There is a hard limit to the amount of Bitcoins however.

I don't get this. If there are 21 million bitcoins but they're infinitely divisible - you can send 0.0000001 BTC to someone.. Then how is there a hard limit?

Countries have done this many times by dropping zeros when their currencies devalue, etc. The whole 'there are a fixed number of bitcoins' makes no sense if you can just divide the currency unit by 1 million and call the new currency micro bit coin.

They are not infinitely divisible. Bitcoins are divisible to 8 decimal places. This means that there are 21 quadrillion unitary elements.

Uhm..last I checked gold was infinitely divisible too? your argument makes no sense.

Divisibility is not the issue, dilution is.

They are not infinitely divisible, merely very divisible. Kind of like elemental gold...

The problem with fixed bitcoins (and while I like btc, I think it is a real problem) is that when you eventually hit 21 million BTC, you only lose bitcoins from lost wallets from that point forward, so the money supply shrinks over time and the currency deflates with no way to get back lost coins.

Deflation is bad because then you can sit on btc (like people are now) and the exchange rate goes up because they gain in scarcity. They aren't really useful as a unit of exchange then, there was a story a day or two ago about how btc (while improving) still has 1/3 the turnover rate of fiat market currencies because most people are holding them as an investment.

A part of that is that btc isn't widely circulated for exchange yet, and sitting on it instead of a savings account makes sense when the speculative market is going through the roof. So even if you wanted to spend it, you still have to translate it back into fiat currencies and use those right now.

What I meant is you can't make more. If someone owns a million Bitcoins, that million Bitcoins cannot be devalued by someone mining a trillion Bitcoins. More Bitcoins cannot come into existence after the 21 million limit.

Sure, they can be slit down and down, but Gold can too. The difference is you can mine more Gold. Not possible with Bitcoin.

I guess the main difference is that we know exactly how many bitcoins are left to be mined, while we don't really know how much gold is left in the earth's crust.

Well then you'll be happy to hear that Bitcoin does NOT allow one entity to produce money out of nowhere.

Exactly. Bitcoin allows many entities to produce money out of nowhere...though this ethereal production will eventually stop at 21 million, if Bitcoin survives that long.

By the same logic gold miners produce money out of thin air too.

It's nearly equivalent, except the rate of production halves every 2 years.

It isn't out of nowhere, it is relative to the market price of electricity and transistors necessary to do the work to generate transaction hashes. There is a valuation of how much money you spend on hardware and power to run a bitcoiner miner to obtain the new btc entering the system.