Two Paradoxes Blocking Bitcoin(alignmenteconomy.org)
alignmenteconomy.org
Two Paradoxes Blocking Bitcoin
https://alignmenteconomy.org
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Bitcoin could have achieved A) through D) by simply doing away with the capped supply and the accompanying subsidy halving needed to achieve it.
Just a pure linear emission [1]. That would avoid the extreme concentration of wealth on early adopters, and make it much less attractive for speculation.
To really deter speculation, one would need to actually increase subsidy over time, but that would make the emission both more arbitrary and resemble fiat.
[1] https://tromp.github.io/blog/2020/12/20/soft-supply
To really deter speculation, one would need to actually increase subsidy over time, but that would make the emission both more arbitrary and resemble fiat.
[1] https://tromp.github.io/blog/2020/12/20/soft-supply
The feature of a deflationary currency is much better than constant money printing. But, as I have learned through light studying of currencies, a huge negative aspect is its encouragement to horde.
Why is saving up negative?
Currency is the most useful when it changes hands constantly. I have mattresses. You have cookies. He has milk. I buy cookies and milk. You buy milk and mattresses. He buys mattresses and cookies. That's better than all of us in a standoff because we don't want to use our currency. Horrible analogy.
I spend my BTC occasionally on my degenerate sports gambling, and then I return some of the winnings back into BTC. I also rarely spend my stonks.
I'm writing this to see if anyone has a good counterargument, or if these are actually as load-bearing as I think they are.
Paradox 1: First-Mover Advantage
Early Bitcoin participants acquired a disproportionate share of the supply when the cost to mine or buy was negligible. As the network grew, the price rose, and new entrants faced dramatically higher costs for the same unit. The distribution curve looks less like a new monetary system and more like a land grab.
This isn't just an optics problem. It creates a structural barrier to adoption. For a currency to function as daily money, it needs near-universal participation within a given economy. But a system where most of the supply was claimed before most people heard about it asks latecomers to buy into someone else's windfall. The psychological effect is real and measurable: most people outside the crypto ecosystem describe Bitcoin (and its derivatives) using language that maps onto pyramid scheme dynamics, regardless of whether that comparison is technically accurate. Perception shapes adoption. The first-mover distribution pattern makes mass adoption unlikely.
You might argue that fiat has the same problem (those closest to money creation benefit disproportionately, the Cantillon effect). That's true, and it's one of the reasons fiat is failing. But the point of a new monetary system is to fix this, not replicate it with different beneficiaries.
Proof-of-stake variants don't solve this either. They shift the advantage from early miners to early capital holders, but the structural issue is the same: the person who shows up on Day 10,000 is worse off than the person who showed up on Day 10, not because they contribute less value, but because they arrived later.
Paradox 2: Deflation
The famous Bitcoin pizza transaction (10,000 BTC for two pizzas, now worth hundreds of millions of dollars) taught the entire ecosystem a lesson: never spend your Bitcoin. And so nobody does. BTC is bought with dollars, held, and eventually sold back for dollars. The unit of account never actually shifts.
This isn't irrational behavior. It's the rational response to a deflationary asset. If you expect the price to rise relative to the goods you could buy with it, spending today means losing future purchasing power. Gresham's Law predicts exactly this: bad money (inflationary fiat) circulates while good money (deflationary BTC) gets hoarded. The result is that Bitcoin functions as a speculative store of value, not a medium of exchange. A currency nobody spends is not a currency. It's an asset class.
Stablecoins don't solve this because they're denominated in fiat. They inherit all of fiat's problems (centralized money supply, Cantillon effects, inflation) while adding counterparty risk. They're a bridge to the old system, not a replacement.
So what would a solution actually require?
If you take both paradoxes seriously, the design constraints for a system that could actually function as daily money are pretty demanding. At minimum, it would need to: A) Minimize late-joiner disadvantage structurally (not just through marketing or subsidy) B) Eliminate the incentive to hoard (meaning neither inflation nor deflation should be the dominant force on purchasing power over time) C) Create positive pressure to transact rather than hold D) Remain decentralized (no central authority that can manipulate supply) Every token design I've seen solves one or two of these and breaks the others. Can all four be satisfied simultaneously, or is there a fundamental tradeoff here? Would love to hear counterarguments or examples I'm missing.