One of the main features of the first cryptocurrency is the limited supply of 21 million coins. This approach provides digital gold with a valuable characteristic – the ability to withstand inflation. This is what distinguishes bitcoin from traditional money, stamped in the right amount by the central banks of the planet. And this is one of the features that explains why the number of bitcoins is limited.
Are there other reasons? And why did the creators choose just such a number of coins?
21 million BTC: why so many?
So, according to the idea of Satoshi Nakamoto, the creator of bitcoin, only 21 million BTC can exist in the world. The total number of bitcoins in circulation today is painstakingly recorded by various services, such as CoinMarketCap.
Why such a quantity? Frankly, there is no exact answer to this question. There is a version that 21 is a “triangular” number of some mathematical interest. For example, if 21 is divided into blocks, they can form an equilateral triangle.
Additional information is contained in the archival documents of Satoshi Nakamoto, which have fallen into the public domain. Judging by these papers, he assumed that in the near future bitcoin would become a world currency. In fact, BTC was created as a counterbalance to traditional money subject to inflation. And since the number of bitcoins is limited, the first cryptocurrency will always have value and protection from inflationary processes.
At the same time, one coin can be divided into small parts – Satoshi. They are easy to use for various calculations – yet Bitcoin operates on the basis of the mathematical laws of the blockchain. Satoshi can be used to pay for goods / services – as ordinary money.
There is another theory – the replacement of the money supply. At the time BTC was created, the total money supply in the world was approximately $21 trillion. It includes all physical money on the planet – cash, checks, coins, etc. If bitcoin becomes a single currency for everyone, we will be replacing every real monetary unit with a digital one. Then 1 BTC will be worth a million dollars. And since one coin is divided into 100 million Satoshi, the value of each such “little thing” will be $0.01. Many representatives of the crypto community are sure that all this was calculated in advance.
How is BTC mined?
According to Buy Bitcoin Worldwide, over 91% of coins have been mined as of the end of summer 2022. And this means that about 900 BTC is “mined” per day. Some of them are lost forever – at least 10%. Some experts estimate the total amount of losses at about 30% of the coins.
A lot of coins are on wallets, which cannot be accessed today. For example, in the crypto community there is a popular story about a hard drive with private keys to a wallet with a large amount of coins, accidentally thrown into a landfill by their owner. The holder of the cryptocurrency never obtained permission from the authorities to search for the lost treasure. In general, according to various estimates, more than 3.7 million BTC remain without movement for 11 years.
The creator of digital gold has established that it is mined using complex mathematical calculations. This process is called mining. To receive BTC, powerful equipment is used to generate new blocks in the blockchain. For connecting a new element to the block chain, a reward in the form of bitcoins is provided. The one who first finds the correct solution gets it – a hash.
The program code is written in such a way that every four years there is a decrease in the amount of reward for the found block. This event is called a halving. At the very beginning of the journey, miners received 50 bitcoins for one found block, and now the reward has decreased to 6.25 coins. The next decline is expected in 2024, when users will be able to receive only 3.125 BTC per block. In general, about 210,000 blocks are generated over a four-year cycle. As a result, we again come to the maximum number of bitcoins – 21 million.
Gradually, all these coins will be mined – approximately by 2140. In the last year of digital gold mining, miners will only be able to expect a block reward of 0.0021 BTC. In the future, the acquisition of BTC will be possible only by buying coins on exchanges or from other owners.
The predetermined and established production process cannot be changed, as it is controlled by software. Satoshi Nakamoto put a condition in the bitcoin blockchain that a block is generated approximately every 10 minutes. It is impossible to change the rule – because of the constant adjustment by increasing the complexity of mathematical calculations. Review takes place every two weeks. And the more powerful devices appear on the network, the higher the complexity of computing takes off.
Basically a vicious circle. If miners want to successfully mine coins, more powerful devices must be used. The connection of such equipment immediately leads to an increase in the complexity of mining in the network. But if some miners go out of business – usually because of the high cost of equipment – the complexity of the calculations may decrease somewhat.
Conclusion
So now we have an idea why the total supply of bitcoins is limited. Of course, there is no exact information. And all because the identity of Satoshi Nakamoto is still unknown. Crypto enthusiasts cannot ask exciting questions to the creator of the first cryptocurrency, so they can only build logical assumptions and conjectures.
But at the same time, Nakamoto cannot be denied originality and excellent mathematical / cryptographic abilities. He was able to come up with a stable settlement system with the possibility of planning future emission. And calculated everything to the smallest detail. Perhaps someday bitcoin will become a form of money familiar to everyone.
In the meantime, it is important for BTC owners to remember about the proper storage of coins. The blockchain is decentralized, so the loss of keys threatens with a complete loss of access to assets, and, consequently, a decrease in the number of coins in circulation. This point is especially relevant in relation to non-custodial wallets, since passwords for them are generated on users’ devices.