:47.860Z
The answer by Patashu is completely misinformed. First of all, many tens of millions of dollars are already spent every day just running/managing the current banking system - so any cost Bitcoin creates must be compared to the status quo. Second, Bitcoin doesn't "require" 51% of all computing power in the world to be secure, it just requires enough that it becomes impractical to attack it. It is already at that level and will grow with more users.
Erik Voorhees
CC BY-SA 3.0
2011-09-15T02:50:20.813Z
2011-09-15T02:50:20.813Z
Patashu
<p>I am not an economist, but one negative impact I can see bitcoin having if it took over an entire economy is that it would make the digital divide worse.  There are still people out there who don't have computers or cell phones.  Paying for things is easy for this group of people is still easy while there is still physical cash - but if there were only digital cash?  </p>

<p>Short of a government handout giving away free cell phones with bitcoin wallets to these people, I can't imagine this would be good for the poor and homeless people.</p>

CC BY-SA 3.0
2013-05-16T10:07:29.593Z
-1 sorry but this doesn't make sense: it would be trivial to print physical bitcoin money to distribute in those areas.
o0'.
CC BY-SA 3.0
2013-05-24T04:33:35.957Z
Physical money is far more complex with bitcoin than with traditional fiat currencies.  Why?  The reliance on the PK cryptography system.  That's the downside to printing physical currency: it's not just an analog to physical cash where if you lose it, you're out $20 or $50 or whatever denomination dollar it was.  To spend a bitcoin, there has to be access to a private key, and with access to that, anyone who steals someone's physical bitcoins can potentially have access to far more than just the $20 denomination, but rather the entire amount in one's wallet.
Evan Lynch
CC BY-SA 3.0
2013-05-24T07:54:00.367Z
Never heard of Casacius, I guess? https://www.casascius.com/
o0'.
CC BY-SA 3.0
2013-05-16T08:46:42.747Z
2013-05-16T08:46:42.747Z
Evan Lynch
<p>GDP would accelerate because of less transactional friction.</p>

CC BY-SA 3.0
2011-09-05T13:51:54.680Z
I actually, think this is a good answer. I believe I misunderstood the purpose of Bitcoins when asking the question. The purpose, from what I understand now is not that of a storage of value, but more a media of exchange. So this answer covers that completely.
David
CC BY-SA 3.0
2011-11-28T21:02:06.330Z
GDP is not a good measure of the growth of wealth (because it measures spending, which is problematic for many obvious reasons). But, in terms of the "growth of wealth" with a bitcoin economy, I think it would be substantial. Bitcoin makes trade more efficient on a fundamental level and applied to an entire world this would create massive wealth gains. The world would be materially richer, because it wouldn't have to consume as much to engage in trade.
Erik Voorhees
CC BY-SA 3.0
2011-08-30T21:29:41.607Z
2011-08-30T21:29:41.607Z
Alex Waters
<p>What would the effects be on the world economy if several million people around the world would utilize the Bitcoin currency for their daily transactions? Would you expect the GDP to grow faster or slower and why?</p>

<p>I am interested in this, because the first thing I want to get straight is whether I would contribute something positive if I supported the project.</p>

