Annualized rate of increase of Bitcoin money supply
The 21,000,000 bitcoin that will ever exist are created on a fixed and predictable schedule.
Most currency today is inflationary on a politically random and capricious schedule. The United States Federal Reserve, for example, increases the money supply of the U.S. Dollar at its own discretion with an ostensible goal of devaluing the dollar by about 2% every year.
The supply of bitcoin is determined by the Block Reward, which halves every 210,000 blocks (about every 4 years). For the first 210,000 mined blocks of bitcoin, 50 bitcoin were created per block. For the next 210,000 mined blocks, 25 bitcoin were created per block. On July 9, 2016, the 420,000th block was mined and the Block Reward halved again to 12.5 bitcoin per block.
This pattern will continue until the Block Reward becomes zero. More than 80% of all the bitcoin that will ever exist already exist today.
Bitcoin inflation is a function of its supply and the current Block Reward.
Annualized Inflation Rate = Annual increase in the supply of bitcoin / Current supply of bitcoin
Inflation rate = (Block Reward * Blocks / Year) / Current supply of bitcoin
The academic debate about the health of inflation in a currency system is being empirically tested by bitcoin’s transparent and limited supply schedule.