Bitcoin, the first and most widely recognised cryptocurrency, stands out for its decentralised design and groundbreaking use of blockchain technology . Its fixed supply limit of 21 million coins is a key feature . This article explores the significance of this limit, the mechanisms enforcing it, and its impact on Bitcoin's value and ecosystem .
Satoshi Nakamoto, the pseudonymous creator of Bitcoin, designed it as a currency resistant to the inflationary pressures affecting traditional fiat money . This supply limit is hardcoded into Bitcoin's system, ensuring that no more than 21 million bitcoins can exist . Nakamoto aimed at a number that would eventually make prices denominated in Bitcoin comparable to existing currencies .
Bitcoin's hard cap, also known as the supply limit, can theoretically be changed, however, such a change would be very unlikely to occur . There are incentive and governance models in the bitcoin protocol that protect the hard cap of 21 million coins .
Changing the supply cap would necessitate a hard fork, which means that all nodes on the network would have to adopt the changes or be forced off the network . As part of the activation path, both miners and nodes would signal their support for the change, and once a dominant portion of the network signaled support, the change would be activated . Nodes and miners who refused the change would now operate a minority fork, preserving the original Bitcoin network, and the two networks would compete for market share and hash rate . Thus, the 21 million supply of the original bitcoin can never be changed .
Despite the countervailing incentives and governance models, changing Bitcoin's hard cap is possible, but several groups would have to collaborate from the developers, community members, and nodes . First, developers must propose and then write the code to implement this change . There would be community discussion, which would likely be controversial . If developers agreed upon these changes, the changes would be integrated into Bitcoin Core . Next, the community would have to agree to an activation path, to ensure that the network transitioned to the new ruleset collectively .
Bitcoin's governance model is decentralized, meaning that changes to the protocol require widespread consensus . Any change to the hard cap would require the majority of nodes to adopt the new rule, which is unlikely .
Speculation that Bitcoin's hard cap of 21 million could change is rooted in two deeper misunderstandings about Bitcoin as a distributed, consensus-based network . Firstly, there is not one, but dozens or hundreds of versions of the Bitcoin source code . Every node in the Bitcoin network runs independent software that will reject any invalid blocks, such as blocks that reward a higher amount of BTC .
Unlike traditional currencies with unlimited supply, Bitcoin's maximum supply is permanently capped at 21 million coins . This fundamental characteristic, ingrained in its DNA since its creation by Satoshi Nakamoto, is a cornerstone of Bitcoin's value proposition .
This supply limit is likely to have the most significant impact on Bitcoin miners, but it's possible that Bitcoin investors could also experience adverse effects .