Bitcoin is a relatively new and very innovative means of electronic payment that can be handled in a similar way to cash. Individual bitcoins are created by solving complex math problems, which is known as mining. Since the introduction of Bitcoin, not only has the interest in this digital currency grown, but also the number of users. At the same time, the amount of money available is growing steadily. But here there is a special feature of Bitcoin compared to other currencies: The number of Bitcoins generated is limited.
In order to be able to carry out transactions in the Bitcoin network, so-called blocks are required. These are generated worldwide and locally in a certain number per time period, exactly six pieces per hour worldwide. The speed with which these blocks are calculated can be directly influenced. It does this by modifying the difficulty of solving a task. A reward of 50 Bitcoins is paid out for every block generated. Over the years, however, this reward will cut in half again and again, which will reduce the rate of bitcoins generated. You can learn more about the development of bitcoin here https://bitcoindata.org/bitcoin_revolution/ .
This serves the purpose of slowing down the money supply growth upwards until the maximum number of bitcoins is reached at some point is achieved. This is 21 million bitcoins, beyond that there is no further generation of bitcoins. Such a monetary limit offers the means of payment exactly what various currencies, above all the dollar, would urgently need at the moment: an effective protection against inflation.
Critical voices could counter this by saying that it would create a risk of deflation. This would especially be the case if speculation were made on the increase in the value of Bitcoins, which in turn would lead to money being hoarded. Deflation would also mean that the goods – measured in Bitcoin – would become cheaper and cheaper. But since Bitcoins is a purely digital currency, it remains to be seen whether an increase in value will actually affect the speed of circulation. However, the fact is that the Bitcoin network does not have to deal with the consequences of inflation anytime soon. Especially in times of sharply fluctuating values, Bitcoins could therefore become more and more interesting, also for investors.
