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You may know, but one of the characteristics of Bitcoin is that it limits the number of coins in circulation. There are currently just over 19 million bitcoins in circulation. However, in the long run, the network will not circulate more than 21 million BTC. What does this mean? And what happens when this limit is reached? We will explain everything to you in this article.
Creating new bitcoins: mining
Before talking about the limit of 21 million BTC, it is necessary to understand the process of creating bitcoins.
Central bank money production
when paper moneymoney creation is usually controlled by the central bank. Central banks control the production of “new money”.
Furthermore, during times of crisis, as was the case during COVID-19, it is not uncommon to use the expression ” turn press “This expression refers to the central bank mechanism, which tends to produce more money. invest in the economy to support structures in times of crisis.
Bitcoin mining, how does it work?
With Bitcoin, things are very different. As you know, the whole principle of Bitcoin (and most cryptocurrencies) is to work without intermediaries, that is. without a central bank, for example. The production of money is directly controlled by the network. How ? Through the extraction …
in Extraction is the name of the mechanism that enables the Bitcoin network create new corners. This term is not reserved only for bitcoins, but applies to all cryptocurrencies that operate on the same principle. This is the case, for example, of Dogecoin (DOGE), Litecoin (LTC), etc.
Specifically, mining consists of check for blocking the transaction. After checking this block registered on the blockchain. The people responsible for mining are called miners.
For bitcoins, mining requires modern computer equipment. Really invest in mining competition all the miners in the network. Those who manage to check the pocket of the block will be rewarded for their work. To keep it simple, we could compare validating a block with solving a math equation (for the curious, it’s actually about finding the correct block hash).
Premium halved every 4 years
The number of bitcoins that are placed on the market after each block
Miners are rewarded for their work as described above. This reward comes in the form of a Bitcoin payment. These are mined bitcoins, e.g. new bitcoins that are transmitted to minors and, more generally, published on the Internet. Therefore, mining is a mechanism that makes it possibleIncrease the number of BTC coins in circulation.
How much do miners actually earn? In other words, how many bitcoins are released after each block is mined?
This is where the concept divide into two parts. Bisection is an Anglicism that refers to dividing something in two. So, with Bitcoin, the reward that is paid to the miners regularly doubled. Mathematically, the amount of bitcoin paid to miners follows the following formula:
50/2 ^ n
In this formula, “n” represents the number of halves since the start of Bitcoin. So, at the beginning of Bitcoin (n = 0), this formula stated that the reward … 50 bitcoins ! Also, at the time, bitcoin mining was very affordable. Does it make you dream? It should be borne in mind that at that time the price of bitcoin was less than 10 euros.
Halving every 210,000 blocks
You should know that roughly every halving happens 210,000 blocks. If you don’t like this, know that this is equivalent to duration 4 years.
Let’s do some math to explain this. In Bitcoin, a block is checked every 10 minutes or so. If we make a breakdown, we find that around 210,000 blocks have been verified in 4 years:
6 (blocks per hour) x 24 (hours per day) x 365 (days per year) x 4 (years) = 210,240 blocks
We have been working in Bitcoin since its inception third half. If we use the above formula, this gives 6.25 BTC premium (50/2 ^ 3). Notably, miners currently receive 6.25 BTC for block validation. So, after each block (every 10 minutes) 6.25 “new” bitcoins circulate!
Recall that the previous three halves of Bitcoin were:
|bisection number (s)||Date||Premium (BTC)||bitcoin price|
|one||November 2012||25||From 10 to 500 euros|
|2||July 2016||12.5||From 500 to 20,000 euros|
|3||May 2020||6.25||From EUR 9,000 to EUR 67,276 (BTC ATH)|
Therefore, the next halving will take place in 2024 and will reduce the miners reward to 3125 BTC.
Bitcoin and the limit of 21 million coins
Let’s take the formula above for the number of bitcoins placed on the market. In the long run, we get the following results:
|bisection number (s)||Premium (BTC)|
|32||0.0000000116 BTC or 1.16 Satoshi|
|33||0.0000000058 BTC or 0.58 Satoshi|
For now, you should keep in mind that the smallest possible fraction of bitcoin is called satoshi it’s the same 0.00000001 BTC. In particular, the satoshi is a bit like your 0.01 euro coin, there is no smaller coin.
In other words, the last halving will be number 32 since from the number 33 the number of bitcoins disbursed will be lower than that of satoshi.
How many bitcoins will be in circulation at the moment (at the 32nd halving)? To do this, you need to stick to the following mathematical formula:
Here are the components of this formula:
- n: number of bisections
- 210,000: number of blocks between two halves
- 50: initial prize (in BTC) distributed for each confirmed block.
If you are not familiar with mathematical formulas, the idea is easy to understand. It is possible to calculate the number of bitcoins in circulation. However, this formula says that at the 32nd halving the number of bitcoins in circulation will be 20,999,999,976,900.
So, thanks to this formula, we understand that the limit of 21 million bitcoins is theoretical and corresponds asymptote. So there will never be exactly 21 million bitcoins, but almost 21 million bitcoins. To be more precise, we should be talking about 21 million bitcoins. near Satoshi.
What happens after 21 million BTC?
With the data explained above, it is easy to see what the 32nd halving will be. in 2140. In other words, by 2140, the Bitcoin network will have spent all of its coins. But what happens next?
At this point there will be no more “new” bitcoins on the market. However, this does not affect the transaction process. Transactions continue as usual and are grouped into blocks. Alone, Miners will no longer receive “new” bitcoin rewards. You will be rewarded transaction costs so still in BTC, but bitcoin is already on the market. Furthermore, at that point, the Bitcoin network will most likely develop and, perhaps, other sources of income will be created for miners. The challenge will be to maintain the attractiveness of mining, which is necessary for the functioning of the Bitcoin network.