How does Bitcoin's scarcity (21 million coin limit) affect its long-term value?
Hello, regarding this question, I'll try to explain it in simple terms.
You can imagine Bitcoin as gold or prime real estate in a first-tier city. What do they have in common? "Scarcity."
1. Fixed Supply, Just Like Gold
The total amount of gold on Earth is limited; every piece mined means one less. Bitcoin is the same; its code is hard-coded to a total supply of 21 million coins, not one more. No one can change this rule, unlike traditional currencies where central banks can print more money if they feel there isn't enough.
So, when something useful has a fixed supply, and even decreases over time (e.g., lost bitcoins), its price will naturally rise as more people desire it (demand). This is the most basic principle of "rarity makes things valuable."
2. "Mining" Gets Harder, Output Decreases
Bitcoin doesn't all appear at once; it's generated gradually through a process called "mining." You can think of it as mining for gold.
What's more interesting is that Bitcoin's design includes a "halving" mechanism. Roughly every four years, the number of new bitcoins "mined" is cut in half.
- Initially, miners were rewarded with 50 bitcoins for each block.
- In 2012, it halved to 25.
- In 2016, it halved again to 12.5.
- In 2020, it halved once more to 6.25.
- In 2024, it halved again, and is now 3.125.
As you can see, the rate of new coin production is visibly slowing down. This is like gold mines getting deeper and harder to extract from, with less gold produced each day. This further exacerbates its scarcity.
3. The Cornerstone of Long-Term Value: Against Inflation
Precisely because of these two points (fixed total supply + decreasing output), many view Bitcoin as "digital gold."
The money we hold, due to continuous issuance, sees its purchasing power decline in the long run; this is inflation. What 100 yuan can buy today might require 200 yuan in 10 years.
Because of its scarcity, Bitcoin can theoretically resist the effects of this "money printing." When global currencies are over-issued, some capital, seeking to preserve value, flows into assets with limited supply like gold and Bitcoin. If more people believe in and adopt Bitcoin in the future, and its supply doesn't increase, then its long-term value has a very solid foundation.
To summarize:
Bitcoin's scarcity acts like an "anchor" for its value. It's not like company stocks, which can be issued more; nor is it like fiat currency, which can be printed infinitely. Its supply is written into its code, transparent and unchangeable.
Therefore, its long-term value largely depends on the strength of future societal "consensus" around it—that is, how many people believe in it and are willing to hold it. As long as there is demand, scarcity will be the core logic driving its value appreciation.