Can Bitcoin's hard cap of 21 million be changed? - Aliens: AI Crypto News & Markets Updates



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Can Bitcoin's hard cap of 21 million be changed?


Tue, Dec 07, 2021


Aliens TLDR

A hard cap is a limit set by the code of a blockchain on the absolute maximum supply of a cryptocurrency.

For instance, the hard cap of the world's first cryptocurrency, Bitcoin ( BTC ), was set to 21 million by its anonymous creator, Satoshi Nakamoto.

This is true in the case of BTC; Bitcoin's issuance rate and hard-capped supply stay constant regardless of how much energy is put into mining it.

A soft cap is a minimum amount that developers must raise to launch their product, whereas a hard cap is a total amount that a team hopes to raise in an ICO.

While the hard limit refers to the maximum number of tokens sold during an ICO, the soft cap refers to the minimum amount of money that a project can raise to begin development.

An adequate hard cap is essential for two important reasons, including the scarcity of the project’s tokens and the roadmap of the project under consideration.

Any project trying to impose a hard cap must follow the same supply and demand principles.

BTC’s anonymous creator has set Bitcoin’s hard cap to 21 million, i.e., BTC's supply is limited.

Satoshi Nakamoto set a hard cap on the amount of BTC that may ever exist when he invented Bitcoin.

The hard cap is a limit that is written in Bitcoin's source code and enforced by network nodes.

The hard cap on Bitcoin is critical to its value proposition as a currency and an investment tool.

By changing the Bitcoin network's rule, its hard cap can be modified.

These critics say that as the block subsidy — the amount of new Bitcoin created in each block — decreases every four years, miners would want to protect their revenue stream by raising the supply cap beyond 21 million BTC.

On the surface, miners would be enticed to modify the supply cap and allow themselves to generate more new Bitcoin.

The hard cap on Bitcoin is secured from alteration by its incentive structure and governance mechanism.

The entities that govern Bitcoin's ruleset have significant incentives to fight a change to the hard cap because of the network's architecture, but those who wish to change it have no power over the network.

The individuals with the most incentive to modify Bitcoin's hard cap are the miners.

Changing Bitcoin's hard cap could boost earnings for miners for a short time.

The possibility of changing Bitcoin's hard cap stems from two underlying misconceptions regarding BTC as a distributed, consensus-based network.

For example, several entities would have to work together to modify Bitcoin's supply cap.

For example, changing the supply cap would necessitate a hard fork, which would require all nodes on the network to accept the modifications or be kicked off.

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