Is Bitcoin and its fixed supply of 21 million at risk? It’s an interesting question. If you’re like us then you follow lots of different accounts on Crypto Twitter. Some big and some small. Sometimes the small accounts have the better alpha or ask the better questions.
We saw this from an account we like and felt it a worthy topic to cover in A LOT more detail. So today, we go over where the 21 million fixed supply comes from. Plus, we look at what the biggest threats could be to the supply of Bitcoin in the market. If you hold BTC, you need to see what we are talking about here.
Can There Be More Than 21 Million BTC?
Bitcoin’s 21 million fixed supply is anchored into its source code. That cannot change. But there are a couple of scenarios where that could change. That said, they are unlikely or in some cases nearly impossible. They include (from most likely reason to least likely):
- Hard Fork: A hard fork means that the new chain can change its code and consensus rules. We have already seen unsuccessful tries at this with BCH and BSV. Bitcoin’s nodes determine which is the “correct” chain by which chain is the longest. Craig Wright can say as often as he wants that BSV is the longest chain so it’s the “real” Bitcoin. But the nodes say differently. And anyone can run a node. That’s the beauty of Bitcoin’s design.
- Protocol change: A change to Bitcoin’s consensus mechanism like Ethereum’s change from Proof of Work to Proof of Stake could open things up to an agreement between miners and developers for more than 21 million coins. Yet, Proof of Work is one of the things that makes Bitcoin different and better. So getting anyone to agree to a consensus change would be incredibly difficult.
- Technical Error: A coding error would possibly create either a double-spend situation or the ability to create more coins out of thin air as we have seen in some smart contract vulnerabilities. Bitcoin doesn’t use smart contracts so those same vulnerabilities don’t apply here. But the result would be the same.
- Quantum Computing Breakthrough: If quantum computing gets strong enough, then maybe it can crack Bitcoin’s cryptography. If so, then it would be possible to create more coins. Right now, this is not possible. Even computer scientists are unsure if quantum computing can get powerful enough for this to happen.
- External Influences: Think governments here. This is real pie-in-the-sky stuff. But if one or two governments and maybe some mining pools colluded together, they could overtake the network and then change it to add more coins. This is clearly the most unlikely of all 5 scenarios.
Last week I gave a presentation about the threat of quantum computing to Bitcoin. Many have dismissed QC as something that will never materialize.
Recently a QC researcher who has spent 25 years working in the field gave a talk about what’s changing.https://t.co/yJC0emv1qv pic.twitter.com/o1qEk97VNu
— Jameson Lopp (@lopp) October 14, 2024
We’ve already seen hard forks and we’ve seen attempts at protocol changes and double spends go nowhere. So the likelihood of the original Bitcoin blockchain that we call Bitcoin with coin $BTC going over a 21 million supply is extremely unlikely. But that’s not all we have to contend with
The BlackRock Effect & Crypto Whales
Now we have the Blackrock/ETF effect to deal with. Blackrock plays to win and dominate every field it can. We see with Coinbase that they are creating a wrapped Bitcoin product called cbBTC. Could a Blackrock-wrapped Bitcoin come soon? Or even an attempted fork of the Bitcoin chain? Could Blackrock fork Bitcoin? Then we would have an institutional-based Bitcoin with the Blackrock fork AND the original Bitcoin too? This is absolutely possible.
cbBTC has Landed 🛬
cbBTC enables #bitcoin to be utilized as a fungible ERC20 asset in @base‘s dynamic and rapidly growing onchain economy.
Multiple cbBTC pools are now live on Aerodrome. 🔵 pic.twitter.com/qNsBYKjSGo
— Aerodrome (@AerodromeFi) September 12, 2024
For now, institutional liquidity is important for Bitcoin. Could institutions follow Blackrock and their version of Bitcoin? Yes, definitely. Other institutions trust Blackrock. But that’s not even necessarily bad for native Bitcoin.
The whales, the long-term holders, and the nation-states like El Salvador will continue buying native Bitcoin. All these groups and most who got into Bitcoin in the first place will prefer the native, decentralized version. It’s far better than the Blackrock forked or wrapped version.
When #Bitcoin was $16k, El Salvador started buying 1 BTC per day 🇸🇻
Bitcoin is now at $67.5k, up over 320% 🚀 pic.twitter.com/vnibyzIj8T
— Bitcoin Magazine (@BitcoinMagazine) October 16, 2024
We’ve seen it time and time again. Others try but none replace the original. But maybe like other institution-only markets like Treasury Bonds, there could be 2 separate markets for 2 different sets of investors. Yet, both healthy and functioning. What do you think? Do you think Blackrock will be a net positive or negative for Bitcoin long term? Let us know in the comments below.
Is Bitcoin Really At Risk?
The answer here is Yes and No. The original Bitcoin chain and its 21 million are fine. That’s not going anywhere. But will we see the equivalent of “paper” Bitcoin sold in various places? By Blackrock or otherwise? That’s one of the concerns around Justin Sun’s group taking over custody of wBTC. There are other wrapped products too like tBTC or SolvBTC.
1/ It’s been 1 week since @BitGo announced plans to transfer WBTC management to a new joint venture with BiT Global in 60 days. Since then, a lot has happened:
→ BitGo announced an initial WBTC custody setup, and then clarified a new one, after wide concerns amongst industry… pic.twitter.com/DgLiTNPoma
— Chaos Labs (@chaos_labs) August 17, 2024
Will there be more wrapped Bitcoin in the market than Bitcoin held as collateral for it? We’ve seen hard forks before. And what’s happened? BTC holders get coins for the new chain and the new chain never overtakes the old one.
Could a new chain become the “new” Bitcoin? It’s possible but unlikely. There are too many different parties from the users to developers to miners, who would have to agree with the nodes to change which chain is the real Bitcoin. It’s incredibly unlikely. Higher than zero but chances are very, very low.
Disclaimer
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