Understanding Bitcoin's Monetary Inflation

Just to clarify, these charts are about Bitcoin's monetary inflation, not price inflation. There's a big difference. Austrian economists mean monetary inflation when they talk about inflation, while Keynesians focus on price.

Nice charts, really interesting!

Anyone else having issues seeing the images?

Could be because they were hosted on Facebook. I moved them to my own space now.

The first curve should meet at 25%, but it kinda looks closer to 29%.

Wait, how did you get that? Before block 209,999, there were over 10 million BTC. After that block, it added 50 BTC, so that's a tiny increase... doing the math gives an inflation rate of about 28.46%.

I see where you got 25% but that was from the last year before the reward halving. That isn’t the same as the ongoing inflation rate.

Looking ahead to 2030+, can’t wait for that 'no inflation'!

Could we get a version with logarithmic scales? The exponential decay would show more detail for the later years.

Sorry if I sound dumb, but I’m kinda lost with this graph. I thought inflation meant rising prices because of more money in circulation, but this chart feels different. How is inflation defined here?

In this context, inflation is the increase in money supply, or money supply inflation. When the graph shows 10%, it means the supply is growing at a 10% annual rate at that moment.

That was my first idea, but I thought the blue line was showing the growth in money supply, so I thought they should be inverses of each other?

All set.

If inflation was the opposite of monetary base, it’d have weird units. Inflation rate is actually unitless, showing how much the money supply grows in a year. This chart shows the instantaneous inflation rate, annualized.

Got it, so if I understand, it's kinda like the inverse, just plotted as a percentage of yearly changes?

Exactly, it’s a percentage. This chart shows instantaneous inflation, which is calculated continuously. When we say annualized, it’s like holding that rate constant for a whole year.

The money supply goes up consistently, starting at 50 BTC every 10 minutes, then 25 BTC, then 12.5 BTC. That's why the blue line is straight with a decreasing slope every four years or so.

Nice.

I think it’d be helpful to see a more detailed chart, from the start till 2014.

Very cool, appreciate it!