The crypto intelligentsia came up with elaborate concepts to describe why the 21 million coins is important, such as calling it a schelling point. I am not as fancy as they are, but I’ll do my best to explain my thoughts.
In my opinion, the 21 million is given importance because it represents the illusion of scarcity. The fact that Satoshi picked 21 million, over some other number, was most likely arbitrary. I don’t think the number being 21 million is any different than the number being 20 million or even 2 million. Furthermore, the fact that a bitcoin can be divided down up to 8 decimal points is most likely arbitrary as well (i.e. why not 7? why not 9?).
Because of Bitcoin’s scarcity, and because of the ideological make up of many of its early adopters, a narrative has been constructed to claim that Bitcoin is “hard money”. The community that develops, uses, and builds on top of Bitcoin generally support this narrative. The literature that has been written about Bitcoin (ex. The Bitcoin Standard) also support this narrative. Narratives surrounding the defense of hard money often become ideological. For example, other contending stores of value, such as gold, have their own cultish followers, often dubbed “gold bugs”. Money is by necessity driven by ideology, since money itself (whether US dollars or gold) has minimal intrinsic value.
Therefore, because of the narrative, Bitcoin’s main application right now is a potential store of value to compete with gold. Other coins that are coming to market do NOT cultivate the store of value narrative. Most cultivate a web 3.0 narrative, or in other words, that blockchain technology will herald a new way to perform business just like Uber and Airbnb have done in web 2.0 and just as Google and Facebook did in web 1.0 (I am not a venture capitalist, so I could be getting these artificial boundaries around web x.x slightly wrong). The developers of these projects are motivated by the web 3.0 vision, the funders are motivated by the web 3.0 vision, and the early users are motivated by web 3.0 vision. They are not mostly motivated by the hard money vision that motivates many people in the Bitcoin community.
In reality, the scarcity of Bitcoin is an illusion. The 21 million could theoretically be altered, or the amount of decimal places it could be divided into could be increased. Furthermore, a new coin could be hard forked from Bitcoin (let’s say it is called Bitcoin2), with the same properties as the original except only 20 million coins could ever be mined. I would argue that even if the artifical scarcity of Bitcoin2 is superior to artificial scarcity of Bitcoin, it will still lose against Bitcoin in the store of value use case.
A narrative that is told over and over again, regardless of it’s logic or validity, eventually holds truth in the people who say it (democracy, freedom, religion, communism, etc.). ESPECIALLY if that narrative makes them money. The more abstract the narrative (i.e. it means something different from person to person but people still glob on to it), the better, since then everyone can see what they want to see in the product.
Bitcoin’s narrative, in my opinion, has gained more followers than any other competing narrative tied to a blockchain. Every year that narrative survives, and gains new followers, the more “real” it becomes. Other coins will compete with Bitcoin, and I believe that the narratives surrounding those coins might also gain salience, but I do not think they will compete with Bitcoin on the store of value/digital gold narrative.