🤔 Is Bitcoin's hard cap of 21 million flexible? 👀 Explore the potential for a change to this fundamental rule of the cryptocurrency, and the implications such a change would have for investors and the overall market. 👇
Absolute scarcity refers to a good's finite, fixed supply. There is no additional supply response to meet higher demand when demand for an item rises. The supply is therefore entirely inelastic. Regardless of the growth in demand, you will be unable to produce more. The price is the only output that can fluctuate. This is true in the case of BTC; Bitcoin's issuance rate and hard-capped supply stay constant regardless of how much energy is put into mining it.
The first is the project's token’s scarcity. The world's first cryptocurrency, Bitcoin, is valuable because it is limited in supply; only 21 million Bitcoins will ever be mined. Any project trying to impose a hard cap must follow the same supply and demand principles. Furthermore, the integrity and value of the underlying project will be safeguarded. Business leaders and team members, on the other hand, must strike a delicate balance to get this number right.
The hard cap on Bitcoin is critical to its value proposition as a currency and an investment tool. Bitcoin, like gold and real estate, is a successful store of value because its quantity is difficult to expand. Every four years, due to halving, producing Bitcoin becomes more complex and finally impossible.By changing the Bitcoin network's rule, its hard cap can be modified.
The attractiveness of BTC for many investors is its predictable, fixed supply. However, it is not in miners' best interests to remove the fundamental driver of Bitcoin's value proposition. Although the modification will raise miner revenue in BTC terms, it would lead to a catastrophic and permanent price fall, resulting in a net loss of miner revenue in fiat terms.
Moreover, miners have no control over the network's rules. Instead, miners are responsible for creating new blocks and validating transactions. When miners submit a new block to the network, tens of thousands of nodes independently verify it, ensuring that it generates a suitable amount of new BTC,and contains valid transactions. All blocks that break these criteria will be rejected by nodes, implying that miners have no control over Bitcoin's ruleset.
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