Is Bitcoin scarce?

Source: Liu Jiaolian

There are about 10 days left before the halving of Bitcoin production. Overnight, BTC (Bitcoin) touched $70,000, but it was obviously not enough to maintain that height, so it fell again. Visually, a wedge of oscillation and convergence is forming. The upper edge is 3/14 73.7k - 3/27 71k - 4/8 69k; the lower edge is 3/20 60.7k - 4/3 64k; the position where the upper and lower edges converge and intersect is roughly estimated to be around the halving day (4/18), with a height of around 68k. This is a symmetrical wedge. Technical analysis tells you that an ascending wedge turns into a decline, a descending wedge turns into an increase, and a symmetrical wedge turns into an increase or decrease. So I know that technical analysis is useless.

The male rabbit's feet are confused, and the female rabbit's eyes are blurred; two rabbits walk side by side, how can I tell which is male and which is female?

A reader once asked Jiaolian: Bitcoin can be infinitely subdivided, so it is basically infinite, not scarce at all.

Jiaolian tried to explain simply: the total amount of Bitcoin is only 21 million.

However, this explanation is not sufficient.

It is entirely possible to ask: the total amount of air on the earth is also limited, why is air not scarce?

We can even ask: the total amount of SHIB is only 100 trillion, so is SHIB also scarce, or even no different from the scarcity of Bitcoin?

If we quote the S2F (stock-to-increment ratio) hardness model, we can say that air can be circulated in large quantities, so its S2F is very low, so it is not scarce.

Then, BTC can also be recycled in the form of handling fees. Does it mean that use makes Bitcoin soft, and hoarding makes Bitcoin hard?

Furthermore, if we apply this model to SHIB, we will find that its stock is 100%, while the increment is 0, because it is minted once and put on the market. So, doesn’t it mean that the S2F hardness of SHIB (and almost all meme coins minted once) is equal to infinity, far exceeding Bitcoin?

Can scarcity and limited total amount really be equated? It seems doubtful.

Jiaolian remembered that in ancient times, someone questioned the value of Bitcoin and said: If I take a shit, the only one in the world, then is it also scarce and valuable?

And if you try to refute this view with the economic substitutability, pointing out that others can also take many shits that are no different from this shit, so this shit is not scarce and has no great value.

Then the skeptic will ask: Others can easily copy a copy of Bitcoin's code and create a digital currency that is no different from Bitcoin (such as Litecoin, Dogecoin, and even BCH, etc.). So obviously, Bitcoin, as a digital currency, is not scarce at all, because just like that piece of shit, the properties of Bitcoin, Dogecoin and other altcoins also have them?

After a series of speculations, we return to the most fundamental conceptual question: What is scarcity (scarcity)?

Wikipedia tells us: "Scarcity, also known as scarcity and scarcity, is a basic concept in economics, which means that the supply of resources by individuals or society cannot meet human needs." "The opposite of scarcity is abundance and richness."

"Scarcity is a relative concept. Its occurrence does not depend on the amount of demand or resources themselves, but on the comparison between the two. When resources are less than demand, scarcity will occur. If analyzed by the supply and demand model, when the price of a commodity is zero and the supply is less than the demand, the commodity is scarce. ”

“Due to the existence of scarcity, people must make choices, choose options with higher value and give up options with lower value. Among the options given up, the one with the highest value is called opportunity cost. In the market, this cost is price.”

“Goods with scarcity problems are called "economic goods". On the contrary, those without scarcity problems are called "free goods".”

Obviously, the meaning is clear: scarcity is relative. A limited total amount is not necessarily scarce, it depends on how much demand there is.

However, some netizens said: Anyone can buy any number of Bitcoins he is willing to buy and can afford.

It seems that what is scarce is not Bitcoin, but his purchasing power.

So the question goes deeper: What is demand?

Wanting (subjectively willing) but not being able to afford (objectively unable to do it), is it demand?

At least in the sense of market economy, this is difficult to be regarded as (effective) demand.

Commodity producers in the market will not produce for those who cannot afford it, because this will only lead to bankruptcy.

So what is "supply exceeds demand"? It must be that the number of people who want to buy and can afford it far exceeds the number of people that can be satisfied by the limited supply.

In this way, Bitcoin will never be in short supply. You can buy as much as you can afford. Therefore, Bitcoin is not scarce.

As the original reader asked: As long as you subdivide it, won't Bitcoin become more? For example, if it is subdivided into Satoshi (one hundred millionth of BTC), the total amount will become 210 trillion. In theory, it can be subdivided infinitely, which means that the total amount of Bitcoin can be infinite.

In fact, the divisibility that is much better than gold is precisely one of the advantages of Bitcoin.

The teaching chain feels a hint of "Zeno's paradox".

On the coordinate axis, the length of the interval from 0 to 21 million is 21 million, and in the interval [0, 21 million], there are infinite real numbers.

When we talk about the total amount of Bitcoin being 21 million, we are talking about the limited length of the interval. And when this reader talks about the infinite total amount of Bitcoin, he is talking about the infinite number of real numbers in the interval.

This is exactly where the tricky part lies. Logical fallacies quietly appear.

When we talk about the scarcity of goods, we are talking about the supply of goods being less than the amount that the money in the hands of the currency holder can buy.

As the opposite of goods, money is in excess when goods are relatively scarce. Conversely, when goods are abundant, money is scarce.

Therefore, for money, a small amount is scarcity. Our demand for money is infinite.

Satoshi Nakamoto, the inventor of Bitcoin, simply defines scarcity as a limited potential supply. He wrote in an August 2010 post: "I think the traditional qualifications of money are based on some assumptions, that is, there are many competing things in this world that are scarce, and things with intrinsic value will definitely outperform those without intrinsic value. However, if there is nothing with intrinsic value in this world that can be used as money, only scarcity but no intrinsic value, I think people will still accept it. (I use the word "scarcity" here only to mean a limited potential supply.)" Obviously, this is not the true definition of scarcity in economics. Perhaps you can even say that Satoshi Nakamoto is changing the concept. (But don't all great inventions start with redefining concepts? For example, Jobs redefined the mobile phone...) After the above discussion, we can find that for Bitcoin, a brand new thing that has never existed before, many very simple questions have become impossible to answer simply, but should ask the definition of the concept. A: Is Bitcoin scarce? B: What is "scarcity"?