Disinflation
A reduction in the rate of inflation. Bitcoin's issuance rate slows with each halving, exemplifying disinflationary behavior.
Disinflation means inflation is happening less over time. Prices or money supply are still going up, but the rate of increase is slowing.
Bitcoin is the cleanest example of programmed disinflation in monetary history. New BTC are minted with every block, so the circulating supply grows continuously - but every 210,000 blocks (about every 4 years), per-block issuance is cut in half. That makes the inflation rate fall in discrete steps:
- 2009-2012: 50 BTC/block subsidy
- 2012-2016: 25 BTC/block (post 1st halving)
- 2016-2020: 12.5 BTC/block
- 2020-2024: 6.25 BTC/block
- 2024-2028: 3.125 BTC/block (current, ~0.83% annual inflation)
- 2028-2032: 1.5625 BTC/block (~0.4% inflation)
This continues every 210,000 blocks until the subsidy rounds to zero around 2140. From that point forward, Bitcoin has zero monetary inflation - all miner revenue comes from transaction fees.
Disinflation is the opposite of how fiat systems usually run. Central banks typically target a positive inflation rate (the Federal Reserve targets 2%). Bitcoin targets none, and reaches it asymptotically.
See Halving for the mechanism, and the Supply Schedule rabbit hole for the long version.
Key takeaways
- Describes a falling inflation rate over time
- Bitcoins minted per block halve roughly every four years
- Positions BTC as more scarce than traditional fiat