21-millionth of infinity - it's still not too late to get involved in the bitcoin economy

Juraj Bednár Dec 2, 2022 20 min read
Photo by Izabel 🇺🇦 / Unsplash

The following is a chapter from my book Cryptocurrencies – Hack your way to a better life.

Many books talk about technological and economic features of cryptocurrencies, my book tries to cover day to day usage to improve our lives.

Can something so volatile be used reliably? And if we don't care about the price, can cryptocurrencies be used in other ways? For example, to fund creators, or for crowdfunding. Can you use cryptocurrencies to take out a loan? How to use them in international trade or to promote your products? How to build a local crypto economy in your social bubble? Can bitcoin be used to expand personal and social contacts? We can even use bitcoin as a form of "insurance" against the failure of the traditional financial system.

You can order the book on my website (use code "FREEDOMNODE" to get 10% off) or Amazon.

The story of Bitcoin is the story of decentralized money with a limited money supply. Satoshi Nakamoto invented Bitcoin so that there would never be more than 21 million of them. In doing so, he created the "hardest currency" on the planet. Inspired by gold and the theory of the Austrian school of economics, he created an analogy of this precious metal in the digital space. This is also why Bitcoin is "mined", like precious metals. Like gold, of which there is a finite amount on planet Earth, Bitcoin has a limited number of available units. What are the implications of this decision for Bitcoin? Can this property be transferred to other cryptocurrencies?

Is 21 million the right number?

I have seen countless discussions about whether 21 million Bitcoins is the right number or whether more or less is needed. I'll start by recalling a conversation at the time Bitcoin first crossed the ten-thousand-dollar mark. I met an acquaintance at Freshmarket in Bratislava who immediately complained to me that "ten grand" for Bitcoin was just too much. Intuitively, ten thousand is just a number with a lot of zeros. I advised him to look at another cryptocurrency – the satoshi. One satoshi was only 0.01 cents, so it's a hundred million times cheaper cryptocurrency than Bitcoin!

Of course, the more well-read of you know that one satoshi is only a hundred millionth of a Bitcoin. It's like saying that an ounce of gold is expensive, at the time I'm writing this it's $1700… but a gram of gold is cheap, only $54.66! And milligrams are a thousand of times cheaper still!

The more observant among you will suspect that the price of a single unit does not matter, especially when we can divide a single unit into smaller parts. When one satoshi costs one dollar, we can start charging and accounting in millisatoshi. The Lightning network even makes this possible today. Although many people don’t believe that bitcoin can cost ten thousand, a hundred thousand or a million dollars, it all depends on how bitcoin will be used in the future and what part of society's wealth it represents.

Just as the price per unit doesn't matter, neither does the number. Even if there was only one unit of bitcoin in the world, it would be enough to account for the wealth of the entire solar system, if it could be divided into smaller parts. If we have a limited number of units, we can calculate exactly what share of all the units we have. If bitcoin has many users trading, saving, or even accounting in it, one bitcoin can be worth a lot of dollars indeed. In doing so, it doesn't matter at all what number Satoshi chooses for the money supply.

What is wealth?

By wealth we mean all goods and services available on the market - all scarce or limited resources that have some value (are in demand). Cars, buildings, human labor, manufacturing machines, space stations. We set prices in monetary units, but they are not that important - just as it doesn't matter whether we measure in pounds or ounces. What matters is that seven kilos is half of fourteen kilos. If a building is worth the same to people as ten cars, it is worth ten times as much in monetary units as one car.

Thus, money is not wealth itself, it merely represents the relative value of wealth to other goods. Moreover, it is our "access key" - the redistribution of scarce resources occurs according to how much money we have and how we choose to exchange it for (real) wealth in the marketplace. If someone creates twice as many monetary units, the number of units for each good and service simply doubles in the long run. In reality, however, this is not uniform (the Cantillon effect). Hello price inflation! Any creation of new units must increase prices if it does not increase wealth in society. And wealth cannot be created either by a civil servant1 or by a central bank.

