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With the third half of Bitcoin upon us, the debate over whether and when the big event will affect the future price of the largest cryptocurrency continues.
But the rules that guide the creation of a new BTC, introduced into the software by its anonymous creator, Satoshi Nakamoto, are crystal clear.
In stark contrast to traditional government-controlled and at-will-print coins, Satoshi set a supply limit of 21 million coins. Also, roughly every four years, the BTC rewards given to miners are halved, and the current halving reduces that number from 12.5 coins per block to 6.25 coins per block.
The rewards system is combined with Bitcoin’s difficulty setting, which automatically analyzes network activity and adjusts the amount of computing power required to process transactions, to ensure miners can continue to make profits as BTC turns around. increasingly scarce.
Bitcoin’s reduced mining rewards are a centerpiece of Satoshi’s method of allowing the new BTC to enter the bid and ensure that the bid does not outpace the demand, while carefully controlling and mitigating the effects of inflation .
He broached the subject in an exchange with the late bitcoin pioneer Hal Finney via email in 2008.
“The fact that new currencies are produced means that the money supply increases by a planned amount, but this does not necessarily result in inflation. If the money supply increases at the same rate as the number of people using it increases, prices remain stable.
If it does not increase as fast as demand, there will be deflation and the first holders of money will see their value increase. Coins have to be distributed somehow initially, and a constant rate seems to be the best formula. “
Bitcoin’s supply schedule will slow down for years and decades to come, ensuring that an increasingly limited number of BTCs enter the market.
That newly created Bitcoin rate will slow down so much that it will take over 100 years for the latest Bitcoin to be mined. That will probably happen sometime around the year 2140.
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Featured Image: Shutterstock / grejak
