Bitcoin's 21 million cap: Defect or advantage?

The total supply of Bitcoin is capped at 21 million coins, a setting that has sparked differing opinions. Some believe this is an advantage of Bitcoin, as it can prevent inflation; others argue it is a fatal flaw that could lead to deflation. So, is this limit on quantity a weakness or a strength of Bitcoin?

First, it is necessary to clarify a common misconception: the actual available quantity of Bitcoin is far greater than 21 million. Although the total supply is indeed set at 21 million coins, each Bitcoin can be infinitely subdivided. The smallest unit of Bitcoin, "Satoshi," is only one hundred millionth of a Bitcoin. Therefore, the actual maximum quantity of Bitcoin can reach up to 21 trillion units. If in the future, 1 Satoshi can be exchanged for 1 dollar, then the total value of Bitcoin would amount to 21 trillion dollars, a scale sufficient to meet the demands of global economic activity.

Even in extreme cases, 21 trillion units are still insufficient to support the transaction needs of humanity, and we need not worry excessively. Human creativity is boundless; just as we invented Bitcoin, we may create other forms of digital currency in the future. Currently, there are thousands of cryptocurrencies on the market, including Litecoin, Ethereum, EOS, and more. This situation is similar to ancient China when gold was insufficient to meet the demand for currency, and people turned to substitutes such as silver, copper coins, and even shells.

The fundamental difference between Bitcoin and fiat currency lies in two points: First, the issuance of Bitcoin is a result of market endogenous factors. Miners incur costs and provide services to obtain Bitcoin, which is essentially the same as bakers or barbers providing services. Second, Bitcoin has a clear limit on its quantity, while fiat currency can be issued indefinitely. It is this limit that gives people an expectation of scarcity, supporting the value of Bitcoin.

The design of Bitcoin can be described as an almost perfect monetary mechanism. It has a limited supply but can be infinitely subdivided, allowing for flexible adjustments based on market demand. When Bitcoin appreciates, miners can increase their mining or further subdivide units. This mechanism effectively addresses many issues related to the quantity, distribution, and production rights of currency in society.

In the millions of years of humanity's quest for a perfect currency mechanism, Bitcoin undoubtedly provides a highly innovative solution.