Description: The supply of Bitcoin refers to the total amount of Bitcoin that can be created and will exist in the ecosystem of this cryptocurrency. This supply is capped at 21 million coins, an intentional design that aims to mimic the scarcity of resources like gold. New Bitcoins are created through a process known as mining, where miners use computational power to solve complex mathematical problems and, in return, are rewarded with new Bitcoins. This mechanism not only secures the integrity of the network but also regulates the issuance of new coins. As more Bitcoins are mined, the reward per block is halved approximately every four years, an event known as ‘halving’. This limited supply approach is fundamental to the economy of Bitcoin, as it creates a deflationary environment that can increase the value of the currency as demand grows and supply becomes more constrained. The predictability of Bitcoin’s supply is one of its main attractions, as it provides investors with greater confidence in its long-term value, in contrast to fiat currencies that can be inflationary due to unlimited issuance by governments.
History: The supply of Bitcoin was established by its creator, Satoshi Nakamoto, in the Bitcoin white paper published in 2008. Since its launch in 2009, the supply has been a fundamental aspect of the cryptocurrency’s design. Over the years, halving has occurred in 2012, 2016, and 2020, reducing the block reward from 50 to 6.25 Bitcoins, which has influenced the price and perception of Bitcoin in the market.
Uses: The supply of Bitcoin is primarily used to establish the scarcity of the cryptocurrency, which in turn affects its market value. Additionally, the limited supply is a key factor in the investment strategy of many users, who view Bitcoin as a store of value similar to gold. It is also used in the development of decentralized applications that require a predictable supply of digital assets.
Examples: An example of the impact of Bitcoin’s supply can be seen in the price increase following each halving, as occurred in 2016 and 2020, where the price reached all-time highs after the block reward reduction. Another example is the use of Bitcoin as a safe haven during periods of economic uncertainty, where investors seek to protect their capital in an asset with a limited supply.
