Why the controlled supply aspect of Bitcoin is fit’s most powerful feature:
As of this writing, the circulated supply of Bitcoin is approximately 15.2 million with the hard limit of 21 million. That hard limit, 21 million is similar to the giant cube of Gold that has been mined in human history, 21m cubed. Let’s take the relatively finite (short of mining asteroids) example of the gold standard to help understand why scarcity creates value.
Connecting the dots: Why 1913 matters (Full Lecture)
At the core of Bitcoin’s value proposition is its incredible power as a store of wealth. If in 2010, upon Bitcoin’s release, one had buried $1000 USD deep in one’s mattress, that money would have lost 10% of its purchasing power. The incredible rate of money creation, primarily digital money, comes at the cost of the buying power of your existing dollar. Your savings have been fighting an incredible war of devaluation since 1913 when the central banking system gained control over the creation of debt-based money. Using cotton printing machines and the Fed’s balance sheet, the US has created enough money from thin air to devalue your savings account significantly.
When the Gold standard was in effect, the concept of money was much more simple. Gold was intrinsically rare and valuable. Instead of lugging around one’s wealth in gold, banks held the gold for tyou and issued a paper receipt. Paper money, essentially useless, was a receipt for your actual stored value. Starting at the beginning of this century, bankers began to create more receipts than the gold they held. This breaking of the gold standard was the first real wedge driven between “money” and “currency”. The following 100 years have seen this wedge widen to a canyon. Your paper currency has lost almost all of its buying power in actual value.
USD Gold bill
The fact that the upper limit of coin creation has been set means one thing: that all future value growth per coin will push the unit of exchange down further. Today a Satoshi is worth about 1/24,000 of a USD. This makes it a perfect unit of exchange for micropayments, but just as the BTC achieved dollar parity, it is not out of the question that widespread adoption of Bitcoin denominated transactions will result in daily use of the Satoshi (parity is a long shot)
Even setting the speculative explosion in Bitcoin adoption aside, the growth in the value of Bitcoin benefits all those who hold coins. Against all common thought, the incredibly volatile “penny-stock”, “scam”, “tulip craze” of Bitcoin/Altcoin has the potential to be a far better store of wealth than the USD. Right now, Bitcoin’s market cap puts it around 1/200th the value in USD of total mined gold. When BTC achieves parity with the 21m Gold Cube, all hell breaks loose...
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