Bitcoin: Is the 21 Million Cap Really Untouchable?

The cap of 21 million bitcoins is back in the debate. Developer Peter Todd advocates for a permanent issuance to continue rewarding miners after 2140. Adam Back opposes this idea. The head of Blockstream sees this argument as a way to rally users towards a dangerous modification of Bitcoin's rules. No changes are currently in preparation.

In brief

• Peter Todd defends a small permanent issuance of bitcoins after block rewards disappear.
• Adam Back rejects the idea and warns against the arguments used to promote it.
• Modifying the 21 million cap would require a hard fork accepted by the market.

Bitcoin has just crossed the threshold of 20 million BTC mined. There are about one million coins left to produce before reaching the limit set by the protocol. This last million will take time.

Miners currently receive 3.125 BTC per block. This reward halves approximately every four years. About thirty halvings are still to come, and the last satoshis are expected to be produced around 2140. After that, no new bitcoins.

Peter Todd has long wondered what will happen to miners when this reward disappears. They will then have to rely solely on fees paid by users to include their transactions in the blocks.

Todd considers these revenues too irregular. Some blocks generate a lot in fees, while others much less. According to him, this situation could encourage miners to reorganize the blockchain to recover particularly profitable blocks.

His solution is to maintain a small permanent reward. Bitcoin would then gradually exceed 21 million units.

This idea is not at all appealing to Adam Back. The head of Blockstream accuses proponents of such changes of constructing simple narratives to attract uninformed users towards modifications he deems dangerous.

Back compares the process to the recent debate around BIP-110. This controversial proposal aimed to filter out certain non-payment-related data in Bitcoin blocks. It garnered only about 2.53% support from miners, while the target threshold was 55%.

However, Peter Todd puts forward another argument.

Bitcoins continuously disappear when their owners permanently lose their private keys. A small permanent creation could thus compensate for these losses. In his model, the available supply would eventually stabilize since coins would be lost at the same rate as new ones would appear.

The issue of miner compensation does not come from nowhere. Cointribune had already looked into the future profitability of mining when rewards in new BTC disappear. Ultimately, fees will need to take a much more significant role.

There is no rush for an answer. 2140 still leaves a few years for discussion.

Peter Todd can propose a new monetary policy. However, convincing the network is another matter. Modifying the 21 million limit does not resemble a simple software update. It would require a hard fork. Users, developers, businesses, platforms, and miners would then have to choose between the new rules and the old version of Bitcoin.

Nothing guarantees that the inflationary chain would retain the name Bitcoin or its value. This is the whole difficulty. The 21 million is not just a number in the code. This limit has been part of Bitcoin's economic discourse since its inception. Investors buy it precisely because no one can normally decide to produce more.

The community has already experienced much less sensitive technical divisions. A direct modification of the monetary supply would touch upon the original contract.

Adam Back does not say that Bitcoin will exceed 21 million. He warns against the arguments that could one day be used to defend this idea. And the debate is just beginning. The lower the block reward becomes, the more the question of funding security will resurface. Fees may be sufficient. Maybe not. For now, Bitcoin's digital scarcity still rests on its cap of 21 million. No one has changed it yet.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.