Can a deflationary currency such as bitcoin function in a global economy?

Let me start off by saying I am huge supporter of bitcoin and blockchain. I have been hodling for years and studying cryptography and computer science. However, I'm not as informed when it comes to economics.

Something that has been concerning me about bitcoin is it's deflationary nature. Hypothetically, if bitcoin were to become a widely used global currency (or even THE global currency), would this not cause problems for the economy? If you know your bitcoins are going to appreciate in value over time, then that incentivises us to hoard our wealth and not spend any of it. Surely such an incentive and resulting lack of spending would lead to an understimulated economy?

Also what do we do about the super wealthy? There are no doubt many early adopters who, in this hypothetical scenario, could now be worth billions upon billions of dollars. There would be a small number of people with an exorbitant amount of wealth and influence over the global economy. Not to mention the absolutely massive amounts of bitcoin stored in ancient wallets that we can't possibly know if anyone still has the keys to. What if satoshi was sitting on his old private keys all this time and suddenly floods the global economy with an absurd amount of liquid bitcoin?

If anyone who knows their economics a bit better than I do can point to any answers to these questions then I'd be greatly appreciative! I'm not trying to start any disagreements or arguments, I'm just genuinely curious about this stuff.

 

EDIT: I just wanted to thank everyone for their helpful contributions to the discussion so far and briefly summarise some of the things I have learned as a result.

• Bitcoin doesn't necessarily have to play the role of a "currency" in the future. There are different roles it could take on, as a settlement layer or as simply an asset to store value. It's still fun to think about the hypothetical scenario of it as a world currency, though.

• We've all grown up only knowing inflationary currency. Whether or not this is objectively a better solution than deflationary is certainly up for debate. I'm not convinced of either being the better solution and there's a lot of arguments to be made either way.

• A deflationary currency could potentially eliviate some of the pressure caused by inflation. If people aren't constantly working their asses off to keep on top of increasing costs of living, then perhaps they'll have more disposable wealth to invest in other things.

• Reduced spending as a result of deflationary currency isn't necessarily a bad thing, although that depends who you ask. Decreased consumerism could potentially have the benefit of leading to better, higher quality goods that last longer.

Submitted December 06, 2020 at 08:31PM by SendMeDistractions https://bit.ly/3mOfiHx