CC BY-SA 3.0
2011-10-07T13:57:30.887Z
This is a good question to ask, just not here at the Bitcoin Stack Exchange.  There are so many different possible effects that many answers will be equally right, and being an expert at Bitcoin doesn't make you an expert at economics, etc. so there will be a lot of opinions without authoritative sourcing.  If your question is primarily economic, you should find an economic community and ask there.  If it is in another focus you should either edit it to that scope or search for another appropriate expert community.
eMansipater
CC BY-SA 3.0
2011-10-07T14:19:10.523Z
@eMansipater You have two points: 1. Although conclusions in economics are never as clear as in for example math, there is one correct answer to this question, the accepted one. 2. I believe that you are way too narrow minded when it comes to the kind of questions can be asked here (meaning that one has to spend a significant percentage of my time on this Q&A to argue with you). One should not consider whether a question primarily requires BitCoin expertise or expertise in economics (often one cannot know which expertise is required to answer a question), as long as the question about Bitcoin.
David
CC BY-SA 3.0
2011-10-07T16:37:22.463Z
@David I can think of at least 20 more significant "effects on the world economy if Bitcoin was widely adopted" so the one you have chosen is relatively arbitrary.  I'm glad it was useful to you, but as far as lasting value to the internet at large (the thing that keeps sites like this going) it can't really be considered a "final, objective answer".  I can understand your frustration with the fact that I consider several of your questions off-topic, but you need to realise it's not personal--my concern is for the overall success of the site, which depends on a specific measure of quality.
eMansipater
CC BY-SA 3.0
2012-02-19T03:18:49.987Z
This is the most on-topic question in the whole site for me.
Camilo Martin
CC BY-SA 3.0
2011-08-31T17:49:02.493Z
This seems offtopic to me. It is inherently extremely speculative, there is no right answer, and it is likely to provoke arguments
lemonginger
CC BY-SA 3.0
2011-08-31T18:17:27.687Z
Even if this is an uncertain and complicated topic, I believe that it is the essence of the Bitcoin project, so it should be attempted to be answered. This Q&A site is also for experts and for them this could be a fairly trivial question. For all I know Bitcoin could lead to a deflation spiral, which would have horrible consequences if it went mainstream.
David
CC BY-SA 3.0
2011-09-01T14:51:01.073Z
Analyzing the effects of disruptive technologies on socioeconomic systems is never trivial. It requires not only a whole raft of assumptions, but also modelling complex feedback relationships. There is no "correct answer" to the question, only possible answers with their assumptions and models made explicit for others to critique. I agree it is an interesting question, but not one well suited for the small snappy SE Q&A style.
lemonginger
<bitcoin-economy><adoption><macroeconomics>
Effect on economy if Bitcoin was widely adopted
David
# Effect on economy if Bitcoin was widely adopted

(Asked by: username_0 on 2011-08-30)

What would the effects be on the world economy if several million people around the world would utilize the Bitcoin currency for their daily transactions? Would you expect the GDP to grow faster or slower and why?

I am interested in this, because the first thing I want to get straight is whether I would contribute something positive if I supported the project.

**Tags:** bitcoin-economy, adoption, macroeconomics

> **Comments:**
> **username_3**: This seems offtopic to me. It is inherently extremely speculative, there is no right answer, and it is likely to provoke arguments  
> **username_0**: Even if this is an uncertain and complicated topic, I believe that it is the essence of the Bitcoin project, so it should be attempted to be answered. This Q&A site is also for experts and for them this could be a fairly trivial question. For all I know Bitcoin could lead to a deflation spiral, which would have horrible consequences if it went mainstream.  
> **username_3**: Analyzing the effects of disruptive technologies on socioeconomic systems is never trivial. It requires not only a whole raft of assumptions, but also modelling complex feedback relationships. There is no "correct answer" to the question, only possible answers with their assumptions and models made explicit for others to critique. I agree it is an interesting question, but not one well suited for the small snappy SE Q&A style.  
> **username_1**: This is a good question to ask, just not here at the Bitcoin Stack Exchange.  There are so many different possible effects that many answers will be equally right, and being an expert at Bitcoin doesn't make you an expert at economics, etc. so there will be a lot of opinions without authoritative sourcing.  If your question is primarily economic, you should find an economic community and ask there.  If it is in another focus you should either edit it to that scope or search for another appropriate expert community.  
> **username_0**: @username_1 You have two points: 1. Although conclusions in economics are never as clear as in for example math, there is one correct answer to this question, the accepted one. 2. I believe that you are way too narrow minded when it comes to the kind of questions can be asked here (meaning that one has to spend a significant percentage of my time on this Q&A to argue with you). One should not consider whether a question primarily requires BitCoin expertise or expertise in economics (often one cannot know which expertise is required to answer a question), as long as the question about Bitcoin.  
> **username_1**: @username_0 I can think of at least 20 more significant "effects on the world economy if Bitcoin was widely adopted" so the one you have chosen is relatively arbitrary.  I'm glad it was useful to you, but as far as lasting value to the internet at large (the thing that keeps sites like this going) it can't really be considered a "final, objective answer".  I can understand your frustration with the fact that I consider several of your questions off-topic, but you need to realise it's not personal--my concern is for the overall success of the site, which depends on a specific measure of quality.  
> **username_2**: This is the most on-topic question in the whole site for me.  

---

## 10 answers

### Answer by username_16 on 2011-08-30. Score: 18 | Accepted answer

GDP would accelerate because of less transactional friction.

