Hello, my name is David and I have a question about bitcoin. As far as I know, as more bitcoin is created then it is harder for miners to create them. Bitcoin also has a cap of 21 million. After a certain point wouldn't the use of Bitcoin exceed the production causing deflation. I know little about economics, but I do know that deflation creates an incentive to not spend. Is deflation a major problem with bitcoin? If it is, are there any solutions to the current system?
I believe the cap was put in place to assure that bitcoin maintains value throughout time. If there was no cap, there would be a pseudo-unlimited supply of Bitcoin, which would lead to massive inflation and devaluation. The technical issues with the current blockchain system lasting that long aside, I can't see devaluation becoming an issue. One of the most powerful aspects of bitcoin is that they are made to be divided into incredibly small amounts ( i.e. 1BTC = 1,000,000 Satoshi). Assuming that Bitcoin does survive to each the 21 million cap, that would mean that while there are only 21 million bitcoins, they can be divided into 2.1e+13 Satoshi (which is about 15 times more than the 1.37 trillion US dollars that are currently in circulation). With that many potential units of currency, it's very difficult to imagine deflation becoming an issue. Hopefully I've somewhat answered your question.
Deflation is a major obstacle to bitcoin's adoption as a global currency. A small, consistent amount of inflation is necessary for economic growth for several reasons. One of the biggest is cash hoarding and the deflationary spiral - as prices go down, people say "I'll just wait a few months until it's even cheaper" which forces companies to lower their prices and reduce wages due to low sales. This was one of the causes of the great depression in the USA when the Federal Reserve reduced the money supply, sparking deflation. This is also a problem today where companies are hoarding cash because inflation is too low to force them to spend it. EDIT: Deflationary spiral: https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral