There's a saying in Bitcoin
Sounds great. But what does this mean?
1BTC = 1BTC means, that 1 BTC out of the total supply will remain the same over time, forever.
The total supply is capped at 21,000,000BTC. There will never be more. A rule written in code and enforced by the network and every single node operator.
If you own 1 BTC, you will always own 1/21,000,000 of the total supply.
If you own 100,000 Satoshis, you will always own 0.001/21,000,000 of the total supply.
Since Bitcoin does not have inflation of the monetary supply, this will remain true, forever. Down to the single Satoshi!
Let's explore this concept with a simple thought exercise and some visuals. We start by comparing this to the USD.
The USD does not have the same rules. The monetary supply can change over time and has done so in the past. This is known as inflation of the monetary supply. The problem with inflation is felt over time. It negatively affects your savings account. Your purchasing power decreases.
And since the monetary supply of the USD does change over time, we say:
1USD โ 1USD
The following illustration should help to explain this.
Below you can see a diagram. The left circle represents the financal view. One part of the left circle represents your savings account. The other part represents the rest of the total supply. Together, they make up the total supply of the USD. The right circle represents the real economy. The total supply of the USD meassures the total market size. It is roughly: price of goods and services * quantity of goods and services. The market size increases if the price of goods and services increases, or the quantity of goods and services increases.
In this example, you start out with 20% of the total supply. That's quite a lot but it helps getting the point across (congrats to your savings account ๐).
Below the diagram you find some control elements.
You can change the size of your savings account, the total market size, and the current total supply of available USD.
- Your USD savings account: $200,000 Mio USD (or 20.00% of the total supply)
- Current Total Supply: $1,000,000 Mio USD
1BTC = 1BTC
Compare this to Bitcoin.
Below you can see the same simple diagram. Again, one part represents your savings account. The other part represents the rest of the total supply. Together, they make up the total supply of Bitcoin.
In this example, you start out with 20% of the total supply. That's a tremendous amount! It again helps getting the point across (congrats again ๐ค Don't lose your private keys!).
Below the diagram you find some control elements.
You can change the size of your savings account, and the total market size.
But you can't change the total supply of Bitcoin.
Because nobody can!
- Your Bitcoin savings account: 4,200,000 BTC (or 20.00% of the total supply)
- Total Supply: 21,000,000 BTC
I hope these illustrations helped you understand the basic concept and the moving parts.
1BTC = 1BTC means, that 1 BTC out of the total supply will remain the same over time, forever.
In fiat, we can't make the same statement. 1USD โ 1USD over time.
The total supply of any asset plays an important role if you want to use it for saving your purchasing power over time. If it can be manipulated at will, it will be done so. If you own some of it, your purchasing power will be affected. In fiat currencies, you'll most likely be negatively affected.
Let me know what you think!