{"id":33125,"date":"2017-01-03T13:51:27","date_gmt":"2017-01-03T21:51:27","guid":{"rendered":"http:\/\/lifeboat.com\/blog\/?p=33125"},"modified":"2017-04-26T13:20:57","modified_gmt":"2017-04-26T20:20:57","slug":"can-bitcoin-flourish-with-a-capped-supply","status":"publish","type":"post","link":"https:\/\/lifeboat.com\/blog\/2017\/01\/can-bitcoin-flourish-with-a-capped-supply","title":{"rendered":"Can Bitcoin Flourish with a Capped Supply?"},"content":{"rendered":"

The answer may be counter-intuitive: Not only can Bitcoin be widely adopted under a supply cap, its trust and integrity are a direct result of a provably limited supply. As a result, it will flourish because<\/em> it is capped.<\/p>\n

Everyone Can Own and Trade a Limited Commodity, IF\u2026<\/strong><\/p>\n

\u2026if it is both measurable and divisible. Bitcoin has a capped supply just as gold has a capped supply. Although both assets will be mined for some time into the future, there is only so much that will ever be uncovered. Thereafter, the total pie cannot grow.<\/p>\n

But the transaction units will continue to grow as needed, because the pie is divisible into very, very tiny units:<\/p>\n

There will eventually be 21 million BTC and each coin is divisible into 108<\/sup> units. This yields (21 million * 100 million), or 21 trillion exchangeable units. And, it can be divided further by consensus.<\/p>\n

As Bitcoin is adopted\u2014whether as a simple payment instrument, an investment asset or even as national currencies around the world\u2014each unit of the limited supply simply rises in value. If thought of as a currency, with a value established by supply & demand, it leads to a deflationary economy.<\/p>\n

But, Isn\u2019t Deflation Bad for the Economy?<\/strong><\/p>\n

\"\"It\u2019s common to associate deflation with economic ills. One need only glance back at the the last century to conclude that deflation coincides with wars, joblessness, recession and a crippling concentration of wealth. Perhaps, just as bad, the tools used to pull a nation out of deflation often force governments to cherry pick beneficiaries of stimulus spending.<\/p>\n

But it is important to note that deflation plays no role in causing these things. On the contrary, it is an effect rather than a cause<\/em><\/span>\u2026 In fact, when a supply cap is introduced as a designed control input<\/em> for monetary policy, all sorts of good things follow. I address these in various answers at Quora. Dig in:<\/p>\n