What Is Inflation and Why Does It Matter?

Overview

Inflation is a gradual decline in the purchasing power of money over time. In simple terms, it means that the same dollar buys less in the future than it does today. Prices for everyday goods like groceries, gas, and housing, tend to rise as a result.

Bitcoin was created as an alternative to this system. Bitcoin has a fixed supply and predictable issuance which make it fundamentally resistant to inflation, and offers a transparent and decentralized alternative to traditional fiat currencies.

What Causes Inflation?

Inflation happens when the total supply of money in an economy grows faster than the economy’s actual production of goods and services. Central banks and governments can increase the money supply by printing or issuing new currency, expanding credit, or lowering interest rates to stimulate spending.

Prices will naturally go up when the amount of goods available stay the same and the amount of money available to purchase those goods increases.

Example:

• In 2000, $100 could fill your grocery cart.

• In 2025, that same $100 might only cover half as much.

This difference reflects the reduced value of the dollar, not necessarily a change in what groceries are worth.

Why Inflation Matters

Inflation affects nearly everyone, often in ways that are easy to overlook:

• Savings Lose Value: Cash held in a bank account gradually buys less each year.

• Rising Living Costs: Essentials like rent, food, and utilities become more expensive.

• Uncertain Planning: Long-term budgeting, retirement, or fixed income savings become harder to manage when the value of money constantly changes.

While moderate inflation is considered normal in fiat economies, it erodes purchasing power over time and can lead to wealth inequality, as asset owners tend to benefit while cash savers lose value. For a visualization look at this consumer price index HERE

How Bitcoin Addresses Inflation

Bitcoin was designed with a fixed supply of 21 million coins, meaning no one can create more. New Bitcoin enters circulation through mining at a predictable rate, which decreases every four years in an event called the halving (learn more).

This built-in scarcity makes Bitcoin resistant to inflation caused by monetary expansion.

Key characteristics:

• Limited Supply: Only 21 million will ever exist.

• Transparent Rules: The issuance schedule is coded into the network, not set by central authorities.

• Global Accessibility: Anyone can use, send, or hold Bitcoin without relying on a central bank or government.

Why This Matters for Everyday People

Bitcoin gives individuals the ability to store value over time without worrying about inflation eating away at their purchasing power. While its price in dollars can fluctuate, Bitcoin’s underlying design prioritizes long-term scarcity and transparency, the opposite of fiat currencies that lose value year after year.

In short:

• Fiat currency → Expands over time → Devalues purchasing power

• Bitcoin → Fixed supply → Protects purchasing power

Summary

Inflation quietly reduces the value of traditional money, making it harder to save and plan for the future. Bitcoin’s predictable, limited supply offers an alternative that aims to preserve value in the long run - built on transparency, mathematics, and decentralization rather than monetary policy.