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Bitcoin Inflation VS Time


These charts show the monetary (supply) inflation of Bitcoin. They bear no relation to price inflation, which is an entirely distinct phenomenon. When Austrian economists say "inflation," they're typically referring to monetary inflation, whereas Keynesian economists are typically referring to price inflation.

Bitcoin Inflation vs. TimeBitcoin Inflation vs. Time

Also, please note that the top axis ("Year") on these charts is approximate, based on the scheduled block generation rate of one block per 10 minutes. The actual block generation rate has averaged a bit faster than this, due to the perpetually increasing hash rate, so we're already a little bit further progressed than the labels along the top axis would suggest. This doesn't mean there will be any more than 21M bitcoins; it only means that we'll reach the end of supply generation a little bit sooner than we would have if the hash rate had always held constant.

Inflation in this case is the increase in the supply of money (sometimes called money supply inflation).
At the point where the graph indicates 10% it means the money supply is growing at 10% annualized rate at that point in time.

It is sometimes useful for people to be specific (price inflation vs money supply inflation).  Obviously both "sides" believe their definition of inflation is the right one but it always leads to confusion and/or fights.  If everyone simply used the terms price inflation or money supply inflation it would always be clear.

The money supply increases linearly (roughly) at 50 BTC every 10 minutes for the first 210000 blocks, then 25 BTC every 10 minutes for the next 210000 blocks, then 12.5 BTC every 10 minutes, and so on.  That is why the blue line is made up of straight lines with decreasing slope every 4 years or so.

The instantaneous inflation rate decreases over time.  If I have 50 BTC in the total economy (block 1), and then I suddenly have an additional 50 BTC 10 minutes later, the total supply has inflated 100% from what it was a moment ago.  Annualized that works out to well over 1000% inflation rate.  As the total supply increases after each block, the next 50 BTC are smaller percentage of the total then the previous 50 BTC were (because the total is larger). Now that I have 100 BTC in the supply, the third block of 50 BTC increases the total supply only 50% instead of 100%.  This is why the red line is made up of curved sections (although given the scale of this graph after 2017 it becomes difficult to see the curve).

Then once every 210000 blocks the amount of newly minted currency is cut in half.  This creates a 1 time sudden drop in the amount of currency being created every ten minutes.  This would be why you see the straight dropping verticle portion of the red line every 4 years or so.

As Satoshi said: "The fact that new coins are produced means the money supply increases by a planned amount, but this does not necessarily result in inflation.  If the supply of money increases at the same rate that the number of people using it increases, prices remain stable.  If it does not increase as fast as demand, there will be deflation and early holders of money will see its value increase."

For a great deal of individuals it is not very clear, however when the train begins going, they are trying to catch up, even if it is still unclear to them why the train is going. and also it ends up being a type of panic turmoil ... that is still unclear, although it would have been better to have actually been at least partly on the train as opposed to chasing it.

Everyone should have their own choices, we must not make choices because of others but, because of our own. If people make their own choices, I believe in the end they would not have any regrets because it is their own choice that they have putted trust into.

So, in the year 2022:

  • The year started with approximately 18,916,000 bitcoins in existence. That would be the "monetary base" at the beginning of 2022-01-01
  • An additional (approximately) 328,500 bitcoins will be created with the 52,500 blocks that are solved during the year 2022.
  • If we divide the number of new coins (328,500) by the monetary base (18,916,000) we get a 2022 inflation rate (inflation of supply, not necessarily of the exchange rate) of about 0.0174, or about 1.74%

These charts are purely showing the price at which new coins come into existence as compared to the number of coins that currently exist. They don't take into consideration the number of coins that have actually been completely lost, or otherwise eliminated from the present markets by those that aren't thinking about selling. These graphes do not make any kind of attempt to predict need and also therefore are not indicated to suggest currency exchange rate or viewed worth.


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