As of August 01, 2019, 85% (17,850,000) of all the Bitcoins to come into existence have been mined. This doesn’t mean you have to rush out and acquire the rest, however. At current mining rates, it’ll take an estimated 121 years to mine the remaining 15%. But it reminds one how significantly different cryptocurrencies like Bitcoin are from fractional reserve-based fiat currency.
All That Glitters is No Longer Gold
When looking at money, we have one of two choices. We can think of it as finite, i.e. having a limited supply. Or we can view it as infinite. Logic dictates that since money represents value (more specifically, a store of value,) it can only be finite if the source is infinite.
Until the abolishment of the gold standard in the US in 1933, currency had always been representative of a reserve. Between the mid-1800s and 1933, that reserve had been gold. Abandoning the gold standard irrevocably changed the global monetary system. These days, we still use gold as a private store of wealth. In exceptional cases, governments hold their currencies in nominal parity with gold. But they reserve this for use cases such as foreign exchange restrictions, export subsidies, and import rationing. At the national level, it no longer forms the basis of any country’s financial system. Switzerland was the last country to abolish the gold standard in 1999.
Fiat’s Neverending Printing Press
Gold, clearly, was not an infinite reserve resource. Not only are gold deposits finite, but its geographical distribution spreads unequally across the planet. This would put large-scale gold producers, namely China, Australia, the US, South Africa, and Russia, at a major advantage over countless nations that don’t produce gold at all. From an economic standpoint, an opposing argument was that the gold standard placed a limit on economic growth owing to the relative scarcity of the precious metal. The answer? Introducing Monopoly money.
Manufacturers of the Monopoly game increase supply relative to demand. In the same way, the central banks of the world print endless money supplies by pulling a rabbit out of a hat. This gives rise to the very thing that quickly makes a dollar bill rather worthless: Inflation. Inflation is not your best friend when you’ve put your hard-earned cash into savings. If you’re a debt holder, however, it becomes a decent ally. The US government, coincidentally, is the world’s largest long-term debtor.
21 Million Bitcoin
People often call Bitcoin digital gold, for it joins its karat counterpart in being backed by a limited reserve supply. Not only is Bitcoin finite, but it’s also predictable. We can break it down to a single Satoshi (1 bitcoin is divisible to the 8th decimal place, or 0.00000001 BTC). However, there will only ever be 21 million coins in circulation. No additional coins can ever be created.
Bitcoin starts off being an inflationary currency – and with this, the mainstream media has had a field day. Ultimately, though, Bitcoin will become a deflationary currency. This will happen once we reach the 21 millionth block. This will result in a stable store of value that is measurable and auditable. Irrespective of how many bitcoins you own, it will always be expressed as a certain percentage of the total supply of 21 million coins.
Immune to fiat’s limitless currency supply, Bitcoin is inherently scarce and thus valuable, which explains why we might see more investors coming in soon.
A Brief History Of Bitcoin Mining
Inbuilt into Bitcoin’s code is controlled supply. When Bitcoin was first introduced, each block generated 50 bitcoins. Floored division halves the subsidy at every 210,000 blocks. This takes roughly four years, the first halving having occurred in 2012. The second halving took place during July 2016.
When Bitcoin was first released, mining capability – a.k.a. the process of confirming transactions – was at 6,400 bitcoins per day. Currently, and until May 2020, it stands at 1,800. Taking continued halving into account, bitcoin mining is set to cease in 2140 when all 21 million coins will have been mined.
What are your thoughts on Bitcoin reaching this milestone? Does Bitcoin present a viable case study for the end of the Age of Inflation? Let us know in the comments below.
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
