30s Summary

BlackRock’s recent video on Bitcoin has ignited a debate over whether its 21 million supply cap is permanent. The video acknowledges Bitcoin’s supply cap, but also suggests it may not be fixed. Noting that it could technically be altered with the consensus of the Bitcoin community, this requires initiating a new version of the blockchain or a ‘hard fork’. Despite some miners advocating for changes to Bitcoin’s structure in the past, these propositions have typically lacked broad community support. This raises questions about whether any proposed alteration to the supply cap would gain acceptance.

Full Article

There’s some buzz going around about whether Bitcoin’s 21 million supply cap is as fixed as we’ve all believed. This fresh debate got sparked by an explainer video on Bitcoin that BlackRock put out. The video mentioned there’s no 100% guarantee that the cap won’t be changed.

Why does it matter? Well, the fixed supply of Bitcoin is one of the big reasons people value it. If more Bitcoin was to be created, it could hit investors’ perception of its worth.

So, what did the video say exactly? BlackRock pointed out that Bitcoin has a set supply of 21 million, and this programmed rule helps to control the balance of power and prevents endless printing of the money. However, the video also throws up a disclaimer that it’s not totally sure this 21 million cap won’t be changed. This video even got shared by the chairman of MicroStrategy and Bitcoin enthusiast Michael Saylor, making some people question if Bitcoin is really limited in supply as we thought.

These critics have suggested that if the cap were increased, it would somehow always have been in the plan. Some even claim Bitcoin has been taken over. Supporters of the video are saying BlackRock understands Bitcoin better than most Bitcoin enthusiasts.

So, can Bitcoin’s 21M supply cap be changed after all? It really depends on the definition of Bitcoin. Some argue that it is theoretically possible to change the cap if most of the Bitcoin community – from developers and miners to investors – agree on it. They would then create a new version of the blockchain, or a ‘hard fork’. Firstly, developers would initiate a discussion in the community to gauge the general consensus. After that, if the new rules are accepted, they would be implemented in the Bitcoin Core software. A hard fork would be created, and the community would have to decide if they want to follow the old or new rules. If most people begin to support the new fork, it could become the new Bitcoin network. But not everyone agrees that this new version would still be considered Bitcoin, as the cap is a defining trait of Bitcoin.

An interesting question is who would even want to change the cap? Bitcoin’s basic operation depends on miners who need to be encouraged to work. They get a reward for each block they mine. But this reward amount keeps getting halved every 210,000 blocks. So, for miners to stay motivated, either the price of Bitcoin has to go up, fees have to go up, or a mix of both has to happen. Right now, they get 3.125 Bitcoin per block, equal to $316,950. But this number will go down to 1.625 Bitcoin per block in 2028.

Previous efforts to change Bitcoin’s structure have fallen short. In 2016 and 2017, most Bitcoin miners tried to increase the block size limit to help Bitcoin scale up. But the investor and operator community didn’t go for it, and developers started focusing more on layer 2 solutions soon after. So there seems to be a real question mark about whether any proposed changes to the supply cap would be accepted. No one can guarantee it, but if you run your own node, you can have some power over it.