Bitcoin inflation rate explained
The inflation rate of bitcoin differs a lot from traditional fiat currencies. Fiat currencies (all existing currencies issued by governments) are centralized. Normally a central bank is responsible for issuing new currency at a rate that equals the growth of the amount of goods that are traded. By doing so the theory is that the goods then can be traded at a stable price range.
However, the inflation rate of bitcoin is predetermined in the software code that every bitcoin node runs. The inflation rate cannot be changed unless a future hard fork of bitcoin changes the rules.
The risk of having such a hard fork is ridiculously low as those that control the network wouldn’t let that happen (we the people). This is one of the great beauties of bitcoin, no single centralized entity can change any of its rules.
How new Bitcoin are minted
New Bitcoin are minted roughly every 10 minutes as a miner in the network finds a new block. These bitcoin are commonly referred to as the “block reward” and is the only inflation that happens in bitcoin. The block reward decreases by 50% every 210,000th block — roughly every 4 years.
The inflation rate is halved every 4 years. When the bitcoin network was launched on the 3rd of January 2009 the initial block reward was 50 Bitcoin. This block reward lasted for four years until the first block reward halving happened at block height 210,000. This block height was reached on 28th November 2012 and it included a block reward of 25 Bitcoin.
The inflation will eventually reach 0 and the idea is that miners — by then will get enough compensation for their hard work purely by collecting the transaction fees.
Inflation rate table
Below we have put together a table to facilitate the process of understanding how the inflation rate for bitcoin will progress in the future.
Each “Reward Era” is 210,000 blocks — roughly 4 years.