bitcoin is currently the only liquid commodity with a perfectly inelastic supply. In other words, the supply of bitcoin is strictly limited and cannot respond to increased demand.  The players in the Bitcoin blockchain are the users of the network and the miners that maintain it. The process of mining generates a reward (new coin generation) and is designed to simulate diminishing returns, just like mining for precious metals. 

Bitcoin has a steady, predictable rate of inflation compared to the unpredictable and rampant inflation of fiat currencies.  The Circulating supply of bitcoin is capped at a maximum of 21 million coins.  it’s a truly finite asset with a relatively scarce maximum supply. Both of these factors should, in theory, help support bitcoin’s price over time – assuming demand remains high.

Bitcoin’s money supply is created through a process called mining.  The maximum amount of newly created bitcoin a miner can add to a block, the coinbase transaction, decreases approximately every four years (or precisely every 210,000 blocks).

The coinbase “reward” started at 50 bitcoin per block in January of 2009 and halved to 25 bitcoin per block in November of 2012. It halved to 12.5 bitcoin in July 2016 and again to 6.25 bitcoin in May 2020. The next Bitcoin halving is expected to occur in 2024 and will see BTC block rewards drop to 3.125 bitcoins per block.  Based on this formula, bitcoin mining rewards decrease exponentially until approximately the year 2140, when all bitcoin (20.99999998 million) will have been issued. After 2140, no new bitcoin will be issued.

As the block reward decreases over time and the number of transactions per block increases, a greater proportion of bitcoin mining earnings will come from fees. Gradually, the mining reward will be dominated by transaction fees, which will form the primary incentive for miners. 

The finite and diminishing issuance creates a fixed monetary supply that resists inflation. Unlike a fiat currency, which can be printed in infinite numbers by a central bank, bitcoin can never be inflated by printing, if the code that handles this is changed, then it seizes to be bitcoin – a fork to a new chain results and nodes will disregard it as not meeting the criteria for a valid block.  creating blocks in this new chain would just be a waste of energy.