Bitcoin’s supply is limited to 21 million BTC. This makes it the only absolutely limited asset that exists. How bitcoiners control the supply and what that has to do with chess.
Why it was 21 million BTC, of all things, can only be speculated about. One possible explanation is the meme number 42 (from Douglas Adams “The Hitchhiker’s Guide to the Galaxy” of course) half of which is 21. But it could also have been pure arbitrariness that persuaded the anonymous Bitcoin father Satoshi Nakamoto to limit his digital peer-to-peer cash system to 21 million units.
Although they have led to some speculation, the motives are ultimately irrelevant. The only important thing is that there is this upper limit of 21 million BTC. Because with Bitcoin, mankind has an asset at hand for the first time, the offer of which is finite.
One can say it so clearly: The invention of digital scarcity is nothing less than a millennium innovation. There are goods that are also in short supply. Naturally limited raw materials such as gold or oil are examples of this. But if you expand your perspective beyond the boundaries of planet earth, suddenly the yellow precious metal is no longer rare. So there can only be an absolute scarcity in the digital space. But creating absolute, digital scarcity is no easy undertaking. On the contrary.
The social layer enforces the limit
Bitcoin is only limited to 21 million coins because the network participants agree on it. The original Satoshi code provides for the limit. But code can be changed. Therefore, in the end, it is not the code that is decisive for Bitcoin, but the social consensus on which the system is based. Because 21 million Bitcoin are ultimately just the rules of the game that Bitcoiners have agreed on. It would not be a problem to create a coin, for example through a hard fork, the supply of which is limited to 20 million or less. However, this does not automatically make this coin tighter in the true sense of the word, since there are no players.
The chess game analogy is therefore popular among Bitcoiners. You can change the rules of the game of chess, but what is missing is the players. Chess is a game that has matured socially over centuries; its cultural significance is unique. Nobody would think of implementing a new set of rules.
The analogy is also good because it shows how long it actually takes to build social consensus. Chess, for example, has been established in Europe since the early 13th century – its tradition is probably much older in Asia and Persia.
Compared to that, Bitcoin is still in its infancy. Digital gold is only eleven years old – and has come astonishingly far for that time.
As mentioned, the limitation of the upper limit is only worth as much as the social class that enforces it. And this aspect is crucial.
A maximalist protective wall
Bitcoiners can use a full node to actively decide which protocol rules they want to follow. Hence the saying “Don’t trust, verify!“. There is 21 million BTC precisely because Bitcoiners chose to install exactly the software that the limit provides. With money in particular, this aspect of decentralized control is crucial. After all, history has shown that the monopoly on the creation of money always has led to taking advantage or inflation. Control of the cash faucet is a too tempting tool to leave it untouched.
It is precisely this social protective layer that Bitcoiners form around their favorite money that is repeatedly disreputed as “toxic maximalism” in social media. The operation of full nodes and the defense of BTC content is exactly what gives digital gold its value. Michael Saylor sees it similarly:
I don’t want to hear that you want to get upset about the transaction fees and introduce smart contracts and change everything. […] I want to hear that you will defend the network to the death against someone who wants to break it or endanger it in any way,
Saylor was quoted in an interview with Pomp.
And that’s exactly it: Bitcoin is limited to 21 million coins because there are a critical number of Bitcoiners who want just that and express their will through full nodes. It is this aspect of decentralization that makes Bitcoin perhaps the best store of value in human history.