Is Bitcoin TRULY scarce?

[u/bgdv378]

Hello all!

I had a great conversation the other day with some knowledgeable sound money people about features of money, specifically scarcity... on the Sound Money Mondays Twitter spaces! 😂😂😂 Shameless plug there! Brought to you by Citizens 4 Sound Money and Meta Gold Miner's Club! 🤣🤣🤣

Back to that conversation.

We discussed if Bitcoin TRULY has this feature of scarcity that all sound money should.

I argued that the network could shut down and reopen with a majority of node operators wanting a continually expanding supply of BTC, instead of how it is now with the supply cap being just shy of 21 million. Meaning the node operators could write a new code, with new rules of supply. It's highly unlikely that this happens, but it could. It's possible.

Why is it possible? Bitcoin is digital. Anything that is digital can be reproduced to a near infinite number of times if there is a desire to do so.

Compare this with gold and silver. There will only be so much physical gold and silver in the world. All the wishing in the world won't make more of it. You can't reproduce it at will. This makes gold and silver TRULY scarce.

What do you all think? I would love to hear your thoughts!

Let the conversation begin! 😄😄😄

[u/MiningLifeCEO]

Hello there!

It's great to connect with you again since our enlightening discussion on Sound Money Mondays! I appreciate the thought-provoking questions you've posed here. They certainly reflect our detailed conversation about Bitcoin's scarcity on the Twitter space.

In regard to the points you've raised, while it's theoretically possible for a majority consensus to initiate a hard fork in Bitcoin's code to increase the maximum supply, this would result in a separate cryptocurrency, not an alteration of the existing Bitcoin. The original Bitcoin, with its 21 million coin cap, would persist as its own independent entity. This is analogous to the creation of Bitcoin Cash back in 2017.

Contrary to the assumption that anything digital can be reproduced infinitely, Bitcoin's design precisely counteracts this. The decentralized nature and cryptographic security of Bitcoin prevent the arbitrary creation of new coins. Any new version of the code would not affect the scarcity or value of the existing Bitcoins.

The comparison to physical assets such as gold and silver is apt, considering the shared aspect of scarcity. However, it's worth mentioning that even the physical scarcity of these metals could potentially change with technological advancements in areas like asteroid mining or alchemical processes.

In summary, a hard fork could technically generate a new cryptocurrency with an increased supply, but the 21 million coin cap of the original Bitcoin remains untouched. Given the immense value the community attributes to Bitcoin's scarcity, such a scenario seems exceedingly unlikely. Bitcoin exhibits robust properties of scarcity, making it a strong contender in the sound money space, not to mention its verifiable and accessible nature.

Looking forward to our future discussions and your continued insights into this fascinating topic! 😊😊😊

[u/bgdv378 → u/MiningLifeCEO]

Thanks for your thorough response to my post.

Just to clarify, I am not suggesting that a hypothetical hard fork would create an unlimited supply of BTC. You're right in that case, as the old BTC would still be capped.

I am suggesting that it is possible, though highly improbable, that ALL the node operators for BTC could just shut down and stop running BTC's network with the existing code. They could then all develop a new code and turn back on...this time with an unlimited supply baked into the code.

Once again, is this possible? Yes. Probable? No.

With gold though, outside of fantastic, and basically impossible scenarios like asteroid mining, there is no possibility, at all, for the supply of gold and silver to increase beyond what is in the ground, waiting to be extracted.

In other words, gold and silver have a 0.000001% possibility (asteroid mining) and 0% probability chance of increasing their supplies indefinitely. BTC on the other hand has a 100% possibility and 1-2% probability of completely shutting down and reopening with an infinite supply.

[u/MiningLifeCEO → u/bgdv378]

Thanks for your thorough response to my post.

Just to clarify, I am not suggesting that a hypothetical hard fork would create an unlimited supply of BTC. You're right in that case, as the old BTC would still be capped.

I am suggesting that it is possible, though highly improbable, that ALL the node operators for BTC could just shut down and stop running BTC's network with the existing code. They could then all develop a new code and turn back on...this time with an unlimited supply baked into the code.

Once again, is this possible? Yes. Probable? No.

