What Would Happen If we Increase the Supply Limit of Bitcoin

Bitcoin was introduced to the world as a truly decentralized financial ecosystem aided by the Blockchain technology. The pioneer of cryptocurrency started out with a zero value and reached a peak of $20k by December 2017. Many Bitcoin bashers and no coiners say that since the digital asset is not backed by any real-world entity, it’s a ticking bubble which might burst any day.

However, those who understand the technology, the vision, and the cryptocurrency would tell you that the price of the Bitcoin is governed by the acceptance level, and the technology backing it. Apart from that the limited supply of 21 million Bitcoin brings in the scarcity factor which also drives the prices up.

Now, a proposal has been put forward to increase the upper supply limit of Bitcoin and the reasoning for the same is to end the monopoly of mining sector which has been overtaken by mining farms who have the resources to run multiple high-grade mining rigs.

Let us look at various aspects of the Bitcoin and why increasing the upper limit could hamper the Bitcoin blockchain could be a bad idea.

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Various Issues That Might Arise By Increasing the Total Supply Limit

The actual Bitcoin supply limit stands at 21 million, and the limited supply is one of the main reasons for the high price value of the coin. Imagine a product that started out at a valuation of zero and now being pegged as the replacement to the gold’s store of value.

Out of the total 21 million supply, 80% of the coins have already been mined and the remaining 4.4 million is predicted to be mined in the coming century. If centralization in mining is the only reason for increasing the supply cap, it’s already too late to do so.

Skeptics have argued that it’s theoretically possible to increase the limit by a 51% attack or Sybil attack, but that hasn’t been feasibly possible on the BTC network.

Let us assume that the upper limit of the total Bitcoin supply is increased theoretically to hope that the monopoly of Mining farms are decreased, but in order to counter one problem, let us see what all would change by increasing the supply limit.

The prices of Bitcoin are majorly driven by its vision of decentralization, the technology, and the limited supply. If the supply cap is increased the prices would go down, and the interest of people towards the Bitcoin would decrease.
The early birds and seasoned investors who looked at various factors including the limited supply might feel cheated and the trust value of the community will be lowered.
Increasing the supply limit does not completely guarantee that the mining farms would have a lower interest in the process, the monopoly might actually increase, as the supply would not really make any changes to the mining parameters.
The stakeholders and investors might feel cheated and they might liquidate their assets and bailout from the Bitcoin world.
Bitcoin is only a decade old and the trade market is still governed by the buzz and trust of the coin, if the supply limit is increased, it would bring in a ton of bad press driving its prices further down.
After 2018’s bearish market, the investors are already skeptical since many predicted the prices of digital assets to go further up. If the Bitcoin community loses interest, then there are chances of a total market crash as well.

People who are propagating the idea of an increased supply cap either does not understand the working process of the Bitcoin or have missed the early bandwagon to be a crypto millionaire. Even if we look at the decision from a technical point of view, there is no point of increasing the limited supply cap as it would neither resolve the scalability issue or decrease the size of the Bitcoin node.

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Final Thoughts

If the centralization in the mining process is the genuine concern behind the reasoning of increasing the supply cap, the propagators must think a little harder. The proposal is as sane as printing more fiat currencies to counter increasing world poverty and inflation.

If the core developers really want to end the monopoly of mining farms, they need to make changes in the mining algorithm so that everyone can benefit out of it. The Satoshi’s vision of Bitcoin was definitely where people can use their normal home-based CPU pc to verify transactions.

However, the boom in the Blockchain and cryptocurrency ecosystem was so fast and large that it did not provide the developers ample time to implement the necessary changes to accommodate such a huge demand. This lead to many scalability issues and of course mining centralization.

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