In 2008, the first decentralized cryptocurrency was created & was named Bitcoin. The use of Bitcoin was started in 2009. There is no information regarding the inventor or the creators of Bitcoin but they refer themselves under a fake name of ‘ Satoshi Nakamoto ‘. Bitcoin is the most successful cryptocurrency with an all-time highest market cap of $1 trillion. But what made it so successful?
Scarcity factor
Bitcoin has a key feature of the built-in scarcity factor. It means that the total supply is limited to no more than 21 million bitcoins, & as more get mined the incentive to mine more goes down. According to Wikipedia – Mining is a record-keeping service done through the use of computer processing power. The process of mining is very complicated & worth the reward. Miners receive a reward for each new block of ledger data generated, accepted, and added to the chain of bitcoin transactions. This reward is halved on every 210,000 blocks. This process creates an asymptotic supply curve & that is scarcity.
There are a total of 21 million bitcoins created & about 18.6 million coins have been mined & this makes Bitcoin a scarce asset.
Scarce asset
The declining supply curve & the increasing growth in demand is what makes Bitcoin a scarce asset. According to the law of supply, price drives supply. But will this affect the future of Bitcoin?
Bitcoin has an entire demand side dynamic at work. The value or the utility of Bitcoin should grow faster than its demand as in the network of buyers, sellers, exchanges & retailers. But how it may perform in the real world is not predictable as it has happened many times that the value of Bitcoin has decreased.