Shrinking demand for transactions makes the lightning network inevitably useless
There are several reasons why deflation leads to a reduction in the number of individual transactions in an economy:
Hoarding of money: In deflationary conditions, the purchasing power of money increases, and people tend to hoard their money instead of spending it. This behavior leads to a reduced number of individual transactions in the economy.
Reduced investment: Deflation discourages investment as the fixed costs of production remain constant, but the prices and revenues generated from selling the products decrease. This creates a disincentive for business owners to invest, which leads to a decrease in the number of transactions in the economy.
Reduced demand: Deflation lowers the prices of goods and services, which may seem attractive in the short run. But it can lead to a reduction in demand as people wait for further price reductions before making purchases. This behavior, in turn, leads to a decrease in the number of individual transactions in the economy.
Increase in debt burdens: Deflation causes an increase in the real value of debt, which means borrowers need to pay more real money to repay their loans. This creates a disincentive to take out loans, which reduces individual transactions in the economy.