Many central planners say that if the total wealth in a society grows faster than inflation occurs, it doesn't matter, there will be no price increases. This is not true – inflation will cause misallocation of capital and the cantillon effect regardless of whether the true wealth in society is also rising despite money printing. But in addition, you have to wonder what would have happened if wealth was rising and the number of units was not rising - prices would fall! And that's great!

In practice, it does not matter how much money there is. Whether the value of a building is represented by a hundred bitcoins or ten million dollars is irrelevant. What matters is that relative prices are maintained and price discovery can happen unaltered.

Our task is to decide whether we are going to save for one building or ten cars. By exchanging money for goods, we adjust prices and signal our preferences through the price information network. But our preferences are not limitless - they are limited by the wealth we have created for others. Money thus functions as a memory of the good deeds of society, unless someone corrupts that memory by printing new money. A corrupted database, while also reflecting good deeds, also contains false records of people who have not yet produced anything, but have gotten the newly created money among the first. Hard money without monetary inflation is the memory of the good deeds of a society that is not corrupt. Money also takes into account the scarcity of resources. Entrepreneurs then know what type of wealth to create. Do people prefer one house or ten cars? How does this price evolve over time?

Can I express a relative preference based on what I have created for others with money? If so, then all is well.

Digital gold

If Bitcoin starts to perform the function of gold, we can assume that there could be a similar demand for it. At the time I write this, a bitcoin is worth $22,000, and so all the bitcoins that would be created would be worth $462 billion at that price. Gold is worth $1700 an ounce and there are about 200 thousand metric tons available above ground, which is 6.43 billion ounces. The market capitalisation of this gold is then just under $11 trillion. Let’s consider what would happen If all gold fans moved into the modern world and switched to digital gold. I am not saying that they have to, gold is perfectly fine for many use-cases, but let’s just imagine it for a while. If the market valued bitcoin at what it values gold at, one bitcoin would be worth $520,000. If you think that's a lot, try changing the unit. A kilo of gold is also worth $55k, that is "a lot" - that's why we account in something more practical, like ounces. So instead of one bitcoin for 520k, imagine one satoshi for $0.0052. A thousand satoshi for $5.2 - that's worth it!

I like this thinking in ratios and we'll come back to it.

We're not late - bitcoin can be a good buy even if you weren't around when it started

The number of units of fiat currencies is not capped in any way. And there are many state-created fiat currencies out there. Countries (with help from central banks, commercial banks and other institutions) are printing them and have no plans to stop, they even think they are "propping up the economy". Almost every central bank even has a price-inflation target. They are not trying to prevent inflation, just keep it at the magic number of 2%. Why two percent? First they had a goal of maintaining the price level (0% inflation), but that never happens when they are printing so much money. So they chose a goal of keeping the level below two percent. That didn't work, because they were printing money. So the target was quietly changed to "price inflation two percent a year." And when it didn't work and we got double-digit inflation, suddenly that's just a long-term target - averaged over decades. Of course, that can't be sustained either, but it's easier to say "wait thirty years, we're not done yet". I don't want to wait and we will most surely see them regret they tried hard but could not achieve this goal either.

Cryptocurrencies – Hack your way to a better life

How Bitcoin, decentralized payment networks, cryptocurrencies and a return to hard, non-inflationary currency will help us change our lives and the world

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In addition to units of dollars being created, we also have quite a few fiat currencies. Almost every central bank produces its own currency. Thus, the many units of nearly two hundred different national fiat currencies chase limited resources, which do not grow as fast as the number of units of all fiat currencies.

Thus, in terms of the value of bitcoin, bitcoin has no price ceiling – the upper limit on the number of fiat units is infinity.

Unlike the unlimited fiat, we have 21 million bitcoins. So unlike fiat, bitcoin is a limited resource in the long run – and that's a good thing, because the role of money is also to redistribute limited resources. This can only be done by "mapping" scarce resources onto scarce resources, otherwise it works very badly.