> **Comments:**
> **username_0**: I actually, think this is a good answer. I believe I misunderstood the purpose of Bitcoins when asking the question. The purpose, from what I understand now is not that of a storage of value, but more a media of exchange. So this answer covers that completely.  
> **username_13**: GDP is not a good measure of the growth of wealth (because it measures spending, which is problematic for many obvious reasons). But, in terms of the "growth of wealth" with a bitcoin economy, I think it would be substantial. Bitcoin makes trade more efficient on a fundamental level and applied to an entire world this would create massive wealth gains. The world would be materially richer, because it wouldn't have to consume as much to engage in trade.  

---

### Answer by username_4 on 2011-09-14. Score: 8

If people are worried about deflation they really need to distinguish what kind of deflation they are referring to.

Asset deflation or monetary deflation.

The real issue with our economy right now is the fact we have asset deflation coupled with monetary inflation which is the worst of both worlds. I believe asset deflation along with monetary deflation would be less problematic than most people think. Maybe username_3 was right, it is a very big concept. We are not even talking about the further implications bitcoin will bring into contract-commercial law. All of which I believe are a positive personally. This is a huge subject.


---

### Answer by username_5 on 2011-10-10. Score: 7

One thing often overlooked is that bitcoin is most useful in chaotic economies. Bitcoin likely will not replace the Euro, Dollar, Yen, or Yuan for very long time (if ever). However many economies suffer from poor economic planning and gross manipulation by central banks.

Take the Zimbabwe hyperinflation scenario. If bitcoin existed and was easily used by 3rd world country as the Zimbabwe dollar collapsed due to rampant printing of money people would move to another store of value such as bitcoin. While the Z dollar would still have collpased the material affect on the economy would be less significant.

Thus the first world (providing most of the hashing power) could provide a launch pad for more stable economies in developing nations and greatly increase the use and legitimacy of bitcoin.

> **Comments:**
> **username_2**: I agree with your point, but AS IF the first world cared about the third world. I think efforts from governments and enterprises could be made to impose laws that restrict bitcoin exactly because it can help developing countries. Think about why ACTA is there, it's to keep few rich and many poor (there can only be rich people if there are poor people, under capitalism, actually it's the basis of capitalism I'd say).  

---

### Answer by username_6 on 2011-10-07. Score: 4

Bitcoins are economical to buy from many different currencies (ie the conversion fees are low), so they have the potential to make many financial & retailing tools available to a much larger audience. This could include stocks, bonds, commodities as well as traditional retail.

Bitcoins also have the potential to change the way artists (in a very broad sense) earn their money. Imagine if the "Like" or "+1" button also donated 0.0001 bitcoins to the author of the content.

Have a look at <http://www.humblebundle.com/> (or get [a summary of what it's about from wikipedia](http://en.wikipedia.org/wiki/Humble_bundle)) to see the power of voluntary donations.

Regardless of the effect on GDP, surely this has got to be beneficial for humanity, which is essentially what economists use changes in GDP try to measure anyway.

> **Comments:**
> **username_0**: This is a really good answer!  

---

### Answer by username_7 on 2011-09-16. Score: 3

Given that economists cannot agree unanimously on the global effects of relatively small events like a change in interest rates or a stimulus package, I would say that a major event like mass adoption of Bitcoin is far beyond anybody's prediction horizon. The global economy is a complex dynamical system and we really don't understand such things as well as some would have you think.

> **Comments:**
> **username_0**: That they do not agree does not mean that it is not important to try. A guess is often better than no guess. I agree, though, that the question might not be suited for this site.  

---

### Answer by username_8 on 2012-01-14. Score: 2

Bitcoin is made for transactions over the net and thus it is ideal for selling information and intellectual or informational services. How such an economy could look like is uncertain. My guess is that because bitcoin make decentral structures possible, it could support more equal power and opportunities.

I am quite confident it would give many many people which are smart, well educated and live in regions with low wages new opportunities - think of all the intellectuals in the Arab world. Bitcoin has the potential to create a worldwide information and service economy. As these are valuable things I think this could be very positive.

Bitcoin could make it also much easier to live from things like art and music.


---

### Answer by username_9 on 2011-08-30. Score: 2

Well, the GDP measured in bitcoins probably wouldn't grow at all, most likely it will shrink. However, that doesn't mean the economy shrinks, just that the bitcoins are increasing in worth.

