The limit on the maximum number of bitcoins is one of the most interesting properties of cryptocurrencies. For BTC it is often called “digital gold” as the reserves of the precious metal on our planet is also not unlimited. But why the anonymous Creator of Bitcoin decided to limit the number of coins that is 21 million? The answer may be hidden in basic math.
Why do we need so many bitcoins?
Issue traditional currencies like the dollar or the Euro can go up to infinity. Because new banknotes are issued, they gradually lose their real value, in Economics this phenomenon is called inflation. Inflation within reasonable limits, absolutely healthy process which encourages people to spend their money.
But Bitcoin in its key characteristics more reminiscent of gold. It cannot “make the air”, while the maximum number of coins is strictly limited to 21 million units. The trader of company digital asset management Arca Sasha Fleishman described in his Twitter a possible reason why Satoshi Nakamoto chose this number.
Sasha Fleyshman@ArcaChemist · Reply to user @ArcaChemist
Sometimes, this deviates by a few seconds in either direction due to what is called “Pool Luck” – since the algorithms are probability based, sometimes it tilts in the miners favor, and sometimes out of favor.
This is offset by what is called a “Difficulty Adjustment”, where the ‘hash'(random generated number) that is required to solve the block is adjusted – this occurs every 2016 blocks (14 days). So, for all related purposes, 6 blocks/hour is a safe metric to use.
Parse explanation. So, each unit of Bitcoin find for about 10 minutes. Time for a new unit can vary by several seconds or minutes depending on the change of the total computing power of all devices in the network cryptocurrency and, consequently, the complexity of the production. To the extraction unit does not go beyond 10 minutes, the difficulty of Bitcoin mining is recalculated every 2016 blocks. If we multiply 2016 for 10 minutes, then check that each conversion occurs at intervals of two weeks.
In Bitcoin there is also a process called halving. Every four years, it cuts the issue of coins by half. Under the issue also includes remuneration of the miners. If in one hour, the miners mined six blocks, then for four years they were able to find 210 thousand units.
The following halving cryptocurrency will occur in early may of 2020, this time the issue will be reduced from 12.5 to 6.25 BTC BTC per block. Recall, after the first such procedure, the emission decreased from 50 BTC to 25 BTC after the second — from 25 BTC to 12.5 BTC.
Now the fun part: if you add up the sum of all previous and future values of rewards we will receive 100. Multiply 100 by 210 thousand units and received $ 21 million. The logic of these calculations is.
Of course, the real reason for the choice of such limits is known only to Satoshi Nakamoto. His identity remained unsolved, although many have put forward dozens of theories about his real name.
Thus no reason to look for the Creator of the first cryptocurrency enough: for example, at the end of November 2018 developer profile on P2P Foundation has a new entry. Alas, the possible explanations of what happened there are at least three — which is a lot, to be sure.