In a world of abundance, Bitcoin redefines the meaning of scarcity.
All other assets have a potentially unlimited supply, but only Bitcoin is absolutely scarce and perfectly limited.
But aren’t precious metals supposed to be scarce? And what about real estate?
Let’s explore every asset class below, and examine just how scarce they really are…👇
Why Fiat Currencies Are Not Scarce
Fiat currencies are government-issued money backed only by promises from the issuer, rather than by a commodity. Central banks can create more at will, leading to inflation and diminishing purchasing power. This lack of scarcity undermines fiat's long-term value.
Fiat's supply is measured in various ways, such as M0 (physical currency) and M1/M2/M3 (including digital forms). These measurements show fiat's flexibility and the blurred lines between present and future money, contributing to its abundance.
Ownership of fiat is conditional and can be revoked at any time by issuing authorities. This uncertainty, coupled with fiat's ability to manifest negative balances through debt creation, further highlights its fundamental lack of scarcity.
Why Stocks Are Not Scarce
Stocks represent ownership shares in companies, and are far from being scarce. Companies can issue new shares, diluting existing ownership. This process is subject to corporate decisions and market conditions, making stocks inherently abundant.
Stock issuance is controlled by company executives and boards, not a predetermined mathematical algorithm. This means the total number of shares can increase, leading to potential dilution of individual share value.
The regulatory environment also influences stock scarcity. Securities laws and market demands can lead to stock splits or reverse splits, further adding to supply volatility, and altering the number of shares without a fixed limit.
Why Bonds Are Not Scarce
Bonds are debt securities issued by entities like governments and corporations to raise capital. Investors lend money in exchange for periodic interest payments and the return of the bond's face value at maturity. Issuers can continually create new bonds to finance debt or fund projects, making them abundant, not scarce.
The issuance of bonds is limited only by the issuer's creditworthiness and market demand, not by a fixed supply. Governments, in particular, issue bonds regularly to finance budget deficits, making the total volume of bonds in the market ever-expanding.
In essence, the bond market's inherent capacity for growth and the continuous introduction of new issuances underscore its lack of scarcity.
Why Real Estate Is Not Scarce
Real estate encompasses land and any structures on it, including buildings and natural resources. While often perceived as scarce due to its fixed geographical nature, real estate is not absolutely scarce when considering the long-term perspective and human innovation, including the eventual colonization of other planets.
On Earth, scarcity of desirable locations drives up real estate values. However, this scarcity is relative and subject to change with technological advancements, such as the ability to reclaim land from the sea, or create habitable environments in previously uninhabitable areas.
Real estate’s scarcity is further challenged by the potential for space colonization. As humanity explores and settles on other planets or moons, the supply of land and habitable locations will expand, reducing the constraints of Earth-bound real estate scarcity.
Why Collectibles Are Not Scarce
Collectibles encompass items like rare artifacts, art, and jewelry, valued for their uniqueness and desirability. While some may appear scarce, their scarcity isn't absolute. Technological advancements and changing tastes can affect their rarity and value.
Furthermore, collectibles' perceived scarcity is often subject to market dynamics. For instance, as more collectors enter the market, previously overlooked items can become sought after, creating new categories of collectibles.
Some collectibles, may in fact be scarce, but they are issued by a central authority, so one must trust the issuer’s claims to scarcity, and their promise that they will never increase the supply in the future. This reliance on a promise make them hardly any scarcer than fiat currencies.
Why Commodities Are Not Scarce
Commodities are raw materials or agricultural products that can be bought and sold. While they might seem scarce, technological innovations, such as more efficient mining techniques and the potential for atomic transmutation, could make it possible to create or mine commodities faster and more efficiently.
The discovery of commodities on meteors and distant planets could reduce their scarcity even further. With the vastness of space, and ever-improving methods to one day access the commodities found there, their potential supply is virtually limitless.
While commodities are currently limited by their available amounts on Earth, as well as the costs of extraction and production, technological advancements and space exploration have the potential to significantly increase their supply, challenging the traditional notion of scarcity.
Why Cryptocurrencies Are Not Scarce
Cryptocurrencies, including Bitcoin, its forks, altcoins, and NFTs, are digital currencies that are secured using cryptography. However, any perceived scarcity in the “crypto” space (i.e. everything besides Bitcoin) is actually anything but absolutely scarce.
New cryptocurrencies can be created relatively easily. This means that even if their protocols make them have a limited supply, every new project dilutes the value of all the others, effectively making them abundant.
Additionally, every cryptocurrency other than Bitcoin has a central leader or group that can change or update their system as they see fit. So even if a cryptocurrency’s protocol says it has a limited supply, the protocol can be altered by central authorities, as has been seen with Ethereum and other cryptocurrencies.
Why Bitcoin Is Truly Scarce
Bitcoin's scarcity is foundational to its value, with an eventual supply of just under 21 million coins. Bitcoin is run by users around the world, who are incentivized to never increase its supply. This immutable supply limit ensures bitcoin remains scarce, regardless of technological advancements or humanity's growth.
The mining process, or guessing a particular large number in order to add transactions to Bitcoin’s ledger, the timechain, is how new bitcoin are issued. However, the rate of the issuance of new coins decreases over time through "halving" events, causing the supply to approach 21 million, but never pass it, or even reach it.
Bitcoin was designed to mirror the scarcity of traditional assets like gold. However, while Bitcoin and commodities are mined more in response to price increases, only Bitcoin maintains its issuance schedule, regardless of how many miners start hashing, thanks to the difficulty adjustment. This makes Bitcoin truly scarce, no matter what any individuals choose to do.
Conclusion
As you can see, Bitcoin is the only completely and permanently scarce asset. The only other thing that might be as scarce as Bitcoin is your time, but you can never know how much you have left. And with technology assisting you in using your time more efficiently, and extending your lifetime by many years, it may turn out that even time itself is not be as scarce as Bitcoin.
Some other things that aren’t scarce are Likes❤️, Shares🔄, and Saving🔖 this article for future reference.
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