Caution, this does not mean that I am saying that Bitcoin will have any particular value in any foreseeable time (e.g., the next thousand years). On the other side of supply is always demand, and that demand may not be infinite. If Bitcoin remains a curiosity for a few nerds or a fringe item for collectors (we also call them HODLers2), price growth may well stall.

However, if the digital gold story and the escape from fiat infinity works, the theoretical limit is infinity divided by 21 million.

This is not necessarily good news. Even infinity can be little. Again, this is a question of demand - if bitcoin is worth a million dollars, is it because it is really valuable or because a million dollars can only buy us a cheeseburger in a cheap fast food chain?

"Cryptocurrencies" are not hard money

A common objection to the 21 million unit Bitcoin story is that there are other cryptocurrencies that have a finite number of units, or at least the number is predictable and very slowly growing. Ethereum, Monero, Bitcoin Cash, Litecoin come with this kind of story. Why aren't these equally hard currencies with the same outcome?

The story of a "new cryptocurrency" with better features is a bet that people will think of that new currency as something they want to save in - they want to have a small portion of a limited supply of what a significant portion of crypto people think of as a good instrument for saving.  That can happen, of course, but social consensus is important (Schelling point). Even gold competes with platinum or silver. And like cryptocurrencies, market capitalization is distributed using the so-called “power law”. Silver is one tenth of the gold market, palladium is one third of silver. For silver to become gold, ten times as many people (or wealth) would have to believe in it as they do now. And since the function of hard money depends on how many people trust it to perform that function, we are disbelievers in altcoins because most others are demonstrably disbelievers so far. The believers are few.

Deflation doesn't matter - progress and saving

The market is a constant competition to see which producer can best solve consumers' problems. We live in an environment in which technological progress is the norm – in some sectors of the economy, progress is even exponential. This means that, in a natural environment without the printing of fiat money, technological development should mean falling prices.

Imagine two farmers - John and Paul. John wakes up in the morning, picks up a hoe and goes to hoe the garden. Paul has saved money and bought a tractor. In the same amount of time, Paul produces several times more tomatoes than John, who has to work hard.

Paul's costs are higher - he had to buy the tractor, but his productivity has increased much more than the cost of capital. So Paul is able to produce more tomatoes at a lower cost. Since he doesn't want them to spoil, he wants to sell them as soon as possible. That means he offers them for a lower price than John. John must at least match the price if he does not want his tomatoes to rot somewhere in his basement. The market price does not look at John's costs and it is possible that John will lose money on the sale of the tomatoes. Thus, overall, tomato prices on the market are falling. Eventually John goes bankrupt and his farm and other farms that are not productive are bought by Peter. Peter is a technology enthusiast and therefore has a tractor - an electric one that charges from solar panels. Peter doesn't like pesticides - not only because it can be harmful, but mainly because he doesn't like the cost of buying and applying them. He has found that it is a major expense. So one day he stumbles across a company that sells drones with cameras and an artificial intelligence app that instantly detects pests on specific plants. Every day the drone flies over his field and if a pest is detected, Peter comes and either sprays the specific plant or simply pulls it up with the pest. This way he has lower costs and still offers better quality - organic tomatoes. So he competes not only on price but also on quality.

In a natural environment of hard money and technological progress, prices should fall. Entrepreneurial innovation creates new wealth that did not exist before (more tomatoes at less and less cost - hence less scarce resources used during the production) and hence a fixed amount of money (21 million bitcoins) should distribute more and more real wealth.

