The Key Point on Bitcoin Scarcity That Few People Understand Today
That should spur you into action.
Bitcoin is hard money. Unlike the U.S. dollar, and other fiat currencies, which can be printed ad infinitum if a few central bankers decide to, Bitcoin exists in finite quantities. Thus, there can never be more than 21 million Bitcoins in circulation.
For this number to increase, there would need to be a consensus of the entire community on a Bitcoin source code evolution concerning this limit.
You can rest assured that this will never happen. The finite supply of Bitcoin is an incredible strength. It gives Bitcoin users an essential certainty when buying Bitcoin.
When you buy 1 Bitcoin, you buy 1 Bitcoin out of a maximum of 21 million units. This is true in 2020, and it will be true again in 2050, and 2100.
The U.S. dollar can be printed ad infinitum
If you look at the evolution of the amount of U.S. dollar in circulation, you will quickly understand that there is a fundamental difference in this respect:
With $100 in 1990, you had $100 out of $3,164 billion in circulation. By 2020, that same $100 is $100 out of $18,329 billion.
No need to draw a picture, you have understood that the U.S. dollar is devalued over time. A purchasing power of $100 in 1990 represents only $48 in 2020.
The value of what you own in U.S. dollar has lost 52% in only 30 years.
In order to beat the effects of monetary inflation, you should have been able to turn that $100 into $196.
The total lack of scarcity of the U.S. dollar is therefore problematic for the people.
While Bitcoin is working for you, it is clear that you are working for the U.S. dollar. The approaches are not the same. On the one hand, you have a hard money that protects its users, and on the other hand, we have the US dollar.
87.69% of all Bitcoins have already been created
It is June 27, 2020, and 18,416,125 BTC have already been mined since Bitcoin was launched on January 3, 2009. A quick subtraction allows us to deduce that there are only 2,583,875 BTC left that can be produced by 2140.
87.69% of all Bitcoins have already been mined.
The issuance rate of these new Bitcoins is predictable because Bitcoin’s monetary policy is written in its source code. One block is issued every 10 minutes on average on the Bitcoin network. The adjustment of the mining difficulty on the Bitcoin network every 2,016 blocks issued allows the network to stay as close as possible to this average over the long term.
When a block is issued, a BTC reward is offered to miners who have validated this block correctly. New Bitcoins are created at this time. This reward is divided by two for every 210,000 blocks mined. This process called Halving is automated, and therefore inevitable.
The next Bitcoin Halving will take place at block height 840,000, in the first part of the year 2024.
The inflation of the supply of new Bitcoins for the coming years can therefore be planned for:
You can see that inflation in the supply of new Bitcoins tends towards zero over time. This figure will be reached around 2140.
From that date on, there will be no more New Bitcoins that can be mined. All users will have to make do with the Bitcoin supply already in circulation.
If Bitcoin supply is hard-capped, the potential number of Bitcoin users continues to grow
While the Bitcoin supply is hard-capped, the number of potential Bitcoin users will continue to grow. The number of potential Bitcoin users is equal to the number of people on Earth today, and in the future:
Today, there are 7.8 billion of inhabitants on Earth. This means that there is 1 Bitcoin for every 371 inhabitants.
In 2015, the United Nations estimated that the world population would be around 9.7 billion in 2050. This gives 1 Bitcoin for 461 inhabitants.
In 2100, the Earth should have 11.2 billion inhabitants. This gives 1 Bitcoin for 533 inhabitants.
Taking into account the current distribution of wealth on the Bitcoin network, we already have 820,098 people who own at least 1 BTC :
People who already own 1 full Bitcoin are therefore starting with an incredible advantage for the world of the future. It is no coincidence that I frequently explain that the race to own at least 1 full Bitcoin has already begun.
If you are interested in the Bitcoin world, you are already more or less aware of everything I have just explained.
The key point that is often overlooked is the number of Bitcoins gone forever
On the other hand, you may not have in mind a key element which is the number of Bitcoins that are considered to be lost forever.
This number can only be estimated.
In November 2017, Chainalysis, a company that analyzes the Blockchain, published a very interesting report, taken up by Fortune magazine, explaining that the number of Bitcoins definitively lost should be in a range between 2.78 million BTC and 3.79 million BTC:
As we are in June 2020, it can be estimated that the number of Bitcoins gone forever must have risen further to 4 million units.
Using the assumption of 4 million Bitcoins gone forever, this means that the maximum supply of Bitcoins really usable will actually only be 17 million.
This does not change the number of Bitcoins still to be mined. However, it does change the number of Bitcoins that are actually usable at the moment. This number would not be 18,416,125 BTC, but earlier 14,416,125 BTC.
This only further reinforces the scarcity of Bitcoin which is truly absolute.
Bitcoin scarcity is even greater than a lot of people think
Since only 17 million Bitcoins will actually be usable when all Bitcoins have been mined, the calculations I presented to you earlier are even more spectacular.
In 2050, there will be only 1 Bitcoin for every 570 inhabitants on Earth. And in 2100, there will be only 1 Bitcoin for every 658 people on Earth.
With a real usable Bitcoin supply of around 17 million units, this means that only 0.21% of the population can own 1 Bitcoin at a time in 2020.
As Confucius put it so well, a picture is worth a thousand words. For you to visualize what this represents, I have prepared the small illustration below:
Each blue square represents 10 million people on Earth in 2020. With a population of 7,800,000,000 people, you see that this makes 78 squares.
In yellow, I’ve given you the number of people who can actually own 1 Bitcoin each given that there are only 17 million BTC left that can actually be used in 2020.
In 2100, only 0.15% of the population will be able to own 1 BTC each at the same time.
The little demonstration I just gave you is there to make you aware that the scarcity of Bitcoin is much greater than you thought.
To talk about the scarcity of Bitcoin, it is customary to base it on its maximum supply which is 21 million BTC.
However, since it can be estimated that 4 million BTC are already lost forever, we should already base our reasoning on a maximum usable supply of 17 million units of Bitcoin.
With this reasoning, and when 820,098 addresses already own at least 1 BTC, you will better understand that buying 1 Bitcoin in 2020, if you can afford it, is an incredible investment for your future.
If Bitcoin were to fail, you would lose a little fiat money I grant you.
But if Bitcoin were to succeed in its revolution, which I am convinced it will, you would be rewarded more than you can imagine today. In my opinion, Bitcoin is the best investment you can make in 2020 in terms of risk/reward asymmetry for the upcoming years.
You take a small risk if you buy Bitcoin when you can afford it, and your reward possibilities are immense.
As always, it is up to you to make the best decisions for your future. I just hope that you will now incorporate the key point I just made in this story about the scarcity of Bitcoin.