BTC: When we reach 21 million?
If you invest in Bitcoin, you have probably heard that there are 21 million Bitcoins available to be mined, and we have to consider approximately 18 million have already been mined. When I first heard about this fixed supply in Bitcoin, it concerned me because being accustomed to our traditional financial system and not having a developer mindset does not make it easier to understand. I immediately thought; if Satoshi Nakamoto created this peer to peer digital currency as a proposal that can overthrow traditional fiat currency (USD, EURO, CLP), how is 21 million going to be enough for the entire world. Well, plain and simple, Bitcoin may be a currency in a digital form used as investment or to buy goods and services, but the truth is Bitcoin is a programmable currency. Therefore, the rules and functions are entirely different from cash. Others say, this limit on BTC created will affect the miners, but this won't be the case. Once BTC reaches its limit, miners will generate a profit on transaction fees.
Unlike traditional currency, where governments can arbitrarily decide to print more money, with bitcoin, there will be no more, but it can be divided into small parts. As of now, the smallest part of a BTC is a Satoshi.
There are many differences that Bitcoin provides in comparison with fiat cash. Fiat cash, regulated by each country, relies entirely on the stableness of each country, and governments can decide to print whatever they consider necessary. We can always expect inflation based on fiat currencies, and Bitcoin is the only currency that is a deflation based currency.
When someone says we can always expect inflation in Fiat currency, the reason is:
“As prices rise, a single unit of currency loses value as it buys fewer goods and services. This loss of purchasing power impacts the general cost of living for the common public, which ultimately leads to a deceleration in economic growth. The consensus view among economists is that sustained inflation occurs when a nation's money supply growth outpaces economic growth.”
What happens with deflation:
“Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time.”
Well, then deflation is a wonderful thing…right? Economists would say otherwise.
“As bitcoin’s value goes up, the cost of paying for things in BTC goes down as a result of an item’s fiat monetary value staying the same. This might trigger deflation, and some economists believe that once it starts happening, deflation will spiral out of control.”
Bitcoin being in its early stages also makes it difficult to see how it will really function with different worldwide scenarios like massive countries in crises or the downfall of the dollar. Although it may scare some, I believe it has exciting new possibilities to change the economy and unsustainable inflation that many countries have experienced. The bottom line, we have Bitcoin for a long time because it's programmable; we can adapt it to our needs. If one thing does not work, another will be programmed until it does.
By: Carolina Pérez