Bitcoin is not Randian gold

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It's frustrated when people say that Bitcoin has bad macro-economic design or that the rules are set in stone. The design is experimental and the rules are consensus-based; so it is silly to make such binary right or wrong analyses.

Bitcoin is incredibly hard to describe. Its subsystems are complex and we often generalize for the sake of audience understanding. Subsystem details may contradict the precision of the generalization. Additionally, people with strong political beliefs often describe it with agenda-charged jargon, leading to a cloudy vernacular.

Here are some of those buzzphrases; (perhaps with more context we wouldn't hear that they denote poor macro-economic design.)

"Bitcoin is scarce and deflationary"
Some people will say that Bitcoin is deflationary. That due to occasional lost private keys its supply is finite and deflationary.

Contrarily, Bitcoin is inflationary until the year ~2140. New coins are released akin to the Keynesian monetary supply of the USA. It is similar to gold in that there is a fixed and predictable supply, but those rules are subject to change if there is consensus.

Currently Bitcoin is inflationary at a rate of 9% per annum.

"Bitcoin is anonymous"
Through most methods of bitcoin private-key creation, Bitcoin is indeed anonymous by definition of anonymity. The part that is often left out is that the anonymity decays in practice. Transactions are often broadcasted by a participant's IP, route to an identified user's wallet account where they are converted to USD, and drawn to a KYC'd person's bank account.

That is far from anonymous, or if anonymity was a spectrum: we could say that's like writing an anonymous book with a picture of the author on the cover.

"There will only ever be 21 million bitcoin in existence"
This is wrong in at least four ways, and yet I still say it often. 

  1. The real number is closer to 20,999,949.9997 because the 50 genesis block coins cannot be spent, and it is more like a limit - as in, approaches 21MM.
  2. Fractional banking can functionally permit an increase of money supply without an increase in the underlying "cash".
  3. The sentence could be lengthened to "There will only ever be 21 million bitcoin in existence... provided that the consensus dictates adherence to the initiating ruleset or robots don't enslave humanity and abolish Bitcoin."
  4. Whole Bitcoins units (as we typically refer to them) are divisible up to 8 decimal places, giving us something like 2.1 quadrillion actual units. 

All that being said, 21MM is close enough and serves for the purposes of understanding how the system works in most explanations.

There are a growing number of Bitcoin myths (https://en.bitcoin.it/wiki/Myths), which illustrates a larger problem. Hard stances on what Bitcoin is or isn't shows that there is a lack of understanding in the consensus mechanism. Consensus is one of its many under-appreciated facets.

Bitcoin is a fluid, adaptive, and self-correcting system. It has several stake-holders with varying interests. All of whom need to agree in order for Bitcoin to press onward. This makes it very difficult to go against what is in the general interest and also makes it very likely that Bitcoin will continue to adapt in the interest of its entire user base. Bitcoin, like many things, cannot work as a Zipf distribution where something like 1% of the users control it. It would collapse in short order if the ruleset did not serve general interests. Subsequently, it would reset with an improved ruleset which invalidates whatever Zipfian rules caused the collapse.

Hopefully all of the new alt-coins will serve as a research testbed for us to discover and eventually implement the ideal incentive macro economics of Bitcoin (among other things). 2140 is only 125 years away.