Page 8 - My FlipBook

There are many ways in which creators of a product deliberately
limit supply. In the late 1990s, music was primarily available only
on compact discs (CDs). If you wanted a song, you had to buy an
individual copy, which you usually got only if you purchased the whole
album. Once you owned the CD, you could not make copies. If you
wanted to share the song with a friend, they had to borrow your CD
(in which case you couldn’t listen to it). This was also true of most other
forms of media—newspapers, books, and DVDs. It is no surprise that
these industries enjoyed strong profits in the late 1990s.
The internet, however, destroyed this model. New websites allowed
users to download entire movies and to share music files. One person
could simply buy a song and make an enormous number of copies to
share with friends at no additional cost. Once newspapers posted stories
online in digital form, they could be easily copied and reproduced
elsewhere.

ENSURING SCARCITY

The value of something is often determined by the amount of it (supply)
versus the desire people have for it (demand). If something is rare and highly
desirable (such as a house on a beach), then it will carry a high price. If
something is common (such as sand) and exceeds demand, then the price will
be low. Fiat currencies usually lose trust when governments print too much of
it, causing it to lose value.
Satoshi Nakamoto designed Bitcoin so only a finite number exist. The
number of coins in circulation will top out at 21 million in 2140. Of the 21
million Bitcoin units that will be released, 18 million are already in circulation.

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CRYPTOCURRENCIES ANd THE BLOCKCHAIN REvOLUTION 12