upper limit of 21 million bitcoins: historical context
Ethereum, one of the largest and most influential cryptographic currency in the world, was in the meteoric increase in its introduction in 2013. As the first decentralized platform for the use of blockchain technology, Ethereum’s success is widely guided by its innovative approach to create the yourself to create a single ecosystem for digital property. However, in the midst of this rapid growth, concerns were concerned due to the scarcity of one of Ethereum’s most respected components: Bitcoin.
The idea of the upper limit of the number of bitcoins that can be extracted is rooted in the early days of cryptocurrency development. In 2009, Satoshi Nakamoto published White Paper, in which he was a Bitcoin concept, which suggested a limited supply of one million bitcoins to avoid inflation and maintain network integrity. This approach is designed to ensure that the value of each bitcoin remains stable over time.
Why the upper limit?
The upper limit of 21 million Bitcoin was partially established due to concern for inflation and the potential of the total supply of Bitcoin exceeds its original plan. In 2011, Nakamoto said he intended to forge a new block in each 2016, which would result in about 100,000 new bitcoins per year. However, as the project advanced, it was clear that this rate could not be sustainable.
The main argument against the expansion of the upper edge was that this would lead to an unsustainable increase in supply, causing a price drop and potential destabilization of the market. This concern led to Nakamoto for a fixed upper limit of 21 million bitcoins, which he believed he would maintain the value of each currency.
Justification behind the upper limit
There are several theoretical reasons why the upper limit is selected:
- The Scarcity Theory
: By establishing a limited offer, Ethereum aimed to create a feeling of scarcity among users, encouraging them to hold their currencies instead of selling them.
- Stability and predictability : The fixed upper limit would provide a predictable value for each bitcoin, allowing investors to make decisions of informed properties.
- Network Effects : Bitcoin limited supply may lead to increased demand, as users encourage them to keep their currencies due to perceived scarcity.
Impact on Ethereum
The decision to establish the upper limit of 21 million Bitcoin had a significant impact on the Ethereum ecosystem. Although it helped maintain the value of each bitcoin and created a sense of stability on the market, it also means:
- New coins cannot be extracted : Once the user’s account is closed or decide to sell their coins, additional bitcoins are not formed.
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Conclusion
In conclusion, the upper limit of 21 million bitcoin in Ethereum is a deliberate design made to create a decentralized economy with a limited supply. Although it has been able to maintain the value of each bitcoin and encourage responsible use, it also means that new currencies cannot be extracted and users are encouraged to keep their bets existing. As the cryptocurrency scenario continues to develop, understanding the historical context behind this design choice remains essential for navigating the complex world of digital property.
Sources:
- Wikipedia: Ethereum
- Bitcoin WhitePaper Satoshi Nakamoto (2009)
- Coindesk: « Why did Satoshi Nakamoto limited Bitcoin’s supply? »