The rewards that miners receive for solving blocks on the network are the only means of mining cryptocurrency. A feature of the network is that these rewards are given out almost constantly, regardless of the current state of mining.
This is possible because the #blockchain encodes the concept of "complexity", through which the network regulates the difficulty with which miners mine on the blockchain.
The higher the processing power of the miners, the faster they work and the faster the blocks are generated. The network wants block rewards to be issued at a constant rate, so it increases the Complexity at the next adjustment, bringing the miners back to the desired rate.
As a result of Complexity, #bitcoin supply almost always increases during Halving events. The graph below shows how the network's issuance (i. e. the number of miners mined each day) has changed over the history of the asset.
Since the amount of issuance is more or less constant between Halving and Halving events, the asset's inflation rate is also constant during these periods. Similarly, during halving events, the inflation rate is also halved.
Naturally, this pattern was also true during the last halving event, when bitcoin's inflation rate halved again. BTC's annual inflation rate in the previous era was around 1.7%, while in the new era it has dropped to 0.85%.
See also: Massive accumulation of funds in XRP: is a rally coming?
This allowed bitcoin to reach a new milestone against gold. " For the first time in history, bitcoin's stable issue rate (0.83%) is lower than gold's (~2.3%), and the title of the most scarce asset has historically been handed over. " the report said.
Below is a chart comparing bitcoin's inflation rate in recent years to that of precious metals.
Bitcoin has managed to recover in recent days, but its value has plummeted over the past day, and the price has rolled back to the $64,700 mark.
Keshav is a physics graduate and has been writing for Bitcoinist since June 2021.
Read us at: Compass Investments
