Ray Dillinger:
> the "currency" is inflationary at about 35% 
> as that's how much faster computers get annually
> ... the inflation rate of 35% is almost guaranteed 
> by the technology

Increasing hardware speed is handled: "To compensate for increasing hardware 
speed and varying interest in running nodes over time, the proof-of-work 
difficulty is determined by a moving average targeting an average number of 
blocks per hour. If they're generated too fast, the difficulty increases."

As computers get faster and the total computing power applied to creating 
bitcoins increases, the difficulty increases proportionally to keep the total 
new production constant.  Thus, it is known in advance how many new bitcoins 
will be created every year in the future.

The fact that new coins are produced means the money supply increases by a 
planned amount, but this does not necessarily result in inflation.  If the 
supply of money increases at the same rate that the number of people using it 
increases, prices remain stable.  If it does not increase as fast as demand, 
there will be deflation and early holders of money will see its value increase.

Coins have to get initially distributed somehow, and a constant rate seems like 
the best formula.

Satoshi Nakamoto

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