The Bitcoin Conundrum
The Backstory
A Change to Bitcoin’s Supply
The Threat of Inflation
The Consequences of Change
Quick Facts
BlackRock, one of the largest asset managers in the world, sparks a heated debate about the fixed supply of Bitcoin.
The Bitcoin Conundrum: Will a 21M Supply Limit Forever Remain?
The world of cryptocurrencies is abuzz with excitement as BlackRock, one of the largest asset managers in the world, sparks a heated debate about the fixed supply of Bitcoin. The debate centers around whether BlackRock’s commentary has the potential to disrupt the very fabric of Bitcoin’s existence. In this article, we’ll delve into the concerns surrounding BlackRock’s words and explore the implications of a potential change to Bitcoin’s supply limit.
The Backstory: BlackRock’s Enigmatic Comments
During a recent interview, BlackRock’s CEO, Larry Fink, touched on the topic of Bitcoin’s fixed supply, stating that there is “no guarantee” that the amount won’t change. This seemingly innocuous comment has sent shockwaves throughout the Bitcoin community, with many wondering if the days of a 21 million Bitcoin supply are numbered.
A Change to Bitcoin’s Supply: Theoretical but Dubious
One Bitcoin developer, myself included, argues that any change to Bitcoin’s fixed supply would effectively render the cryptocurrency no longer “Bitcoin.” The idea of a fixed supply is fundamental to Bitcoin’s design, making it a store of value and a hedge against inflation. Changing this fundamental aspect would fundamentally alter the identity of Bitcoin, making it a fundamentally different animal.
In an interview with Forbes, Jon Matonis, a founding member of the Bitcoin Foundation, echoed this sentiment: “If you changed the supply, it would be a different protocol… it would be a different currency.” Matonis went on to explain that the fixed supply is what makes Bitcoin unique among other digital currencies.
The Threat of Inflation
Proponents of a potential supply change argue that increasing the supply of Bitcoin could help prevent inflation and ensure the continued viability of the currency. However, this argument is based on a flawed understanding of the Bitcoin economy.
Inflation in the classical sense is caused by an over-issue of currency, which leads to an increase in the money supply and a subsequent decrease in its value. However, Bitcoin’s fixed supply ensures that the money supply is capped at 21 million, eliminating the risk of inflation in the classical sense.
Furthermore, the scarcity of Bitcoin is actually a feature, not a bug. The limited supply creates an artificial scarcity that drives up its value, making it a highly valuable store of value.
The Consequences of Change
If a change to the supply limit were to occur, it would have far-reaching consequences for the economy and users alike. The value of Bitcoin could plummet, as investors lose confidence in the cryptocurrency’s ability to maintain its value. This would not only harm individual investors but also businesses and institutions that have come to rely on Bitcoin as a store of value.
Moreover, a fundamental change to the protocol would undermine the trust that users have in the system. Bitcoin’s decentralized, open-source nature relies on consensus and agreement among its users. Changing the supply limit would be a breach of that trust, potentially leading to a loss of faith in the cryptocurrency.
Friedrich Hayek, an Austrian economist and philosopher, once said, “The most important thing is to stabilize the purchasing power of money, and… to ensure that the supply of goods and services matches the demand.” Bitcoin’s fixed supply is the key to achieving this stability, ensuring that the value of the cryptocurrency remains intact.
While the idea of changing the supply of Bitcoin may seem theoretically possible, it would be a grave mistake to alter the fundamental nature of the cryptocurrency. The integrity of Bitcoin’s fixed supply is what makes it a unique and valuable store of value, and it’s essential that we protect it from those who would seek to undermine it.
