Scarcity is Bitcoin's most underrated feature

Have you ever stopped to consider why things tend to cost more over time? A home today versus one in 2000. A car. A basket of groceries. 

Rising prices are often blamed on external factors like supply chain disruptions or corporate greed, but a more honest explanation lies in the ever-expanding number of dollars in circulation. When the supply of anything grows without restraint, its value gets diluted over time. Money is no exception.

🧠Why scarcity matters

Plainly speaking, scarcity means there’s not enough of something to go around, no matter how many people want a piece of it. 

Throughout history, every form of money competed on scarcity. Early societies experimented with grains, salt, feathers, shells, and plenty of other things. They all failed for the same reason. They were too abundant and too easy to produce. And easy money doesn’t hold value for long. 

Gold outlasted everything else because it’s hard to extract and the supply of it grows at a slow, predictable pace. Even though no one knows exactly how much gold exists on earth, its relative scarcity has helped it maintain value for thousands of years.

On the other end of the spectrum is the money most of us use every day, like dollars or shekels. We call this fiat currency, meaning its value comes from trust in the government that issues it. 

Fiat money is abundant by design. Central banks create new units all the time, often just to keep up with the interest on the debt they already owe. And the more of it that gets created, the less each unit buys. That slow loss of purchasing power is why many believe fiat currencies are destined to join grains and shells in the museum of monetary history.

Bitcoin flips this dynamic entirely. It is the first asset with absolute scarcity, enforced not by geology or political promises, but by open-source software that fixes the total supply at 21 million coins.

Bitcoin earns its scarcity in three ways:

1. There will only ever be 21 million bitcoins.

   The 21 million cap is baked directly into Bitcoin’s code. It isn’t something a committee can revisit or a setting that can be tweaked. Bitcoin runs on a global network of independent participants, which means there’s no central authority that can simply decide to create more. As the network has grown, changing that cap has become increasingly unrealistic. The bigger Bitcoin becomes, the harder it is to move the goalposts.

   
   

2. New supply shrinks every four years.

   Roughly every four years, the number of newly created bitcoins gets cut in half. In the early years (2009-2012), computers running Bitcoin software generated 7,200 new coins per day. Today that number is 450, and in 2028 it will drop to 225. By 2035, approximately 99% of all bitcoins will already be in circulation, with the remaining 1% released at a glacial pace over the next century.  

   
   

3. The supply schedule can’t be altered.

   Bitcoin’s network is powered by highly specialized computers, known as miners.  They consume energy to keep the system running and face real-world operating costs like hardware and electricity, similar to gold miners who need to invest in heavy machinery and fuel. 

   
   

   Here’s the key difference. When the price of gold rises, gold miners can dig faster and increase the supply. Bitcoin miners cannot. No matter how high the price goes, or how many machines come online, Bitcoin’s issuance rate does not change.

Unlike anything else in finance, Bitcoin gets more scarce over time.

Bottom line

Scarcity gives money the ability to protect the value people create with their time and energy. With Bitcoin, the rules are simple and transparent. One bitcoin will always represent one out of 21 million. 

Its price in dollars may bounce around from day to day, but the number of bitcoins in circulation cannot grow arbitrarily. The same can’t be said for dollars.

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