Since its inception eleven years ago, one of the main strengths of Bitcoin has been its deflationary design. Thus, unlike traditional fiat money, which constantly faces inflationary waves. The value of Bitcoin has risen sharply in the decade that followed the Financial Crisis of 2008. As a result, many have even claimed that Bitcoin defeated fiat money inflation.
The design of Bitcoin
When Satoshi Nakamoto, the legendary anonymous creator of Bitcoin, developed the cryptocurrency, he did so by following the example of gold in the financial markets. Thus, over the years and despite the economic crises that have cyclically affected the entire world. The value of gold has not stopped increasing, becoming the asset reserve of value par excellence.
With this in mind, Satoshi Nakamoto created the Halving. The mechanism by which Bitcoin guarantees that its value will not be affected by inflation, in the same way that it impacts fiat money. Well, after every 210,000 blocks mined in the BTC Blockchain, the rate of issuance of new tokens of the cryptocurrency is reduced by half.
Due to this, Bitcoin miners went from receiving a reward of 50 BTC per block, to only 25, then 12.5 and finally to 6.25 that they receive at the moment. In this way, since the issuance of Bitcoin is defined through a code that cannot be altered, and not through the political decisions of governments. Satoshi Nakamoto thought he could avoid the effects that the excess supply of fiat money has on its value.
Inflation of fiat money
Thus, today there are plenty of examples of the harmful effects that exaggerated government intervention can have on inflation. With cases such as those of Argentina and Venezuela being signs of the weakening of fiat money caused by an excess of supply, and a total collapse in demand.
These effects of inflation are also seen, although in a less exaggerated way, in countries like the United States. Where its national currency, the US dollar, has seen its purchasing power reduced due to inflationary pressures on it. Just what the executive of Kraken, Dan Held, comments through his account of Twitter, from a CoinTelegraph quote.
«Since 2010, inflation has turned $ 1 into 84 cents while $ 1 invested in Bitcoin would be worth $ 274,000 – CoinTelegraph ».
With figures as strong as these, it would then be clear the value that Bitcoin has provided to its users so far. Which can protect your capital within the Blockchain of the cryptocurrency. What has allowed them to avoid, until now, the most harmful effects of inflation on fiat money.