What we see in this story is that it is important that Paul was saving. A deflationary environment encourages this - austerity causes someone who has access to scarce resources to decide not to consume them and wait. That is, if I see that prices are going down, I decide not to buy a car, and thus there will be capacity leftover to make a tractor, which will help me and will lower the price of tomatoes even more, thus I will enjoy my (saved) money even more. Thus, the result of saving in a hard money environment is cheaper tomatoes and the car that I will buy later will probably be cheaper too. Thus, actual scarce resources are saved and made available to other people (which increases the value of money, because if Paul hadn't consumed some of the 21 million bitcoins, the entire planet's available exchangeable wealth is "valued" using a smaller number of bitcoins). HODLers are people who save, i.e. don't spend scarce resources, and these are thus available for other people, among other things, for increasing productivity and technological development. Converting saved money into capital goods means that Ferko will create more wealth - tomatoes will be created that otherwise would not have been grown.

It is also important that John went bankrupt. This is not pleasant, but it means that he did not create wealth efficiently enough, i.e. he did not use scarce resources as well as someone else can. John's bankruptcy has enabled the creation of further wealth – on land originally owned by John, Peter has built an eco-farm of the future – he runs the tractor on solar power and, thanks to drones, saves on pesticides and produces healthier tomatoes. Thanks to John's bankruptcy, more wealth has been created - cheap organic tomatoes and a cleaner environment.

This part, by the way, also means that if we do not allow unproductive farmers to go bankrupt, the innovations in productivity, but also in quality, that we have mentioned will never happen. The farmers will still be hoeing the garden by hand and we will still be paying high prices for tomatoes. It is a pity that the European Union is doing exactly the opposite of what is needed – even though agriculture accounts for less than 2% of the European Union's GDP, subsidies under the Common Agricultural Policy account for between 25% and 40% of the Union's annual budget. That means that useful bankruptcies that foster innovation and help the preservation of scarce resources never happen; inefficient production is paid for by other sectors of the economy.

The story of inflation destroys wealth. Newly created money is not wealth. If the central bank prints money and gives it (via government subsidy) to someone to build a nature trail, the builders have not built something that is in demand (like Peter's new tomato sorting station). A nature trail will indeed be created, but this is not the result of saving scarce resources and demonstrating preference (demand), but is only created by diverting resources from productive and profitable activities to unproductive ones. That is, without the entrepreneur making the decision "I will save scarce resources now so that I can produce efficiently in the future". While a nature trail will be created, it will not create something that was in demand that was created by using resources saved by postponing other consumption. Instead of producing, people are running around collecting the money that the fiat money producer is throwing at them from the sky - and building nature trails in the process. These are riches, but the riches are not worth that much to the people - if they could choose what riches they wanted, they would buy tomatoes rather than a nature trail.

Suddenly, an official decides that a nature trail is something that will come into being and the wealth of the society declines. It makes no difference whatsoever how the official decides what to support. Why? Because the people who valued tomatoes more in the marketplace (i.e., they had a higher value to them) suddenly have a nature trail. It does have value, but less than tomatoes - based on demonstrated preferences, i.e., decisions about how people want to access scarce resources. Nominal gross domestic product does rise, but it is not discounted for errors. Thus, zombie companies emerge that build nature trails that no one values as much as what has not emerged thanks to the diversion of scarce resources.

Once again, because this is the key - inflation reduces the overall wealth of society. It does create more stuff, but not stuff that people demonstrably want by choice, but stuff that is decided by someone who allocates the newly created money.

Price deflation encourages saving and is natural in an environment of technological development. It can make us better off. Deflation leads to an increase in real interest - it is only worth doing projects that will increase wealth even more than the appreciation of the value of money.

Inflation solves the "there is no money" problem by creating it - abracadabra! A hard currency environment solves a much more fundamental problem - how to increase the wealth of society - that is, how to make scarce resources more abundant.

The hard currency environment allows everyone to make the decision to save in order to be better off tomorrow. An inflationary environment motivates people to consume (destroy) a scarce resource today because there will be less wealth tomorrow available for the same amount of money – both in society in general and as the wealth that is available to the individual. At ten percent annual price inflation, prices double in less than 7.5 years. Who wants to delay consumption for 7.5 years if they know their money will buy them half of their current wealth? Why not enjoy more wealth now than less wealth tomorrow? But if I put my money away in an environment of ten percent annual price deflation, I will be able to buy twice as much in 7.5 years.

