How it is possible to increase max BTC supply and what consequences it may have
BlackRock has questioned one of the main distinguishing features of bitcoin from other assets and currencies - a hard limit of 21 million bitcoin coins. We talk about how the number of bitcoins could be increased and the implications for the major cryptocurrency if this happens.
On the website of iShares, a company owned by BlackRock that manages dozens of its exchange-traded funds (ETFs), a three-minute instructional video is posted on a page devoted to bitcoin. After listing the cryptocurrency's advantages, which include a strict limit on emissions, the authors made a clarification that “there is no guarantee that the 21 million bitcoin limit will not be changed.”
Renaming the smallest unit of bitcoin
One of the options for a conditional increase in issuance was presented by Synonym CEO John Carvalho in early December. He presented for discussion to the bitcoin community an initiative to rename the smallest unit of bitcoin, equal to 0.00000001 BTC. The proposal involves changing the name of 0.00000001 to 1
$BTC , which at the December 23 exchange rate would mean that 1 BTC equals $0.92 .
“The current convention defines one BTC as 100 million smallest indivisible units. This representation requires working with eight decimal places, which can be confusing and contribute to the misconception that bitcoin is inherently based on the decimal system. This would reduce cognitive costs by ensuring that users understand bitcoin as countable discrete units, which ultimately improves educational clarity and user experience,” Carvalho noted.
These are not the first discussions about changing the names in bitcoin's unit structure. In 2017, bitcoin developer Jimmy Song proposed introducing “bits” as the standard for naming 0.00001 BTC. This is all part of a long-running debate over comprehension issues and user error in the bitcoin transaction process. None of the proposals have yet been accepted by the community.
After the name change, it will no longer be Bitcoin
The proposal to change the name of bitcoin fractions is not radical, although it will require a huge effort to change the mechanisms of applications and wallets. As well as educational materials for users. However, this option preserves one of bitcoin's main features - a limited issue of 21 million BTC, whatever they are called.
This is what sets it apart from traditional currencies and assets for which inflation is a given. Inflation refers to an increase in units of currency in circulation.
From an economic point of view, moderate inflation is perceived as one way of encouraging holders of currency to spend it. But from an investment point of view, inflation is perceived as a hidden tax. And one that gradually devalues savings through rising commodity prices.
However, BlackRock's announcement through an educational video has sparked debate on whether it is really possible to increase the number of bitcoins and what consequences it could lead to.
Experts believe that it all depends on what exactly we consider a bitcoin. Cointelegraph, citing bitcoin developers at Super Testnet, wrote that any changes of this nature would lead to the creation of something else that would no longer be bitcoin.
“The inflation ceiling is the determining factor for bitcoin. Take that (the emission limit) away and whatever you have is no longer bitcoin,” Super Testnet noted, pointing to a document that describes Satoshi Nakamoto's concept of bitcoin (aka white paper).
Is it possible to change the bitcoin supply limit?
It is theoretically possible to change the overall supply of bitcoin by changing its underlying code. To do this, developers, major market participants, and the community at large must agree to change the code. If such an agreement is reached, the developers will write the code to integrate the changes into Bitcoin Core (the software that is used to access the network).
To ensure reliability, the next step will require making sure that all nodes (network nodes) either accept the changes or are forced off the network. This will be a very challenging task, as bitcoin was created as a self-contained system that does not require changes.
But even if the operators of all network nodes agree to such changes, there is another level where consensus is needed - users and investors. Avalanche blockchain founder Emin Gün Sirer pointed out back in 2014 the power of users in terms of accepting any changes.
The bitcoin ecosystem is made up of many people, not just the miners and other participants running the nodes. Every single bitcoin user, every single person with a wallet, and every single trader all have a say on the adoption of certain changes. Gün Sirer's key thesis is that ordinary market participants “vote” for changes with their money.
In the most borderline cases, the public can simply stop buying or using bitcoin in other ways, even if it is technologically possible to change the 21 million BTC limit.
“This is why ordinary users have a lot of power in bitcoin. It is the power of the network that determines the shape of the blockchain, not the power of the mining (network nodes),” Gün Sirer wrote.
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