/cdn.vox-cdn.com/uploads/chorus_image/image/62316779/shutterstock_703957714.0.jpg)
Economics teaches that an excessively tight money supply can cause economic problems. But the harms from deflationary monetary policy mostly occur when wages, rents, mortgages, and other long-term financial arrangements are based on a currency such as the dollar. In economics jargon: deflation is harmful when a currency is used as an an economy’s unit of account.
But hardly anyone uses Bitcoin this way. Most merchants who accept bitcoins price their goods in a conventional currency, converting to an equivalent number of bitcoins at the time of sale. Even the Bitcoin Foundation, which pays its staff in bitcoins, sets salaries in dollars and converts peoples’ paychecks to bitcoins on payday.
Will you support Vox’s explanatory journalism?
Millions turn to Vox to educate themselves, their family, and their friends about what’s happening in the world around them, and to learn about things that spark their curiosity. Financial contributions from our readers are a critical part of supporting our resource-intensive work and help us keep our journalism free for all. Please consider making a one-time contribution to Vox today.
-
What is Bitcoin?
-
Can you explain bitcoin in a 2-minute video?
-
What’s the case for optimism about bitcoin?
-
What will people be able to do with Bitcoin that they can’t do with conventional financial systems?
-
Who is in charge of Bitcoin?
-
How does the Bitcoin network process transactions?
-
Why does the Bitcoin network use such a crazy scheme to process transactions?
-
What incentive do people have to help process Bitcoin transactions?
-
How do people get bitcoins?
-
People have made a lot of money investing in bitcoins. Should I buy some?
-
Is volatility going to be a fatal problem for Bitcoin?
-
Isn’t Bitcoin just a currency for criminals?
-
What’s up with Bitcoin competitors such as Litecoin and Dogecoin?
-
Is using Bitcoin a good way to fight inflation?
-
Does Bitcoin have a security problem?
-
What is the future of Bitcoin?
Sign up for the newsletter Future Perfect
Each week, we explore unique solutions to some of the world's biggest problems.