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When Satoshi Nakamotobuilt Bitcoin,design choices were made that effectively limits the number of Bitcoins that will ever exist to (roughly) 21 million.
A fixed supply limit certainly gives Bitcoin anti-inflationary properties, but the reason it was set to 21 million is hidden in personal correspondence between Nakamoto andsoftware developer Mike Hearn.
21 million was an educated guess
According to an email shared by Hearn, Nakamoto intendedBitcoin’s unit prices to eventually align with traditional fiat currencies, so that 0.001 BTC would be worth 1 Euro, for instance.
“I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that’s very hard. I ended up picking something in the middle,” Nakamoto said.
“If Bitcoin remains a small niche, it’ll be worth less per unit than existing currencies. If you imagine it being used for some fraction of world commerce, then there’s only going to be 21 million coins for the whole world, so it would be worth much more per unit,” they added.
Turns out, Nakamoto was a little off in theirprediction. 0.001 BTC is currently worth 10.62 Euro, almost 11 times their original example.
OK – but how did Nakamoto come to 21 million Bitcoin?
Nakamoto explainedwhy they chose 21 million for Bitcoin’s supply limit, but never really expressedhow.
One solid theory involves dissecting Bitcoin’s distribution model (which had been hinted at in the Hearn email), but it unfortunately requires some mathematics.
Many believe that Bitcoin’s 21 million limit wasarbitrarilyset when Nakamoto made two key decisions, that: Bitcoin should add new blocks its blockchain every 10 minutes (on average); and the reward paid to miners (starting with 50 BTC) halves every four years.
A post on the Bitcoin section of popular dev forum StackExchange suggested Bitcoin’s 21 million supply limit is more of a mathematical coincidence than a conscious choice.
Calculate the number of blocks per four year cycle:
6 blocks per hour * 24 hours per day * 365 days per year * 4 years per cycle = 210,240 ~= 210,000
Sum all the block reward sizes:
50 + 25 + 12.5 + 6.25 + 3.125 + … = 100
Multiply the two:
210,000 * 100 = 21 million.
But as one responder put it: this arithmetic only really provides themaximum amount of Bitcoin that can ever exist, and that number was determined by the parameters set by Nakamoto in the first place— so again, this doesn’t answerwhy.
Yeah but that’s just numbers
If you’re like me (and you’re over the mathematics already), the internet is ripe with alternative suggestions much easier to understand.
So, there you have it. Nakamoto is a secret numerologist, die-hard table tennis fan, and a serial guesstimator.The more you know!
Satoshi Nakamoto's 21 million Bitcoin limit introduced the concept of digital scarcity, revolutionizing the financial world. This fixed supply is enforced by Bitcoin's code and supported by network nodes, ensuring the scarcity remains integral.
The number of bitcoins generated per block is set to decrease geometrically, with a 50% reduction every 210,000 blocks, or approximately four years. The result is that the number of bitcoins in existence is not expected to exceed 21 million. Bitcoin was designed to be a currency that holds its value.
Once all 21 million bitcoin are mined by the year 2140, no new bitcoin will be created. This means miners will no longer receive block rewards for adding new blocks to the blockchain. Instead, their compensation will come solely from transaction fees paid by users.
If Satoshi had that number too, then with 21 million bitcoin, there'd be 2.1 quadrillion of the smallest units (now called satoshis, 0.00000001 bitcoin is a satoshi). If Bitcoin took all that store of value, and many expect it will, then 1 satoshi would be worth 1 dollar.
If a Bitcoin is lost or destroyed, it cannot be recovered, which can decrease the total supply of Bitcoins and increase their overall value. The 21 million Bitcoin supply limit ensures that the cryptocurrency is deflationary in nature and sets it apart from fiat currencies, which are typically inflationary.
Nodes and miners who refused the change would now operate a minority fork, preserving the original Bitcoin network, and the two networks would compete for market share and hash rate. Thus, the 21 million supply of the original bitcoin can never be changed.
The length of time it takes to mine 1 Bitcoin can vary. Each committed Bitcoin block releases 3.125 Bitcoin. To answer the central question in mind, it takes an average of 10 minutes to mine not just 1 Bitcoin but 3 — and that rate will fluctuate over time.
Mining a Bitcoin depends on your energy rate per Kwh, it costs $11,000K to mine a Bitcoin at 10 cents per Kwh and $5,170K to mine a Bitcoin at 4.7 cents per Kwh. Learn how and if mining right for you in July 2024!
How many Bitcoins are left to be mined? As of July 5, 2024, there are 19.72 million Bitcoins in circulation out of a total supply of 21 million. This means there are only 1.28 million Bitcoins left to be mined. All 21 million Bitcoins are expected to be mined by the year 2140.
So, who are the top holders of BTC? According to the Bitcoin research and analysis firm River Intelligence, Satoshi Nakamoto, the anonymous creator behind Bitcoin, is listed as the top BTC holder as of 2024. The company notes that Satoshi Nakamoto holds about 1.1m BTC tokens in about 22,000 different addresses.
If Satoshi is alive and in control of his keys, then he has access to holdings worth around $70 billion at today's prices. But they've never moved. The market assumes they are lost coins.
In Satoshi Nakamoto's own words: “I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that's very hard. I ended up picking something in the middle. If Bitcoin remains a small niche, it'll be worth less per unit than existing currencies.
The reason for the limited number of bitcoins (21 million) is to create scarcity and maintain the value of the cryptocurrency. Once all bitcoins are mined, miners will no longer receive block rewards, and transaction fees will be the primary incentive for mining.
The number of bitcoins generated per block is set to decrease geometrically, with a 50% reduction every 210,000 blocks, or approximately four years. The result is that the number of bitcoins in existence will not exceed slightly less than 21 million.
Unlike traditional currencies with unlimited supply, Bitcoin's maximum supply is permanently capped at 21 million coins. This fundamental characteristic, ingrained in its DNA since its creation by Satoshi Nakamoto, is a cornerstone of Bitcoin's value proposition.
Notably, Cathie Wood, CEO of Ark Invest, predicted that bitcoin could reach an astounding $1.48 million by 2030. Obviously, the world's oldest cryptocurrency has come a long way since its first recorded price of less than a cent.
Bitcoin Cash derives its value from its limited supply (21 million), meaning that there is a flat rate at which BCH enters circulation until all the coins are mined.
When Bitcoin halves, the reward given to the contributors securing the network is reduced by 50%, directly impacting the rate at which new Bitcoins are introduced into circulation. And because there are only 21 million bitcoins and the halving makes fewer of them, the halving contributes to making bitcoins more scarce.
Introduction: My name is Merrill Bechtelar CPA, I am a clean, agreeable, glorious, magnificent, witty, enchanting, comfortable person who loves writing and wants to share my knowledge and understanding with you.
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