Description: The dilution effect in the context of Bitcoin refers to the reduction in the ownership percentages of existing Bitcoin holders due to the issuance of new tokens. Unlike shares in a company, where dilution can occur by issuing new shares, in Bitcoin, dilution primarily occurs through mining and the creation of new blocks. Each time a new block is mined, new bitcoins are generated and distributed to miners as a reward. This means that, although the total supply of Bitcoin is capped at 21 million coins, the proportion of bitcoins owned by an individual can decrease as new bitcoins are issued. This phenomenon is relevant for investors and users of Bitcoin, as it affects the perception of value and scarcity of the asset. Dilution can influence supply and demand, as well as the investment strategy of Bitcoin holders, who must consider how the issuance of new bitcoins may impact their market share and the value of their investment over time.
