30 Dec '13

Will 21 Million Bitcoins Ever Be Enough ?

The number 21 million is causing a lot of confusion for people who are starting to learn about Bitcoin.

21 million always comes up as a talking point to help explain Bitcoin’s deflationary nature and fixed money supply. That is, there will only ever be 21 million of them.

This explanation introduces the false imagery of Bitcoin being an indivisible unit. This false imagery is not helped by calling our new currency “bitCOIN” or by using graphical representations of a coin (which are physically indivisible objects).

"If there is only a certain amount being made, how is it going to work when more and more people start using Bitcoin?"
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The number 21 million is of course a matter of misunderstanding.

Bitcoins are divisible and you can buy just a fraction of a bitcoin.

In reality, what we call ONE BITCOIN, is divisible into 100 million units, with each unit called a Satoshi – named after Bitcoin’s creator.

Therefore, the Bitcoin network will eventually contain approximately 2.1 quadrillion units of value.

A part of the misunderstanding stemming from this infamous 21 million number results in people believing they can’t afford to buy a bitcoin.

As the value of one bitcoin surpasses $1000, it is helpful to quote prices in millibit, eg $1 per 1 millibit. Granted, speaking of millibits adds “something else to explain”, but it also solves the misunderstanding of an indivisible bitcoin.

"A millibit is 1000th of a bitcoin."
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21 million is the approximate number of bitcoins that will ever come into existence. I say “approximate”, because the *actual* number is 20,999,999.9769 bitcoins.

Why Are There Only 21 Million Bitcoins?

I’ll spare you the mathematics and finer details, but a quick run down goes like this.

When bitcoin miners verify blocks of transactions, they are rewarded a fixed number of bitcoins for their work. The “block reward” was 50 bitcoins when the network started in 2009.

Every 4 years or so, the block reward is cut in half. Currently in 2014, the reward is 25 bitcoins.

Due to this halving, the number of new bitcoins created will decline until no more are created.

The last ever bitcoin was originally due to be mined in 2140. That’s another commonly misunderstood date, which is often incorrectly stated in the media as occurring in 2040.

The reason for the misquoted date is because 99.9% of all bitcoins will be mined by around 2040, however there will still be a trickle for the next century.

Is 21 Million Bitcoins Enough?

Please excuse the dramatic title of this post, which is to illicit how a newcomer may misunderstand bitcoin’s divisibility.

Yes, 21 million bitcoins will be plenty because they are divisible to 100 million units.

By 2040 when 99.9% of all bitcoins will be in existence, there will be 2,000,000,000,000 units of value.

Right now, you can buy 100,000,000 units for $800 – $1000.