| Won't the finite amount of bitcoins be a limitation? | Bitcoin is unique in that only 21 million bitcoins will ever be created. However, this will never be a limitation because transactions can be denominated in smaller sub-units of a bitcoin, such as bits - there are 1,000,000 bits in 1 bitcoin. Bitcoins can be divided up to 8 decimal places (0.000 000 01) and potentially even smaller units if that is ever required in the future as the average transaction size decreases. |
| Won't bitcoin fall in a deflationary spiral? | The deflationary spiral theory says that if prices are expected to fall, people will move purchases into the future in order to benefit from the lower prices. That fall in demand will in turn cause merchants to lower their prices to try and stimulate demand, making the problem worse and leading to an economic depression. Although this theory is a popular way to justify inflation amongst central bankers, it does not appear to always hold true and is considered controversial amongst economists. Consumer electronics is one example of a market where prices constantly fall but which is not in depression. Similarly, the value of bitcoins has risen over time and yet the size of the bitcoin economy has also grown dramatically along with it. Because both the value of the currency and the size of its economy started at zero in 2009, bitcoin is a counterexample to the theory showing that it must sometimes be wrong. Notwithstanding this, bitcoin is not designed to be a deflationary currency. It is more accurate to say bitcoin is intended to inflate in its early years, and become stable in its later years. The only time the quantity of bitcoins in circulation will drop is if people carelessly lose their wallets by failing to make backups. With a stable monetary base and a stable economy, the value of the currency should remain the same. |
| Isn't speculation and volatility a problem for bitcoin? | This is a chicken and egg situation. For bitcoin’s price to stabilize, a large scale economy needs to develop with more businesses and users. For a large scale economy to develop, businesses and users will seek for price stability. Fortunately, volatility does not affect the main benefits of bitcoin as a payment system to transfer money from point A to point B. It is possible for businesses to convert bitcoin payments to their local currency instantly, allowing them to profit from the advantages of bitcoin without being subjected to price fluctuations. Since bitcoin offers many useful and unique features and properties, many users choose to use bitcoin. With such solutions and incentives, it is possible that bitcoin will mature and develop to a degree where price volatility will become limited. |
| What if someone bought up all the existing bitcoins? | Only a fraction of bitcoins issued to date are found on the exchange markets for sale. Bitcoin markets are competitive, meaning the price of a bitcoin will rise or fall depending on supply and demand. Additionally, new bitcoins will continue to be issued for decades to come. Therefore even the most determined buyer could not buy all the bitcoins in existence. This situation isn’t to suggest, however, that the markets aren’t vulnerable to price manipulation; it still doesn’t take significant amounts of money to move the market price up or down, and thus bitcoin remains a volatile asset thus far. |
