From what I understand, the supply of BTC increases at the same rate no matter how many people are mining. Isn't this unrealistic, since if it were like mining in real life, supply would increase less with fewer miners and more with more miners?
Mining is the least important part of mining.
Pretend that gold was the only money around, and that there was exactly one once of gold in the world, and that it had already been mined. No one would be employed mining gold, but many people would be employed assaying tiny specs of it.
Bitcoin mining has a lot more to do with assaying than it does with mining. We are verifying that no fake gold is coming to the market.
Just that in the bitcoin world, we only have access to a third of that ounce of gold, and there is a strange quirk of the assaying process that makes more gold show up whenever we successfully complete a test, and that the amount of new gold will gradually diminish at a fairly regular rate until the whole ounce is here.
Oh, and real gold can only be divided to a finite degree before it stops being divisible (or stops being gold!). Currently we don't bother dividing bitcoins beyond a certain size because there is no point to values that small. But there is no limit to how finely we can divide bitcoins if we ever need to. A few more bits and we could assign a part to each and every atom in the solar system. A few bits beyond that and we could give a part to every quark, electron and photon in the universe.