In deflation adjusted bitcoins, I think that the GDP will grow, and if only because micro- and international transactions are vastly simplified. However, I expect that it would also lead to a collapse of the traditional banking system, since those are superficial now.

Next, note that a growing economy isn't necessarily positive. If you take into account that resources on earth are not infinite but limited, it becomes obvious that a stable, not growing economy (I think that's what you mean by GDP) is preferable.

> **Comments:**
> **username_0**: The debate of whether a growing economy is positive is outside the scope of my question.  
> **username_9**: But it is essential to it - how could you judge whether bitcoin was positive or negative without that assumption?  
> **username_0**: You are right, I am assuming that, so your answer is relevant. I do believe that your are wrong in assuming that an economy cannot grow without using more resources, though, but let's leave that debate.  
> **username_9**: Yes, that debate should go somewhere else. Overall, I think you should support the bitcoin system, and if it's just because it reduces inefficiencies.  
> **username_0**: Economics are complicated, so reducing inefficiencies alone is not enough to judge it as something positive. One thing I am especially worried about is inflation or deflation during the cycle, when the government would have reduced it's influence  
> **username_2**: We are already mining the hell out of Earth's resources, and we have been much before Bitcoin. In a "good" economy, people would recycle as much as possible, and growing GDP *will be a good thing*. Now this does does have anything to do with Bitcoin. It has to do with what we, humans, do.  

---

### Answer by username_10 on 2012-03-07. Score: 1

As one who has tackled the issue of transaction fees with the intent of lowering them I have to say that the way Bitcoin shifts all transaction costs to the buyers and sellers (separate currency, peer to peer, mining) is brilliant.

As some of the comments have pointed out the real system resource use and cost Bitcoin incurs
needs to be rightly quantified in relation to alternatives. Where Bitcoin fails the alternative would need to be adapted.

In any case Bitcoin has certainly set the stage for the future of "money".


---

### Answer by username_11 on 2011-09-15. Score: 1

Millions of dollars every day will be spent on keeping the bitcoin network up. After all, it has to use 51% or more of all GPU power in existence - or else risk the entire economic system collapsing.

> **Comments:**
> **username_12**: Why do you think it has to use 51% or more of all GPU power in existence? If Bitcoin uses say 10% of the power, and the rest 90% is used for gaming / SETI@Home / whatnot, does this mean the network is insecure?  
> **username_5**: Not only is the answer incorrect I think that IF bitcoin was widely adopted people would devote their computers to an "as needed basis". If the network noticed a single entity gaining significant fraction of hashing power it could notify these idle nodes which would spring into action dumping terashashes of additional power into the network).  It is entirely possible in some future bitcoin economy that the number of idle but ready nodes greatly exceeds the active nodes providing a second layer of defense.  
> **username_13**: The answer by username_11 is completely misinformed. First of all, many tens of millions of dollars are already spent every day just running/managing the current banking system - so any cost Bitcoin creates must be compared to the status quo. Second, Bitcoin doesn't "require" 51% of all computing power in the world to be secure, it just requires enough that it becomes impractical to attack it. It is already at that level and will grow with more users.  

---

### Answer by username_14 on 2013-05-16. Score: -2

I am not an economist, but one negative impact I can see bitcoin having if it took over an entire economy is that it would make the digital divide worse. There are still people out there who don't have computers or cell phones. Paying for things is easy for this group of people is still easy while there is still physical cash - but if there were only digital cash?

Short of a government handout giving away free cell phones with bitcoin wallets to these people, I can't imagine this would be good for the poor and homeless people.

> **Comments:**
> **username_15**: -1 sorry but this doesn't make sense: it would be trivial to print physical bitcoin money to distribute in those areas.  
> **username_14**: Physical money is far more complex with bitcoin than with traditional fiat currencies.  Why?  The reliance on the PK cryptography system.  That's the downside to printing physical currency: it's not just an analog to physical cash where if you lose it, you're out $20 or $50 or whatever denomination dollar it was.  To spend a bitcoin, there has to be access to a private key, and with access to that, anyone who steals someone's physical bitcoins can potentially have access to far more than just the $20 denomination, but rather the entire amount in one's wallet.  
> **username_15**: Never heard of Casacius, I guess? https://www.casascius.com/  

---

