If this kind of thing keeps happening, isn't Bitcoin inherently deflationary? With gold, for example, only a small proportion is ever permanently "lost"; even shipwrecks can be recovered in the future. And of course more gold is always being dug up. But if bitcoins from a fixed set are slowly being lost in various ways, irreparably shrinking the money supply, it seems like it'd have trouble being a viable long-term currency.
Yes, BTC is inherently deflationary, but one of the fascinating things about it is that since it can be infinitely subdivided, this may not be as much a problem as it for meatspace currencies.
Currently BTC is divisible down to 8 decimal places, enabling a maximum possible 2.1 quadrillion atomic units. But that is only an artifact of the data structure used in the current implementation, and could potentially be modified to allow even more granularity.
So, as the value of BTC rises against goods, services, and other currencies, the market can reprice in smaller and smaller increments of BTC, and the incentive to save/hoard that is typically associated with deflationary monetary systems may be weaker with BTC.
> the incentive to save/hoard that is typically associated with deflationary monetary systems may be weaker with BTC.
I don't see how that is possible. The coins may undergo a process similar to a stock split but any holders of the coins end up with equal purchasing power. The incentive to hoard does not go away if the currency is deflationary.
In practice, when used to back a currency, gold is usually also inherently deflationary; mining of new gold generally cannot keep up with real economic growth.
