If you could use bitcoin to buy things like a chocolate bar at your local
grocery shop, would you There are many reasons to spend bitcoin. For example,
you could spend bitcoin to learn about bitcoin. Perhaps you would buy a
chocolate bar with bitcoin to try out the technology and gain a new experience.
Spending bitcoin and even just holding bitcoin are fantastic ways to begin to tumble down
the bitcoin hole. Spending and holding bitcoin are great ways to learn about bitcoin,
because nothing beats immersive learning. You could spend bitcoin to help bitcoin grow
in terms of users. By spending bitcoin where they accept it, and by
asking your local merchants to accept bitcoin, you provide incentive for further development of
infrastructure, more and better bitcoin ATMs, more and better exchanges, more ways
to accept bitcoin, and ultimately more merchants accepting bitcoin. You could spend bitcoin
to inspire. Perhaps you want to transmit your passion for a bitcoin to a
friend, a family member, or a colleague. And what's better way than
gifting them a few satosha that they could use to buy a chocolate bar on
their own. That would be a fun and diffusing experience for someone who's new
to bitcoin. It would make bitcoin much less scary and much less abstract.
There are many reasons to spend bitcoin, but from an economic perspective, it
doesn't make a lot of sense to spend bitcoin at this point in time.
The reason it doesn't make sense to spend bitcoin right now, at least not
mindlessly, is because bitcoin is an appreciating asset. By that, I mean
that bitcoin is purchasing power will increase with time. In twenty ten, you
needed ten thousand bitcoins to buy two pizzas. Today you can buy I used
but fairly decent car for just one full bitcoin. In a few years,
one full bitcoin could buy a decent home. And who knows where bitcoins purchasing
power will be when it's time for the next generation to inherit our generations bitcoins.
So what is it that makes bitcoin and areciating assets. Bitcoin has many
great qualities that makes it superior to all other forms of money that have existed
prior to bitcoin. But let's look at something really fundamental about Bitcoin that makes
its unappreciating assets, namely, bitcoins heavily skewed supply and demand. Bitcoins monetary
system is disinflationary, meaning that the rate at which new bitcoins are created is
gradually decreasing until the inflation rate or issuance rate is at zero and that no
more bitcoins will be created. In other words, bitcoin has a fixed supply
and this is a much bigger deal than it sounds. Here's why. The
dollar, like all fiat currencies, has a supply that is constantly being expanded.
We have no idea how many new dollars are created out of thin error
every day, and we have no idea how many dollars there are in the
world, but we do know this, Substantially more dollars are created than are
being destroyed, and hence the currency supply is being diluted at an alarming pace.
This is known as quantitative easing, which is a fancy word for extreme
money printing. When the currency supply is diluted as the vast amounts of new
currencies constantly being injected into the economy, the purchasing power of each unit each
dollar is gradually reduced. We notice this reduced purchasing power of the dollar as
price is going up as food or real estate, transportation, etc. Getting
more expensive. But what is really going on is that the purchasing power of
the dollar is reduced due to more and more dollars entering circulation. Just think
about what a pair of genes, an apartment, or a bar of chocolate
costs when you were a kid, and how much do it cost now.
How much does it cost to fill up your car or buy an apartment today
compared to when your parents were your age. The increasing prices is a consequence
of inflation. Bitcoin is disinflationary, which means that bitcoin has a predetermined and
predictable slow down in its issuance rate. At the time of making this video,
bitcoin inflation rate is about four percent, meaning the bitcoins supply is increased
by four percent year to year. This is an amazing chart. It contains
a world of information. On the x axis, we have time, but
here measured in a number of blocks or block height as it's known. Two
hundred and ten thousand blocks is roughly four years, so every little box here
is four years. On the left hand y axis, we have number of
bitcoins. If we follow the blue line and look at the y axis,
the supply started at zero. About seventeen point five million bitcoins have been created
so far, and there is never going to be more than twenty one million
bitcoins, meaning that there are only three point five million bitcoins left to be
mined. If you're born in the eighties, you will reach the age of
retirement somewhere around here when twenty point ninety eight million out of bitcoins, twenty
one million bitcoins will have been mined. On the right hand y axis,
we see bitcoins issuance rate or inflation. In the beginning, there were no
bitcoins, so the expansion of the supply was exponential. Then we see very
clearly that bitcoins inflation rate is decreasing in steps. This continuous slow down in
inflation rate will continue until there are no more bitcoins left to mind, giving
bitcoin a fixed final supply of twenty one million, we know exactly how many
bitcoins there are right now, We know exactly how many new are being created
every day, and we know exactly how many bitcoins there will be at any
given point in time in the future. Bitcoins issuance model is predetermined and predictable,
and words like this miner's mind. Bitcoin blocks. With every newly mined
Bitcoin block, new bitcoins spring into existence. One block is mined on average
every ten minutes, meaning that new bitcoins are created every ten minutes. This
is how new bitcoins are issued. In the beginning, fifty new bitcoins were
created with every new block. Every two hundred ten thousand blocks, or roughly
every four years, the issuance rate is cut in half, so after the
first two hundred and ten thousand blocks, after the first four years, the
issuance rate dropped from fifty new bitcoins every ten minutes to twenty five new bitcoins
every ten minutes. Four years later, there was another halving event and the
issuance rate to dropped from twenty five new bitcoins with every new block to twelve
point five new bitcoins with every new block. And this is where we are
now. The next halving event will be next year, in twenty twenty.
Then there will only be six point twenty five new bitcoins with every new block.
The supply of bitcoin is fixed at twenty one million, and the issuance
rate is gradually reduced as we approach that number. The last bitcoin will be
mind sometime around the year twenty one forty. Unlike the dollar, bitcoin will
by design not have its supply expanded over time. Demand will increase, but
the supply will not, and this is very important. Just like real estate
on Manhattan, bitcoin supply is inelastic. It cannot grow, which is going
to drive demand into disguise. There are seven point five billion people in the
world, but only twenty one million bitcoins. There won't even be enough bitcoins
for every millionaire in the States to own a full bitcoin. You do the
math. Demand will increase, but the supply will not. The dollars purchasing
power decreases over time because it has a constantly expanding supply, which gives us
the people, incentive to spend our fee at fast before it loses any more
of its purchasing power. Then there is bitcoin, providing us the people,
with incentive to save instead of spending because bitcoin increases in value over time