The Currency

Bitcoin, as a form of money, represents a decentralized digital currency that operates without the need for a central authority like a government or financial institution. It is based on a peer-to-peer network, where transactions are verified by network nodes through cryptography and recorded on a public ledger called a blockchain. This structure allows Bitcoin to function independently of traditional banking systems, providing a global currency that can be sent and received by anyone with an internet connection, regardless of geographical location.

One of Bitcoin's defining characteristics as money is its fixed supply. Unlike fiat currencies, which can be printed in unlimited quantities by governments, Bitcoin has a hard cap of 21 million coins. This scarcity is built into its protocol, making Bitcoin inherently deflationary. As more people adopt and use Bitcoin, the limited supply increases its value, similar to how precious metals like gold have maintained value over time. This fixed supply makes Bitcoin an attractive store of value, preserving purchasing power in the long term.

Moreover, Bitcoin is divisible and portable, making it highly practical for everyday transactions. Each Bitcoin can be divided into 100 million smaller units called satoshis, allowing for micro-transactions and making it adaptable to various scales of economic activity. Being digital, Bitcoin can be transferred quickly and securely across the globe, without the need for intermediaries, reducing transaction costs and settlement times. This ease of transfer and security makes Bitcoin not only a store of value but also an efficient medium of exchange.

At Bitcoin Policy Vermont, we are dedicated to educating the public about the importance of Bitcoin and its potential to transform Vermont’s economy and society.

The Idea

As an idea, Bitcoin represents a profound shift in the way we think about money, freedom, and financial sovereignty. At its core, Bitcoin embodies the principle of decentralization, challenging the traditional financial systems that rely on centralized control by governments and institutions. It offers a vision of a world where individuals have full control over their own wealth, free from the influence of third parties. This decentralization empowers people to transact and store value without needing to trust or rely on intermediaries, fundamentally altering the dynamics of financial power.

Bitcoin also represents the idea of transparency and trust through technology. In a world where financial systems are often opaque and prone to manipulation, Bitcoin's blockchain provides a transparent and immutable record of all transactions. This public ledger is accessible to anyone, ensuring that trust is built not on authority or reputation, but on open, verifiable data. The trustless nature of Bitcoin means that transactions can occur between parties who have never met, without the need for a middleman, fostering a new kind of digital trust built on cryptography and consensus mechanisms.

Beyond its technical attributes, Bitcoin symbolizes the potential for financial inclusion and innovation. It represents a global, open financial system that is accessible to anyone, regardless of their location, economic status, or political environment. In this way, Bitcoin transcends borders, offering a form of financial participation to billions of people who are unbanked or underbanked. The idea of Bitcoin challenges existing structures and encourages innovation in financial technology, pushing the boundaries of what is possible in creating a more equitable and inclusive global economy.

The Importance of 21 Million

The single most important aspect of Bitcoin is the enforced supply cap of 21 million coins. This is the economic driver which makes it such a valuable currency and powered early adoption and mining. As shown in the graph above, new Bitcoin issuance gets reduced by 50% every 210,000 blocks, or roughly every 4 years. Currently, the block subsidy of new Bitcoin is 3.125, but it will coninue to diminish until it ends at 0 in 2140. At this point, all Bitcoin which will ever exist will have been mined, and the network will be sustained by transaction fees bidding for blockspace.

Demand for Bitcoin has steadily increased over the past 16 years, driven by growing awareness of its unique monetary properties. With a continually shrinking supply of new coins entering circulation, the price naturally adjusts upward. This upward price movement draws greater interest in the asset, and at a certian point it becomes a feedback loop where Bitcoin starts to transition into a global reserve currency.

Ultimately, Bitcoin will serve as a stable economic benchmark for value. Instead of relying on a flexible and undefined money supply like we have today, we will have a global currency with a fixed, defined supply of 21 million units. All economic activity can be priced within this limited supply. Prices will no longer rise simply because new currency is issued—instead, they will only increase when things genuinely become more expensive due to market conditions. Over time, prices are likely to decrease against Bitcoin, as technological advancements make goods more abundant and production more efficient.