Is a deflationary currency compatible with growth-based economies?

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I've tried to learn and understand why inflation is so much tolerated in mainstream economics but the only answer I've seen in text books is basically a bit of inflation is okay as long as wages keep up, which we all now is not what happens in reality.

On the other hand, for years I've seen people in crypto communities complaining about inflation over and over again (and with very good reasons). I get it (specially now): inflation sucks. What I haven't seen though is a description about how growth economies can keep working with a deflationary currency.

As you may know, currently our economic systems rely heavily on credit, which is basically the main mechanism to create money. If you, for instance, would like to start a small coffee shop and don't have enough money to build it, you can go to a bank, and the bank may lend you some money to do it. The bank doesn't really have this money, the amount they give you is typically partially collaterised. The rest is just "magically minted". This increment in money supply is the main inflation driver, but it is also a great mechanism for social mobility and entrepreneurship.

You can't do something like this with hard money like bitcoin. Or at least, I can't imagine how could it work. The only alternative I see is creating new coins like in the 2017 ICO era, which, IMO, was a failed experiment. Furthermore, if demand for (hard) money grows, we'll actually have inflation, but without its advantages (credit).

So, how can we enable people (specially regular people) to start new businesses in an hypothetical economy that uses hard money like bitcoin? Because, without credit, western economies won't be able to grow, and that will inevitably lead to disaster. Is non-leveraged credit (ie. with 1:1 collatesisation) the only alternative? what are the implications?

edit: typo

submitted by /u/lahuan
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