What is the Bitcoin Supply Cap?
The Bitcoin supply cap refers to the maximum limit set on the total number of Bitcoins that can ever be created. This cap is established at 21 million Bitcoins.
Why is there a Supply Cap?
The supply cap is an essential feature of Bitcoin's design, set by its pseudonymous creator Satoshi Nakamoto. The rationale behind this limit is to mimic the scarcity of precious resources, such as gold, thereby establishing value over time. Unlike traditional currencies that can be printed without limit, Bitcoin's designed scarcity ensures that inflation is controlled.
How is Bitcoin Issued?
Bitcoins are generated through a process called mining, where miners use computational power to solve complex mathematical problems. Initially, the reward for successfully mining a block was 50 Bitcoins. This reward is halved approximately every four years in an event known as “halving.” Currently, this reward is 6.25 Bitcoins per block (as of 2023).
What Happens When the Cap is Reached?
Once the Bitcoin supply cap of 21 million is reached, no new Bitcoins will be created. Miners will then earn transaction fees for validating transactions, which is expected to create an ecosystem where Bitcoin's value is driven solely by supply and demand dynamics.
In comparison to many altcoins, which may not have a fixed supply or have an inflationary system, Bitcoin remains unique due to its predetermined supply cap, making it a deflationary asset in the world of cryptocurrencies.