Bitcoin is a little different from regular fiat currency that governments create. Unlike them, the total amount of bitcoin that can ever be in circulation is finite. So, after a while, the algorithms that allow miners to extract bitcoin will hit a mathematical brick wall, after which no more coins can be mined.
In that sense, therefore, bitcoin is performing a vital money function - limiting supply. Making bitcoin scarce is essential if the token is to ever have any meaningful advantage over regular fiat currency. By keeping supply to a minimum, nobody can inflate away the coin's value over time, allowing people who hold cash to preserve their wealth.
The number of bitcoins in circulation changes all the time. A new "block" (a record of all past Bitcoin transactions) is added to the blockchain every ten minutes or so, adding additional bitcoins to the circulation. Getting hold of these bitcoins is technically challenging and requires massive computational power, so people in the network can't just create unlimited coins to increase their wealth.
As of June 2021, there are currently around 18,736,000 bitcoins in circulation. However, this number is rising all the time, currently by 6.25 bitcoins every 10 minutes or so.
Interestingly, bitcoin is approaching its upper limit, as predicted by mining algorithms. This is because the total amount that can ever exist is 21 million units. So that means that there are currently only around 2.264 million bitcoins left to mine.
Many people think of bitcoin by analogy to gold. For many years, gold has served as a hedge against inflation. People who own it can protect their cash wealth long-term from government money-printed and bank credit creation.
Gold, like bitcoin, has a finite supply. There is only so much of the stuff accessible in the Earth's crust. Furthermore, getting hold of it isn't easy. Companies often have to dig deep mines to reach thin, low-yield veins. All of the easy gold is already mined and in circulation. In the future, space companies may mine gold on asteroids. But, again, the costs of doing this are likely going to be high, further limiting supply.
Bitcoin, like gold, faces hard limits on supply. However, the limits are digital and imposed mathematically, and not physical and imposed geologically. When Satoshi Nakamoto created the bitcoin currency, he built a hard upper limit of 21 million bitcoins into its parameters. No matter how much computing power is available in the future, nobody will be able to add more bitcoins to the system past a certain point.
There are various theories for why Nakamoto chose this upper limit. One idea is that he wanted to mimic the world's supply of M1 money - cash in circulation. Back in 2009, that stood at around $21 trillion. So, if each bitcoin was worth $1 million, then it would eventually equal the total amount of money in circulation at the creation of the digital currency.
Another theory is that Nakamoto didn't really set the limit at 21 million at all. Instead, it emerged naturally from the parameters set to control bitcoin's supply. The 21 million figure allows the bitcoin network to mine blocks in a regular timeframe of 10 minutes. It also ensures that miners' block rewards decrease over time. So the system enabled Nakamoto to make bitcoin predictable, regardless of the hash rate of miners in the network.
Which interpretation you pick is very much a personal decision. We don't know whether the 21 million figure is a satirical gesture or the result of cold, pure mathematical calculation. That's because we still don't know who Satoshi Nakamoto actually is.
The network as a whole has never lost any bitcoins. However, individual owners of bitcoins can lose their money if they lose their access credentials.
According to a recent estimate, around three to four million bitcoins are no longer usable. That's because the people who own them have lost their ability to access them.
For instance, imagine that you have a money box and you lose the key. You know your money is in the box, but you can't access it. In real life, you could just bust the box open. But with bitcoin, that's nearly impossible. The ciphers are difficult to break.
According to statistics, bitcoin miners add around 144 blocks of bitcoin per day, each yielding 6.25 bitcoins. Thus, the total number of bitcoins mined is around 900 per day.
Massive and unexpected increases in computing power (thanks mainly to improvements in video gaming GPUS) have increased the hash rate so much that some days see 990 new bitcoins added to circulation. However, this figure may return to baseline over time.
Currently, estimates suggest that there are around 1 million unique bitcoin miners in existence. One of the largest networks, Slushpool, has approximately 200,000 miners and commands 12 percent of the network's hash rate. Estimates for the total number of miners are based on that.
The bitcoin market has been running since 2009, and in that time, more than 18 million coins have been mined. However, the rate of coin mining is going to slow considerably over the coming decades and eventually reduce to a crawl. Currently, we're living in the golden age of bitcoin.
Because the number of new coins available in each block halves every few years, the pace of supply increases will slow. At the same time, the mining difficulty will increase. Estimates, therefore, predict that miners will mine the last bitcoin 2140 - over one hundred years from now.
If you'd like to learn more about bitcoin, how it's mined and why it's so valuable, read more on Unblocktalent.com.
"I really, really like the article. It's very clear and well written."