Even though Bitcoin is a digital currency, you cannot make an infinite amount of it.
As in the case of gold, its value is determined by its rarity. In this regard, the Bitcoin protocol has two important foundations. First, there will only be 21 million Bitcoins in total. This now has approx. 90 percent of it has already been mined. This is why the second base is necessary, that the amount of new Bitcoin added to the network is halved every four years. This concept is called halving.
At the beginning of 2020, 12.5 new Bitcoins were added to the network every 10 minutes with virtual "mining". In May, this amount was halved to 6.25. In 2024, this will further decrease to around 3.125. And this process repeats until all 21 million coins are mined. This will happen around 2140 according to some estimates.
By issuing fewer and fewer Bitcoins over time due to the halving, it will likely increase the value of Bitcoin. This is in stark contrast to traditional currencies, which tend to lose value over time due to inflation.
How It Works?
Bitcoin is often compared to gold as it is a similarly valuable and rare asset that is likely to resist inflation. However, unlike gold, the digital and exact amount of Bitcoin is known and verifiable by everyone.
According to the United States Geological Survey, all the gold mined so far would fit in a little more than three Olympic swimming pools, but it is impossible to know exactly how much gold is left on Earth, as new gold deposits are discovered every year, making the amount of supply unpredictable. In contrast, Bitcoin is finite and its supply schedule is known.
Like gold, Bitcoin is "mined", but not by grapples and sieves, but by a global network of computers that compete to verify Bitcoin transactions and reward miners with Bitcoin.
This reward is halved approximately every four years to keep Bitcoin mining predictable, thereby maintaining its value and the massive fanfare surrounding it.
For more content, follow us here, on Twitter, or visit our blog.