A hard limit is a limit set by the code of a blockchain on the absolute maximum supply of this digital asset. A hard cap prevents further production or circulation of this virtual asset unit. Many people widely regard it as having a good effect since it promotes scarcity, which raises the value of each token. As a result, the hard cap of this virtual asset is set to 21 million by Satoshi Nakamoto, its anonymous creator. Perhaps you can start buying and selling Bitcoin by clicking on this trading platform Bitprime Gold
Absolute scarcity refers to a finite, fixed supply of a good’ There’s no additional supply response despite the increasing demand for an item.
Why Does Bitcoin Have a Hard Cap
Bitcoin has a hard limit which makes it valuable because it is limited in supply. Any project attempting to impose a hard cap must follow supply and demand principles. Additionally, there is a safeguard for the underlying project’s integrity and value. Team members and business leaders, on the other hand, must strike a delicate balance to get this number right.
Can the Hard Cap of Bitcoin be changed?
Some Bitcoin skeptics argue that because Bitcoin is merely software, people can modify its network rules. These critics say that with the black subsidy, the amount of new Bitcoin created in each block decreases every four years, and miners would want to protect their revenue stream by raising the supply cap beyond 21 million Bitcoins.
On the surface, the network would entice miners to modify the supply cap to generate more new digital coins. However, this adjustment will not take place for a variety of reasons.
Why the Hard Cap of Bitcoin Cannot Change
The hard cap of this electronic currency is secured from alternation by its incentive structure and governance mechanism. The entities that govern Bitcoin’s rule set have significant incentives for fighting a change to the hard cap. That’s because of the network’s architecture, but those who wish to change it have no power over it.
Bitcoin Governance
The possibility of changing Bitcoin’s hard cap comes from two underlying misconceptions regarding this virtual asset as a distributed, consensus-based network. There are dozens, if not hundred,s of different versions of the Bitcoin source code. For instance, every node in the Bitcoin network runs software to reject any incorrect blocks.
Many nodes use the recent Bitcoin Core version. However, some still use older versions and implementations. As a result, while changing Bitcoins Core’s source code is straightforward, convincing thousands of nodes to implement the modifications is significantly more challenging.
More so, miners have no control over the rules of the network. Instead, miners create new blocks and validate transactions. When the network receives a new block from miners, thousands of nodes independently verify it. And this ensures that it generates a suitable amount of new BTC, has legitimate proof of work, and contains valid transactions. All blocks that break these criteria will be rejected by nodes, implying that miners have no control over the rule set of this digital asset.
Incentives
Miners are the only people with the most incentive to modify Bitcoin’s hard cap. Changing this electronic asset’s hard cap could boost miners’ earnings for a short time. However, doing so would negate one of the main arguments for investing in Bitcoin, its scarcity.
The main feature that makes this digital asset attractive is its predictable fixed supply. However, it is not in miners’ best interest to remove the virtual drive of Bitcoin’s value proposition.
The Bottom Line
Bitcoin’s hard cap is vital to its value proposition as money and investment. Also, the hard cap on Bitcoin is encoded in Bitcoin’s source code and enforced by nodes on the network.
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