Bitcoin: limited supply and unlimited potential


#1

http://heavilyarmedclown.com/wp/?p=75

If you’ve ever studied economics, you know there are two primary schools of thought when it comes to discerning past, present and future. They are keynesian and austrian. I consider myself to be more of an Austrian economics enthusiast, but that is something I can get into in more detail later.

What I’m most excited to talk about, is Bitcoin. You see, bitcoin is a lot like gold, in that it is a very hard currency. Meaning, as relative value of the currency goes up, thereby increasing demand, there is little (or in bitcoin’s case no) impact on the rate of production of the underlying asset.

Here’s an example:

Let’s say warren buffet decides he wants to buy 1 billion dollars worth of copper and drive up the price of copper so that he can sell it all at a profit. He goes out and buys 1 billion dollars worth of copper, taking that amount out of the total circulating supply, and thus driving up demand for what remains, this will in turn, increase the price. However, Mr. Buffet has a problem because copper production companies will now begin to ramp up their annual copper production, to help meet the increased demand, and they can now afford to do so because copper is selling at an increased price.

What makes Gold, such hard currency, and the primary reason it was the de facto monetary standard for centuries, is that it is relatively resistant to changes in rate of annual production, regardless of changes in supply and demand.

Therefore, it stands to reason, that bitcoins “code is law”, immutable, decentralized protocol presents a very interesting dynamic indeed. For the first time, outside of a few very niche historical examples, we have a truly global, borderless, and theoretically infinitely scalable hard money. That is because the total supply of bitcoin is fixed at 21 million, according to its immutable protocol.

As of the writing of this post, the total circulating supply of bitcoin is around 17 million, and the rate of new bitcoin being created is around 1,800 new BTC per day, which is paid out to miners discovering new blocks of transactions and writing them into the blockchain. Approximately every 4 years the reward rate for discovering a new block is halved, until eventually, no more new bitcoin will be created, and thus we will have our 21 million maximum supply.

It doesn’t take a math wizard to figure out that we are already well past the peak production rate of bitcoin and at this pace the annual rate of production will continue to go down and down and down to a negligible degree. Now, for the first time, we have a truly hard money who’s production is entirely independent of the laws of supply and demand.

Take a look at a chart of the purchasing power value of the USD over the last 50 years and you will be able to see very clearly, that the power of purchase of 1 USD has gone down over the years, due to inflation (that is an increase in the circulating supply of USD). This is the case for virtually all fiat currencies as they can be printed at will…or rather at the whims of keynesian economic theorists who think more government control is better for the economy, but again, a conversation for another day.

Wealth will always flow into the hardest, soundest money available because that money is the best store of value. You may not understand bitcoin, you may not understand blockchain, you may not understand economic law, but the fact of the matter is, those things will go on whether you choose to accept and understand them or not.

So my question to you is, are you prepared for the next financial revolution. How much of the 21 million bitcoin do you own?


#2

21 million is a fallacy. All you have to do is fork and you have more. It’s being done every day. If B-cash was not around that money would most likely be in Bitcoin itself or not all. We say that crypto will be a World currency so then when we create another crypto we are causing inflation. The pool is diluted no matter which way you look at it.


#3

That’s not the way it works.

A forked coin is not the same thing as the original product.

The phenomenon that is bitcoin: the monetary protocol can be copied (to a lesser degree), but not recreated.

The vast majority of alt coins built as strictly monetary protocols, if not every single one of them, will go to zero. Besides bitcoin.


#4

Bitcoin has the best chance of survival as a technology of all cryptocurrency.

Due to its age and size, it is the most progressed and most secure, largest and most trusted.

Scalability, divisibility, immutability…all of them make copy cats irrelevant.


#5

Bitcoin can be exactly and totally copied. It is open source. If we ascribe value monetarily to any token or coin then it dilutes everything else that monetarily quantified. It’s easy to discount now because digital currency is so small but if we consider it the new money then we shall see that the creation of another digital currency is a dilution to the existing pool.


#6

The iPhone was first of its kind but it’s market share is much less than Android. The electric vehicle was before a gas powered one. Over a hundred years later and still struggling to get market value. Just because it’s first means nothing especially in technology. Bitcoin is only dominant because nothing else has figured out how to be Bitcoin be fast, cheap and easy to use. Something Bitcoin will have a hard time accomplishing before someone else does.


#7

Yes. Many altcoins have forked off of bitcoin. There is still only one bitcoin network. There is still only 21 million bitcoins. That cannot and will not change.

The vast majority of altcoins are only relevant right now for 3 reasons…

  1. Scalability solutions are still in their implementation phases, lightning network and sidechains will change the game.
  2. Altcoins are speculative assets (to the majority of folks who don’t understand the economic factors behind a monetary protocol and just want big money gains). We are right inbetween the very early stage of mainstream adoption and the late stages of early adoption.
  3. There is a lot of loose capital sloshing around in this marketplace, at first it was because of the returns from bitcoin itself…which fueled the fires of more returns in point number 2. Now just slap a blockchain sticker on a box of cereal and you’ve got a new best selling app…but this will pass.

There is only one bitcoin network. There can only ever be one bitcoin, and it’s total supply will not change.


#8

You miss the point. There is Bitcoin yes and Bitcoin Cash and Bitcoin gold and Bitcoin private and on and on. If none of them existed then Bitcoin would be worth more because that money would be in Bitcoin. So very simple, it is a dilution of Bitcoin or inflation, thus 21 mil is a fallacy.


#9

That arguement could be made for anything and its irrelevant to the monetary economics behind bitcoin. Its non sequitur.

If cars didn’t exist that money could be in bitcoin, therefore cars dilute the value of bitcoin.

99% of cryptocurrencies today will not exist in 10 years. Bitcoin will.


#10

No it was against the arguement of being first. Don’t just see what you want to see. We are talking of digital currency.


#11

Okay I went back and reread your earlier point. I see where you are coming from.

There is already other cryptos which are faster, easier, and cheaper than btc. But they’re not btc.

I find it hard to believe anything will be able to do it better than bitcoin and maintain its soveirgnty/decentralization. It could happen, yes, but even then, I still don’t consider it dilution of the fixed supply.


#12

I guess only time will tell! Keep buying that Bitcoin!


#13

BTC is top 1 because it was first and it’s most-known. However I thing that market is very young and soon we will see changes. There are many new, innowative projects with some real value like Nebula Network, decentralized storage cloud with emission mechanism tied to the supply which guarantee rock stable rate independent from BTC.