Can the fixed cap of 21 million Bitcoin be changed?

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Bitcoin’s hard cap is protected from changes by its incentive structure and governance mechanism. The entities that govern Bitcoin’s rule set have strong incentives to fight against a change to the hard cap due to the network architecture, but those who wish to change it have no power over the network.

Incentives

The people most likely to change Bitcoin’s hard cap are miners. Changing Bitcoin’s fixed cap could increase miners’ incomes for a short time. However, this would negate one of the main arguments for investing in Bitcoin: its scarcity.

The appeal of BTC for many investors is its predictable and fixed supply. However, it is not in the interests of miners to remove the fundamental driver of Bitcoin’s value proposition. Although the change increases the miners ‘income in terms of BTC, it would lead to a catastrophic and permanent drop in prices, resulting in a net loss of miners’ income in fiat terms.

Miners are more concerned with their fiat-denominated income than their Bitcoin-denominated income, as virtually all of their costs – salaries, equipment costs, and energy bills – are paid in fiat. As a result, if the price of Bitcoin drops, miners will lose money.

Bitcoin governance

The ability to change Bitcoin’s hard cap stems from two underlying misconceptions about BTC as a distributed and consensual network. For starters, there are dozens, if not hundreds, of different versions of Bitcoin source code. For example, every node in the Bitcoin network runs software that rejects any incorrect blocks.

While many nodes are running the newer version of Bitcoin Core, some still use older versions and implementations. As a result, while modifying the source code of BTC Core is straightforward, convincing tens of thousands of nodes to implement these modifications is significantly more difficult.

In addition, minors have no control over the rules of the network. Instead, miners are responsible for creating new blocks and validating transactions. When miners submit a new block to the network, tens of thousands of nodes independently verify it, ensuring that it generates an appropriate amount of new BTC, has legitimate proof of work, and contains valid transactions. Any blocks that violate these criteria will be rejected by the nodes, implying that miners have no control over Bitcoin’s rule set.

When 95% of miners agreed to lift the block size limit in 2017 in an attempt to allow Bitcoin to adapt, this theory was confirmed by reality. On the other hand, nodes and users resisted the change and were successful in forcing miners to switch to a different scaling method.

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