Replying to Avatar NaturalNerd

Is the assumption of #Bitcoin doesn't have inflation wrong? This is true if a hard cap exists.

Many people keep coins on the exchange. Seems like a big exchange could sell more than they control fractional reserve style. As long as there is not a 'bank run' it seems more than 21 million could 'exist'. Am I wrong?

#asknostr
Avatar
BITwise 🐳 >>= RIGHTish 1y ago

Exchanges can certainly fractionally reserve but that doesn't mean there's more bitcoin. There's simply more IOUs. But dont get it twisted, an IOU is not the same as the real thing.

An interesting thing to note... Bitcoin sorta does technically have inflation before it reaches hard cap. The difference is its a programmed and scheduled inflation rate. As coins are mined and released into the wild, technically that's inflation. But the difference here is that everyone is on a level playing field and everyone knows the score. Full transparency and no one can unilaterally decide to adjust the inflation rate.

Reply to this note

Please Login to reply.

Discussion

Avatar
NaturalNerd 1y ago

True an IOU is not the same but, any person with BTC on an exchange could withdraw and spend at any time. Seems to me like this increases the number of BTC 'available'. This assumes no 'bank run'

Maybe I'm just high or dumb. 😂

Avatar
BITwise 🐳 >>= RIGHTish 1y ago

Aye so long as the actual supply of btc outweighs the amount of bitcoin you hope to withdraw, all is well. The iou's traded on exchange are inconsequential since they're within their own closed ecosystem. As soon as you wish to remove them and do anything other than simply passing ious back and forth, you have to pay the piper. And the piper only accepts real hard money.

As soon as you try to redeem 1 iou more than exists btc, then you're shit out of luck. So from a numbers perspective, sure there's more "bitcoin". But thats a meaningless number because as soon as you want to do anything with it, you have to exit to actual bitcoin. In reality when it comes to actual available liquidity, 21m=21m no matter how you slice it.