<p>This is a tough question.</p>

<p>I'd consider Bitcoin as being just deflationary. Why?</p>

<p>Because, instead of thinking about mining as "adding new currency", you could consider that mining is just "enabling" more coins each block from the 21 million total coins. Everyone knows that ultimately there will be 21 million coins, just not all of them are spendable.</p>

<p>Quoting Wikipedia on inflation:</p>

<blockquote>
  <p>In economics, inflation is a persistent increase in the general price level of goods and services in an economy over a period of time.</p>
</blockquote>

<p>It's clear that the increase of the amount of Bitcoin in circulation is not <em>persistent</em>. I ends. We all know when and why and how much there will ultimately exist.</p>

<p>That said, why is Bitcoin deflationary. Again quoting Wikipedia:</p>

<blockquote>
  <p>Deflation occurs when the inflation rate falls below 0% (a negative inflation rate).</p>
</blockquote>

<p>One can argue that after the last block reward has been paid, the amount of bitcoins will stay the same. That's not true. Now already, bitcoins are getting lost. People lose bitcoins every day by losing the private keys. So, bitcoins will become scarcer whenever the rate at which people lose them tops the generation rate through mining.</p>

<p>So ultimately, the number of spendable bitcoins will decrease, but firstly, as bitcoins tend to increase in value, people will probably become more careful with them over time. And second, bitcoins can be <a href="https://en.bitcoin.it/wiki/Units" rel="nofollow">divided to the order of 10^8</a>, so even when there is only a fraction of the 21 million bitcoins left, people will be able to spend regular amounts using the bitcoin protocol.</p>

CC BY-SA 3.0
2014-01-06T19:06:10.427Z
2014-01-24T18:25:59.420Z
2014-01-24T18:25:59.420Z
Steven Roose
<p>The answer to this question depends on the terminology used. "To inflate" normally means "to increase the volume". "To deflate" is the opposite.</p>

<p>In this sense, bitcoins were inflationary in 2013 (the inflation was ca 15%) and will be inflationary in 2014 as well.</p>

<p>At the same time, bitcoins were undergoing hyperappreciation in 2013 (bitcoin appreciation relative to USD was 5783%).</p>

<p>Also, bitcoins were undergoing hypermonetization in 2013 (bitcoin monetization, i.e., increase in liquidity expressed in USD was 2995%).</p>

CC BY-SA 3.0
2014-01-24T20:19:36.160Z
2014-01-24T20:19:36.160Z
Ladislav
<p>Bitcoin is an inflationary currency. Again from Wikipedia:</p>

<p>"In economics, inflation is a persistent increase in the <strong>general price level of goods and services</strong> in an economy over a period of time."</p>

<p>Inflation/Deflation is the measurement of price levels. The Bitcoin community consistently gets this wrong in that they are referring to the <strong>unit of measurement</strong> when discussing inflation/deflation.</p>

<p>With that said, Bitcoin is infinitely divisible and as the demand begins to outpace supply you will see:</p>

<p>A) Inflation in the price value of Bitcoin, and
B) The units of Bitcoin required to buy a good decrease.</p>

<p>To recap, we do not consider changes in the number of units required to buy something inflation or deflation. Inflation/Deflation <strong>only</strong> refers to <strong>price levels</strong>.</p>

<p>Thank you.</p>

CC BY-SA 3.0
2014-08-07T14:32:05.653Z
2014-08-07T14:32:05.653Z
Jacyle
<p>Bitcoin is deflationary, like Gold or any other natural resources. The value of Bitcoin is limited and it will be exhausted by 2140. This limited supply of bitcoin will make sure that it will become rarer and precious with time. Its value increases as time passes. Now, as the value increases, it will encourage people to hoard it and people will not spend it. This will pull out the Bitcoins from the economy, and increases its value. So you will get more product or services for the same number of Bitcoins, ie. value of good and services decrease.
This is different from an inflationary currency based system where government pump more money in the economy and this, in turn, leads to less value for currency and price increase.
Both of these type if the economy has pros and cons.</p>

CC BY-SA 3.0
2017-12-27T08:42:26.813Z
There is no guarantee that Bitcoin's value will keep increasing over time.
Pieter Wuille
CC BY-SA 3.0
2017-12-27T07:18:37.600Z
2017-12-27T07:18:37.600Z
vivek kumar
<p>I was wondering as Bitcoin is represented in the public and media as a <code>deflationary</code> currency (for more adept media as payment protocol). Is it really deflationary?</p>

<p>Deflation is <a href="http://en.wikipedia.org/wiki/Deflation" rel="nofollow">described on Wikipedia</a> as:</p>

<blockquote>
  <p>In economics, deflation is a decrease in the general price level of goods and services ...
  <strong>This allows one to buy more goods with the same amount of money over
  time.</strong></p>
</blockquote>

<p>Inflation is <a href="http://en.wikipedia.org/wiki/Inflation" rel="nofollow">described on Wikipedia</a> as:</p>

<blockquote>
  <p>Economists generally believe that high rates of inflation and hyperinflation are caused by >an <strong>excessive growth of the money supply</strong>.</p>
</blockquote>

<p>At the moment there is really an excessive growth of Bitcoin supply - in the past 4 years there was mined over <strong>12 millions of bitcoins</strong> and will continue
 with every block rewarded by c. 2140 when all bitcoins are expected to be mined. So there will be only transaction fees as block rewards, which will  end the growth of the units supply. </p>

<p>Can we consider Bitcoin as inflationary and deflationary currency until 2140, because there are still new bitcoins generated until c. 2140?</p>

CC BY-SA 3.0
2014-02-01T11:59:54.950Z
It appears to me that while the money supply of Bitcoin is growing, the price has been stable or going up. Therefore, "excessive growth" doesn't describe it fittingly, i.e. Bitcoin is not inflationary.
Murch
<economic-theory><deflation><terminology><inflation>
Is Bitcoin deflationary and inflationary at the same time?
Marek
# Is Bitcoin deflationary and inflationary at the same time?

