Bitcoin Supply Limit: Advantage or Disadvantage?

The total supply of Bitcoin is capped at 21 million coins, a setting that has sparked controversy. Supporters believe it can prevent inflation, while critics worry it may lead to deflation. So, is this limit an advantage or a disadvantage for Bitcoin?

In fact, the actual usable amount of Bitcoin far exceeds 21 million. Although the total supply of Bitcoin is indeed set at 21 million coins, each Bitcoin can be infinitely subdivided. The smallest unit of Bitcoin is "Satoshi", equivalent to one hundred millionth of a Bitcoin. This means that the actual scale of Bitcoin can reach 21 trillion, sufficient to meet global economic demand.

Even if the future economic development reaches 210 trillion in circulating currency, it will not hinder transactions, and humanity will not fall into trouble. Just as we created Bitcoin, it is possible that other digital currencies may be created in the future. Currently, there are thousands of cryptocurrencies in the market, and more may emerge in the future if needed. This is similar to ancient China using gold as currency; when gold was insufficient, people turned to alternatives such as silver, copper, and even shells.

Some may question what the difference is between such a large quantity and fiat currency. The key lies in two points:

First of all, the issuance of digital currency is an endogenous result of the market. Miners need to incur costs, and their actions of increasing liquidity and creating value are essentially the same as producing bread or providing services like haircuts.

Secondly, Bitcoin has a clear limit on its supply, while fiat currency can be issued infinitely. It is this limit that gives people an expectation of scarcity, enhancing the value assessment of Bitcoin. In contrast, fiat currency continues to depreciate due to its unlimited supply.

The characteristics of Bitcoin, which has a limited supply and can be infinitely subdivided, give it unique flexibility. As its value rises, it can be divided and used more finely. This monetary mechanism provides innovative solutions to issues such as how much currency society needs, who should be the first to receive new currency, and who has the right to produce currency.