Do you understand the HODLers now?

Pareto distribution

The assets in the company are distributed on the basis of the so-called Pareto distribution. The standard formulation says that 20% of the people own 80% of the assets. Pareto distribution has several interesting properties. One is that it has a "fat tail" - the distribution is determined by extremes, of which there are few instances. Most people are extremely similar and then there are a few extreme exceptions. For more on fat-tailed distributions, see Nassim Nicholas Taleb's book Antifragile. Understanding how fat-tailed distributions work is one of the most important pieces of knowledge you can acquire to understand the world today. Another interesting feature is the fractality of this distribution - it resembles itself in all parts. For example, if you look at the poorer 80% of people – those who own 20% of the assets, they have the same distribution among themselves - the 20% own 80% of the assets. And if you look now at the richest 20% of the original poorer 80%, for example, it's 80%/20% among them as well.

The consequence is that if you are not the absolutely richest person, you can always envy someone, because within your group you are 80%-likely to be one of the poorer ones who own only 20% of the wealth of your sub-group.

Another interesting feature is that the distribution of assets always converges to some Pareto distribution. All attempts at equality have either resulted in the market mechanisms becoming dysfunctional and the price mechanism completely destroyed - and thus extreme poverty for all - or again in a form of Pareto distribution.

Therefore, anyone who wants to prevent extreme poverty has basically only one option - to ensure that there is enough wealth and that even the poorest are in fact rich enough. That is to say, uplift the "extremely poor" person so they have air conditioning at least in one room and at least one car per family. Fortunately, this works, despite the interventions of central banks. Today, we have health care at a level that even the Sun King Louis XIV couldn't afford. So the average office worker is, in a sense, richer than kings of the past, thanks to technological advances.

The key to making everyone rich is technological progress and the creation of capital goods. And the key to making this possible is money, which is not corrupted by wealth-destroying central banks.

The other option is to try to fight Pareto distribution and try to take the wealth of the richest 20% and redistribute it among the poorest 80%. Then everyone will have the same. Even if this were theoretically possible, the result would be global poverty. Because the richest won't invest capital goods in technological development, they won't want to compete to solve other people's problems more efficiently (why, when they have as much as everyone else anyway). And even in extreme attempts at something like this in the past, we still ended up with Pareto distribution, except that even the richest 20% were glad they at least had the money for a cheap east-German Trabant car and bananas – if they waited in a line long enough.

Playing with the Pareto distribution

Let's look inside the Pareto distribution, towards the median. If we are among the poorest 80% and within that we are among the poorest 80% and within that we are also among the poorest 80%, we are approximately in the middle (80%^3=51.2%). Thus, we own 20%^3=0.8% of the assets (80% of the poorest own 20% of the assets, and of those assets 80% of the poorest own 20% of the assets, and of those assets 80% of the poorest own 20% of the assets). Thus, in a (original) Pareto distribution, 51.2% of people share 0.8% of the wealth. Thus, more than half of the Bitcoin users in such an 80-20 Pareto distribution would own a total of 168,000 bitcoins.

The question is how many users there are. If there are a million Bitcoiners, then half of them have an average of 0.336 bitcoin per person (but of course, even there it's divided according to the Pareto distribution, so the average isn't very useful). If there are a hundred million bitcoiners, then the poorer half of them account for 0.00336 bitcoin on average. If you have more than that many bitcoins and there are a hundred million bitcoiners, you are already above average. One hundred million bitcoin HODLers is not an unrealistic number. The only question is whether you buy those 0.00336 bitcoins for a hundred dollars or ten thousand dollars.