(Asked by: username_0 on 2014-01-06)

I was wondering as Bitcoin is represented in the public and media as a `deflationary` currency (for more adept media as payment protocol). Is it really deflationary?

Deflation is [described on Wikipedia](http://en.wikipedia.org/wiki/Deflation) as:

> In economics, deflation is a decrease in the general price level of goods and services ...
> **This allows one to buy more goods with the same amount of money over
> time.**

Inflation is [described on Wikipedia](http://en.wikipedia.org/wiki/Inflation) as:

> Economists generally believe that high rates of inflation and hyperinflation are caused by >an **excessive growth of the money supply**.

At the moment there is really an excessive growth of Bitcoin supply - in the past 4 years there was mined over **12 millions of bitcoins** and will continue
with every block rewarded by c. 2140 when all bitcoins are expected to be mined. So there will be only transaction fees as block rewards, which will end the growth of the units supply.

Can we consider Bitcoin as inflationary and deflationary currency until 2140, because there are still new bitcoins generated until c. 2140?

**Tags:** economic-theory, deflation, terminology, inflation

> **Comments:**
> **username_1**: It appears to me that while the money supply of Bitcoin is growing, the price has been stable or going up. Therefore, "excessive growth" doesn't describe it fittingly, i.e. Bitcoin is not inflationary.  

---

## 4 answers

### Answer by username_2 on 2014-01-06. Score: 3

This is a tough question.

I'd consider Bitcoin as being just deflationary. Why?

Because, instead of thinking about mining as "adding new currency", you could consider that mining is just "enabling" more coins each block from the 21 million total coins. Everyone knows that ultimately there will be 21 million coins, just not all of them are spendable.

Quoting Wikipedia on inflation:

> In economics, inflation is a persistent increase in the general price level of goods and services in an economy over a period of time.

It's clear that the increase of the amount of Bitcoin in circulation is not *persistent*. I ends. We all know when and why and how much there will ultimately exist.

That said, why is Bitcoin deflationary. Again quoting Wikipedia:

> Deflation occurs when the inflation rate falls below 0% (a negative inflation rate).

One can argue that after the last block reward has been paid, the amount of bitcoins will stay the same. That's not true. Now already, bitcoins are getting lost. People lose bitcoins every day by losing the private keys. So, bitcoins will become scarcer whenever the rate at which people lose them tops the generation rate through mining.

So ultimately, the number of spendable bitcoins will decrease, but firstly, as bitcoins tend to increase in value, people will probably become more careful with them over time. And second, bitcoins can be [divided to the order of 10^8](https://en.bitcoin.it/wiki/Units), so even when there is only a fraction of the 21 million bitcoins left, people will be able to spend regular amounts using the bitcoin protocol.


---

### Answer by username_3 on 2014-01-24. Score: 2

The answer to this question depends on the terminology used. "To inflate" normally means "to increase the volume". "To deflate" is the opposite.

In this sense, bitcoins were inflationary in 2013 (the inflation was ca 15%) and will be inflationary in 2014 as well.

At the same time, bitcoins were undergoing hyperappreciation in 2013 (bitcoin appreciation relative to USD was 5783%).

Also, bitcoins were undergoing hypermonetization in 2013 (bitcoin monetization, i.e., increase in liquidity expressed in USD was 2995%).


---

### Answer by username_4 on 2014-08-07. Score: 0

Bitcoin is an inflationary currency. Again from Wikipedia:

"In economics, inflation is a persistent increase in the **general price level of goods and services** in an economy over a period of time."

Inflation/Deflation is the measurement of price levels. The Bitcoin community consistently gets this wrong in that they are referring to the **unit of measurement** when discussing inflation/deflation.

With that said, Bitcoin is infinitely divisible and as the demand begins to outpace supply you will see:

A) Inflation in the price value of Bitcoin, and
B) The units of Bitcoin required to buy a good decrease.

To recap, we do not consider changes in the number of units required to buy something inflation or deflation. Inflation/Deflation **only** refers to **price levels**.

Thank you.


---

### Answer by username_5 on 2017-12-27. Score: 0

Bitcoin is deflationary, like Gold or any other natural resources. The value of Bitcoin is limited and it will be exhausted by 2140. This limited supply of bitcoin will make sure that it will become rarer and precious with time. Its value increases as time passes. Now, as the value increases, it will encourage people to hoard it and people will not spend it. This will pull out the Bitcoins from the economy, and increases its value. So you will get more product or services for the same number of Bitcoins, ie. value of good and services decrease.
This is different from an inflationary currency based system where government pump more money in the economy and this, in turn, leads to less value for currency and price increase.
Both of these type if the economy has pros and cons.

> **Comments:**
> **username_6**: There is no guarantee that Bitcoin's value will keep increasing over time.  

---

