Understand the limitation of the total Bitcoin supply: an Ethereum guide
As one of the largest and most recognized cryptocurrencies, Bitcoin has sparked an intense debate on its underlying architecture. A fundamental aspect that has drawn significant attention is the scarcity of the total Bitcoin offer. In this article, we will immerse ourselves in the concept of a total limited number of bitcoins, explore the protocol responsible for its application and examine why participants are not allowed to manipulate or bypass this rule.
The concept of total supply
The total amount of new bitcoins that can be extracted is capped at 21 million. This means that once the 21 million bitcoins have been created, there will be no other additions to the existing offer. The process of operating new bitcoins is to solve complex mathematical equations, which require significant IT power and energy.
Why a total limited offer?
The limitation of the total bitcoin offer is used for several purposes:
- prevents inflation
: With a fixed diet of bitcoins, there is no possibility for inflationary pressures. This maintains the value of each currency unit.
- ensures rarity : The limited availability of new bitcoins ensures that the demand for the overtaking supply, which in turn prevents prices handling and reduces the risk of market instability.
- promotes decentralized governance : The decentralized nature of the Bitcoin network and the open source code base guarantee that there is no single entity controlling the offer or manipulating the system for their own gain .
The blockchain protocol
The blockchain protocol responsible for the application of the limitation of the total bitcoin offer is the algorithm of evidence of work (POW). In the POW, minors are in competition to resolve complex mathematical equations, which requires significant IT power and energy. The first minor to solve the equation can add a new blockchain block and distribute it to the network.
Why can’t participants rape the rule?
The security of the Bitcoin network is based on the decentralized and open source of the protocol. Any attempt to manipulate or bypass the rule would require significant power and calculation energy, which are currently exceeding the capacity of the largest mining operations. In addition:
- The mining difficulty increases : The level of increasing difficulty in the Pow makes it more expensive and with high energy intensity for minors to validate transactions and create new blocks.
- The security of the network requires confidence : dependence on a decentralized network means that participants must have confidence in the integrity of the protocol, which is difficult to achieve without significant supervision.
Conclusion
Bitcoin’s total limited offer serves as a robust mechanism to maintain its value, prevent inflationary pressures and promote decentralized governance. The blockchain protocol responsible for the application of this rule is the consensual work proof algorithm (POW), which is based on network safety and participants’ confidence to operate effectively.
In conclusion, although it may seem counter-intuitive that a system intended to promote scarcity and to prevent inflation would also have limits in place, these constraints are essential to maintain the integrity and stability of the Bitcoin network.