Why Bitcoin Has a 21 Million Coin Limit
As the years go by, the discussion of Bitcoin’s ceiling continues to increase. But why does Bitcoin have a coin limit? And why can’t more just be printed?
The creator of Bitcoin, Satoshi Nakamoto, knew he had to pick a limit to the number of tokens created to keep the token deflationary. While the exact number was picked somewhat at random, there were many reasons for choosing it. Read on to learn more about why Bitcoin has a 21 million coin limit.
To Make Bitcoin Deflationary
The number one reason that Satoshi Nakamoto wanted Bitcoin to have a finite token count was to make the token deflationary. Looking around the world, all he could see were major currencies that all had the same issue—massive inflation until eventual implosion. As such, he wanted to ensure Bitcoin was never like that.
Every fiat currency on Earth suffers from the same fatal flaw: governments can print more whenever they want. Satoshi Nakamoto knew the only way to remedy this flaw was to create a token that had a maximum number that could be printed. Meaning Bitcoin would have to always have a ceiling to ensure its longevity and that it wouldn’t be printed into oblivion like every other currency on earth. Because a ceiling or cap is truly the only way to stop inflation.
Not only that, but with the way Bitcoin halving works, the supply of Bitcoin drops off steeply after only the first 20 years of the algorithm, ensuring that those who believed in the project early will be rewarded rather than watching the token fall victim to increasing inflation.
To Make Bitcoin a Big Player
So now that you know why Bitcoin has a maximum number of tokens that can be created, you might be wondering why the number 21 million was chosen, and the reality is, Satoshi Nakamoto didn’t know what number to pick. He knew he needed a big one to rival other currencies, but he never knew how big he would need—because he had no way to predict how popular Bitcoin would become.
The issue was that the final count of Bitcoins had to correlate with its future popularity. Since he couldn’t see the future, he had to make an educated guess. According to many of his posts before his disappearance, he looked at strong currencies, and ultimately chose the most conservative number he could—for the purpose of ensuring its continued strength whether or not Bitcoin became popular. Though he did hope for it to become popular and knew a smaller number would only help, and not hinder, if that was the case.
To Create Scarcity
So why did Satoshi Nakamoto round down and estimate low? Because he knew scarcity was the way to go. Remember the laws of supply and demand—lower supply equals more demand, and Satoshi wanted to ensure the digital money he was creating would be in demand forever.
Of course there are other ways to create scarcity, but then you enter the complicated monetary policies which many countries currently work to maintain. Satoshi also knew these methods had flaws and the quickest way to create scarcity was to cap the number of tokens at a low enough number that supply would dwindle.
Because it Was Convenient
Interestingly enough, while 21 million was a bit of a “number out of a hat,” it also was an easy number to work with mathematically and algorithmically. Bitcoin has a 4-year halving cycle, a 10-minute peak block time, and 50 BTC as the first reward. With all this, it was very simple to pick 21 million as the final number with a simple round-down. This is why Satoshi didn’t pick 20 million and didn’t pick 25 million—the math made 21 million a very easy solution without having to change the math.
When Will Bitcoin Reach 21 Million?
The truth is, Bitcoin rounds down, meaning it will never truly reach 21 million tokens; rather, it will almost reach 21 million, and the final number will be just below that. That being said, with the current halving protocol, the final Bitcoin will be mined in the year 2140—long after anyone reading this will have left this earth.
It’s important to remember that the difficulty of mining Bitcoin will continue to increase, so while we are certain it will eventually all be mined, it is a challenge to pin down the exact date of the final token being mined.
We do want to mention that 99% of the Bitcoin supply will be mined by 2035, and it will take the next 105 years to mine the final 1%. Just so you have an idea of how incredibly challenging mining the final 1% of Bitcoin will be.
Can Bitcoin’s Supply Be Changed?
Technically speaking, if the majority of the network participants agreed, the Bitcoin protocol could be changed. That being said, we find that incredibly unlikely, as most individuals believe in and trust the protocol that Satoshi Nakamoto put forth.
It can be easy to look at the rising value of Bitcoin and think that we need more—however, remember that this was the point of creating Bitcoin in the first place. Satoshi Nakamoto wanted to create a form of money that couldn’t be controlled by governments and inflated for their own benefit. Rather, he wanted to create a token for the people, by the people, ensuring they would have the final say.
So, trust us when we say we don’t foresee the protocol being changed, or the cap being raised anytime soon.
Overall, there is no single or simple reason that Satoshi Nakamoto chose 21 million as the cap for Bitcoin; rather, it was a culmination of research, estimation, and keeping the math easy. The last Bitcoin won’t be mined for a while, but the supply is about to slow drastically to create the exact scarcity Satoshi Nakamoto desired.