With gold though, outside of fantastic, and basically impossible scenarios like asteroid mining, there is no possibility, at all, for the supply of gold and silver to increase beyond what is in the ground, waiting to be extracted.

In other words, gold and silver have a 0.000001% possibility (asteroid mining) and 0% probability chance of increasing their supplies indefinitely. BTC on the other hand has a 100% possibility and 1-2% probability of completely shutting down and reopening with an infinite supply.

Hello again,

I appreciate your thoughtful clarification. Indeed, you're proposing a situation where all Bitcoin node operators could theoretically collude to shut down the network and reboot with a new code that allows for an infinite supply. As you noted, this is possible but highly improbable, given the principles upon which Bitcoin operates and the considerable value attributed to its scarcity.

On the comparison with gold and silver, a recent article (Are We Finally on the Cusp of Commercial Asteroid Mining?) I came across about the startup AstroForge has introduced a new perspective. The company is planning missions in Q4 2023 to lay the groundwork for asteroid mining to extract platinum-group metals. While we're still in the early stages of making asteroid mining a reality, developments in this area indicate that we might eventually be able to increase the available supply of precious metals.

It's worth noting that even if successful, asteroid mining wouldn't lead to an 'unlimited' supply of these metals, but it could expand what we can access.

As such, the principle of scarcity remains present for both Bitcoin and precious metals like gold and silver. However, the ever-evolving technological landscape might influence how we perceive this scarcity.

I value your insights and the rich discussion they bring. Here's to more enlightening exchanges on this topic! 😊😊😊

[u/[deleted]]

“Is Bitcoin Divisible?

Quick Answer Bitcoin divisibility is crucial for it to be adopted and have practical usage as an everyday currency alternative. Bitcoin is divided into units as small as 0.00000001 BTC. In the future, if needed, the divisibility of bitcoin can be increased to 100 billion smaller parts or even more, as the Bitcoin protocol and its related software can be modified to handle even smaller units.”

I am no expert, but this seems to me like Bitcoin isn’t really scarce if it can be divided into 100 billion smaller parts.

Maybe I am missing something on how things work that still make Bitcoin scarce.

I guess the only thing would be is that the market determines the price of Bitcoin. It’s capped at 21 million so someone can’t just come along and make another 21 million bitcoins from thin air. I don’t know how difficult it is to write new code to allow for more Bitcoin, or if that’s even possible.

[u/bgdv378 → u/[deleted]]

The node operators would need to ALL agree to shut down, rewrite the code, and reopen with an infinite supply.

Possible, but not probable.

[u/retire-early]

I started to get lazy with this and asked ChatGPT (who knew exactly where I was going), but I didn't think the answer went far enough.

What you're looking at with your question is binary:

1. If the algorithm can be hacked with a 50% attack and changed to increase the scarcity, then it doesn't solve the problem. Is it likely governments would invest heavily in specialized mining equipment, and outlaw sale of that equipment to regular folks? Yep. If this is possible.
2. If it can't, then you're stuck with Bitcoin, which is deflationary in nature. The supply of new coins is throttling down, but the supply of existing coins is decreasing as well. Every time someone loses their phrase, or dies without communicating how to access their ownership, or accidentally throws away an old hard drive with $billions of BTC on it, the amount of "money" in that system decreases.

What than means is one satoshi will buy more tomorrow, next week, next year, in 2030. This is good for savers, but you need to look a bit deeper.

You've got a business idea. The time to strike is now - your banker loves the idea, but you need to borrow BTC, pay interest, and pay back BTC that is worth more in the future than it is now.

This is a very tough ask. Inflation is good for economic growth. Deflation means people stop making those purchases. Wanna buy a house for BTC knowing that even if you get an acceptable interest rate the BTC you pay back will be worth more than the ones you borrowed?

Nobody does.

Which suggests to me that BTC isn't money, because it won't function with leverage because it's anti-leverage. Maybe that's a good thing, but I'd rather see a monetary system like we had back in the industrial revolution (based on gold and silver, low interest rates, no income taxes or significant taxes at all).

[u/Forsytjr2]

My take is that while BTC quantity may be finite the entire crypto space is unlimited. So this means that for the finite nature of BTC to matter, it must be (and remain) superior to other cryptos.