LarryRuane · July 28, 2021 19:47
diff --git a/gistfile1.txt b/gistfile1.txt
 absently> 
 Thought experiment, if economic exchange is better off by destroying 1 bitcoin, then does it follow that destroying half of everyone's bitcoin balance is beneficial?  I'd argue no but the "destroying stores of wealth results in prosperity" argument says yes 	  				 	 	 	    		  	   		  		
 12:40 PM 
 ← absently left #bitcoin-core-pr-reviews ([email protected])
 1:44 PM <larryruane> Larry Ruane 
 Hi absently, I think you're exactly right, destroying half of everyone's balance would not create prosperity... it would have no effect, other than doubling the value of each bitcoin ... so the USD bitcoin price would double from 40k (or whatever it is now) to 80k, and the price of things in units of bitcoin would reduce by half ... But this is because *everyone's* bitcoin balance is affected equally (is multiplied by the same constant, 0.5), so it's a simple scaling effect... It could be disruptive if it this change was unexpected but that's a second-order effect.

 What I was trying to say is that if I destroy one of MY bitcoins, then the total bitcoin supply decreases by 1, and that makes each other bitcoin worth (21,000,000 / 20,999,999) as much as before I did that. So that's a (tiny) gift to each holder of bitcoin, in proportional to their current balance. So the effect is different from *everyone's* balance being adjusted by some constant fraction -- this is only MY balance being adjusted.

 I once was explaining the basics of Bitcoin to a friend, and when I explained satoshis, my friend said, well, what happens if a single bitcoin becomes so valueable that one satoshi is worth more than (let's say) a cup of coffee? I said, that's not a major problem, the entire network would agree to a hardfork to subdivide satoshis, so that the new definition of a satoshi is 1/1000th of the old satoshi (i.e. there would be 100 billion satoshis per bitcoin, instead of 100 million, like a stock split). Then he said, wait, you said Bitcoin has a fixed supply, but it doesn't, because there are now 1000 times as many of the base (smallest) unit! That's inflation! But I said, no, it's not inflation if everyone's balance is affected by the same multiplicative constant. Inflation would be if *I* could create new bitcoins (beyond what happens with mining, because maybe I found a bug or something), that would hurt everyrone else. Burning bitcoin is the opposite of inflation, it benefits everyone else.

 I don't know if you're a fan of Austrian economics (as I am), but they emphasize (and I don't think even mainstream economists disagree with this) that the money supply is arbitrary, any supply is as good as any other supply -- as long as it's fixed. Take something like a hypothetical worldwide gold standard, theoretically, the entire economy could run on one gram of gold. But *practically* that wouldn't work because a few atoms would be worth as much as a jumbo jet or something, so it would be very easy to accidentally lose, and it would be hard to measure ... but theoretically, it doesn't matter what the (fixed) money supply is.
	absently>
	Thought experiment, if economic exchange is better off by destroying 1 bitcoin, then does it follow that destroying half of everyone's bitcoin balance is beneficial? I'd argue no but the "destroying stores of wealth results in prosperity" argument says yes
	12:40 PM
	← absently left #bitcoin-core-pr-reviews ([email protected])
	1:44 PM <larryruane> Larry Ruane
	Hi absently, I think you're exactly right, destroying half of everyone's balance would not create prosperity... it would have no effect, other than doubling the value of each bitcoin ... so the USD bitcoin price would double from 40k (or whatever it is now) to 80k, and the price of things in units of bitcoin would reduce by half ... But this is because everyone's bitcoin balance is affected equally (is multiplied by the same constant, 0.5), so it's a simple scaling effect... It could be disruptive if it this change was unexpected but that's a second-order effect.

	What I was trying to say is that if I destroy one of MY bitcoins, then the total bitcoin supply decreases by 1, and that makes each other bitcoin worth (21,000,000 / 20,999,999) as much as before I did that. So that's a (tiny) gift to each holder of bitcoin, in proportional to their current balance. So the effect is different from everyone's balance being adjusted by some constant fraction -- this is only MY balance being adjusted.

	I once was explaining the basics of Bitcoin to a friend, and when I explained satoshis, my friend said, well, what happens if a single bitcoin becomes so valueable that one satoshi is worth more than (let's say) a cup of coffee? I said, that's not a major problem, the entire network would agree to a hardfork to subdivide satoshis, so that the new definition of a satoshi is 1/1000th of the old satoshi (i.e. there would be 100 billion satoshis per bitcoin, instead of 100 million, like a stock split). Then he said, wait, you said Bitcoin has a fixed supply, but it doesn't, because there are now 1000 times as many of the base (smallest) unit! That's inflation! But I said, no, it's not inflation if everyone's balance is affected by the same multiplicative constant. Inflation would be if I could create new bitcoins (beyond what happens with mining, because maybe I found a bug or something), that would hurt everyrone else. Burning bitcoin is the opposite of inflation, it benefits everyone else.

	I don't know if you're a fan of Austrian economics (as I am), but they emphasize (and I don't think even mainstream economists disagree with this) that the money supply is arbitrary, any supply is as good as any other supply -- as long as it's fixed. Take something like a hypothetical worldwide gold standard, theoretically, the entire economy could run on one gram of gold. But practically that wouldn't work because a few atoms would be worth as much as a jumbo jet or something, so it would be very easy to accidentally lose, and it would be hard to measure ... but theoretically, it doesn't matter what the (fixed) money supply is.