The stock-to-flow ratio explains why some forms of money endure and others fail.
Stock is the existing supply of an asset.
Flow is the amount added each year.
When flow is small relative to stock, supply is stable.
When flow is large, value is diluted.
This ratio matters for money.
Gold functioned as money for centuries because its stock-to-flow was high. New supply could not be produced quickly, even when demand increased. That constraint protected purchasing power over time.
Fiat currency has a stock-to-flow problem by design. Flow responds to policy, not scarcity. When demand for money rises or debt becomes unmanageable, supply expands. Purchasing power declines as a result.
Bitcoin was designed with this distinction in mind.
Its total stock is capped.
Its flow is known in advance.
Issuance decreases on a fixed schedule.
Every four years, Bitcoin’s flow is cut in half. Its stock-to-flow rises automatically, without discretion or intervention.
This is not a pricing model.
It is a description of supply mechanics.
Hard money does not depend on restraint.
It depends on constraint.
Bitcoin’s stock-to-flow is enforced by rules, not promises. That makes it the first digitally native form of hard money with predictable scarcity.
Over time, assets with stable supply are used to preserve value.
Assets with elastic supply are used to spend.
That pattern has repeated throughout history.
Bitcoin fits the former category by design.
#Bitcoin #HardMoney #Money #Economics #Inflation #Finance
Stock is the existing supply of an asset.
Flow is the amount added each year.
When flow is small relative to stock, supply is stable.
When flow is large, value is diluted.
This ratio matters for money.
Gold functioned as money for centuries because its stock-to-flow was high. New supply could not be produced quickly, even when demand increased. That constraint protected purchasing power over time.
Fiat currency has a stock-to-flow problem by design. Flow responds to policy, not scarcity. When demand for money rises or debt becomes unmanageable, supply expands. Purchasing power declines as a result.
Bitcoin was designed with this distinction in mind.
Its total stock is capped.
Its flow is known in advance.
Issuance decreases on a fixed schedule.
Every four years, Bitcoin’s flow is cut in half. Its stock-to-flow rises automatically, without discretion or intervention.
This is not a pricing model.
It is a description of supply mechanics.
Hard money does not depend on restraint.
It depends on constraint.
Bitcoin’s stock-to-flow is enforced by rules, not promises. That makes it the first digitally native form of hard money with predictable scarcity.
Over time, assets with stable supply are used to preserve value.
Assets with elastic supply are used to spend.
That pattern has repeated throughout history.
Bitcoin fits the former category by design.
#Bitcoin #HardMoney #Money #Economics #Inflation #Finance