Of course, this is pure speculation with a specific 80-20 Pareto distribution - the specific percentages may be different, and we don't know how many Bitcoin users there will be. In this Pareto distribution of bitcoin HODLers, it is not that hard to be "above average". In practice, this means that we can buy a ticket to the parallel economy for a few dollars. If all goes well with the primary - state-controlled - economy, it's not a big loss. But if the parallel economy turns out to make a difference, it's not that hard (and not at all expensive) to be there and already have a record in the database of good deeds of the parallel society. My point is that if we enter the Bitcoin economy now, it still wouldn't be too late - the Bitcoin story is only just beginning. Hard currency, if it works well, should work for decades or centuries.


There is no "right price of Bitcoin". Bitcoin is neither expensive nor cheap, its price only reflects what the demand is for units that someone exchanges for something else. Hard currency is good money that supports technological advancement, reduces global poverty, and helps humanity move forward. If we use it, we will have vast quantities of organic tomatoes, and if we don't know what to do with them, then maybe we will build that nature trail with our own money.

But the most important information is that it is not too late. Gold as a hard currency has been able to function for centuries and cover people's needs. In the US, there was huge GDP growth and technological advances during deflation (1870-1890 Great Sag). Even in Japan, which has been fighting deflation for years, there have been no deflationary spirals. People have needs other than saving so that they can buy something tomorrow. For example, they want to read a book today, to eat something today, or to go on a holiday in the planet's orbit to see from above how our planet is doing. People have needs and dreams, and they won't give those up just because they can buy a bit more with Bitcoin tomorrow.

Bitcoin maximalism's main argument makes sense - if we're looking for what cryptocurrency will do 1000x fast and risk-free because it has better properties than Bitcoin, we're in an inflationary environment. We are chasing an infinite number of altcoins. We buy a limited amount of Ethereum today to exchange it for a limited amount of Cardano tomorrow, which falls to a fraction of its value and we can save up for Solana, and so on and so forth. How many monetary units of different coins will we have? Is this really a limited supply? An infinite number of coins with a limited number of units each is still an infinite number of coins. There is no difference between an infinite number of altcoins and an infinite number of units of all fiat currencies - it's a path to poverty and chasing tokens that make wealth more accessible.

Cryptocurrencies – Hack your way to a better life

How Bitcoin, decentralized payment networks, cryptocurrencies and a return to hard, non-inflationary currency will help us change our lives and the world

Order Now Order on Amazon

Gold was for many years a Schelling point - there was a global consensus that gold is and will be money. Regardless of whether the coin had a picture of a king on it or not. People came to this consensus naturally, without any economist or other expert having to tell them. And without regard to central planners.

In the digital space, the consensus is on Bitcoin.

1 Many people would disagree with this, sure a civil servant can collect taxes to pay a private company to build a road. But this is a destruction of wealth, even when it creates something valuable. Because if they would not have collected the tax (which is involuntary), people would have bought something more valuable for their dollars. In a voluntary exchange, both parties get something that is more valuable than what they parted with (otherwise they would not do the exchange). When they cannot do this type of exchange, they necessarily get something that is less valuable to them, so from the point of view of wealth, it is a net loss – even though a road might still be valuable to some, that what they would have bought if not coerced into paying for the road, would be even more valuable to them.

2 Wikipedia’s Bitcoin page: “HODL is slang in the cryptocurrency community for holding a cryptocurrency rather than selling it. A person who does this is known as a Hodler. It originated in a December 2013 post on the Bitcoin Forum message board by an apparently inebriated user who posted with a typo in the subject, "I AM HODLING." It is often humorously suggested to be a backronym to "hold on for dear life". In 2017, Quartz listed it as one of the essential slang terms in bitcoin culture, and described it as a stance, "to stay invested in bitcoin and not to capitulate in the face of plunging prices“.”

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Juraj Bednár

An educator, author, coder, cryptoanarchist. He is a co-founder of Paralelná Polis and author of Cryptocurrencies - Hack your way to a better life. Enjoyer of volatility, swimmer in uncertainty.

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