21 million Bitcoin — Nothing more, nothing less
A closer look at Blockchain and the issuance of new Bitcoin.
In my recent article where I explain where new Bitcoins come from, I talked about how the blockchain undergoes a halving event roughly every 4 years (or after every 210,000 blocks are mined).
So what’s going on?
When the first ever block (also called the genesis block) was mined, 50 new Bitcoins were created. But 4 years later in 2012, only 25 Bitcoins were rewarded for every block that was mined. In 2017, Bitcoin experienced its 3rd halving event, which means that as of writing this article — only 12.5 Bitcoins are rewarded per block.
But why does this happen?
As a cryptocurrency, Bitcoin is but one of many versions of programmable money. And because of the program, the Bitcoin model is built to behave very similarly to precious metals such as gold.
The picture above compares gold, to fiat currencies (such as the US dollar), and even cryptocurrencies. For this article, I want you to take a closer look at the row that is labeled “Scarce (predictable supply)”. The scarcity and predictable supply of Bitcoin are what makes Bitcoin more similar to gold instead of currencies like the USD.
By looking at the rate of each halving event, by the year 2140–21 million Bitcoins will have been mined, and no more will be created beyond that. With a model that is purposefully deflationary, it simulates the issuance of gold. With more and more time, there will be less and less Bitcoin, thus regulating a steady demand for Bitcoin.
The benefit of having a model that has a predictable supply means that it does not suffer from inflation like other fiat currencies. A country that tries to boost its economy would undergo “quantitative easing”, by printing more money and injecting it into the economy. With quantitative easing, fiat currencies suffer the risk of inflation.
Many Bitcoin advocates say that Bitcoin is like gold 2.0 might they be right?
