What Is Digital Scarcity?


Jake Morr


August 25, 2023

Digital scarcity refers to the finite nature of resources in a digital realm, distinct from the endless replicability of other digital goods. Bitcoin embodies this principle by having a limited supply. Unlike virtual currencies in games or fiat currencies, which can be created indefinitely by central authorities, Bitcoin's maximum supply is capped at 21 million, which cannot be changed. Mathematical and cryptographic rules within the Bitcoin protocol assure this limit. Bitcoin's proof-of-work mechanism further ensures that creating new bitcoins requires real-world energy and time, making it impossible to forge or "print" more beyond the set limit. This fusion of digital efficiency with physical constraints gives Bitcoin its unique value proposition: a digital asset with genuine scarcity, akin to gold in the digital world.

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