This is one article in a collection of 52 articles published weekly throughout 2023 on the basics of Bitcoin. The series is intended for people unfamiliar with Bitcoin or people wishing to enhance their understanding of the fundamentals that underpin the technology. Please contact us, if you have any questions or comments.
We are finally ready to begin our journey into the basics of Bitcoin. While there is no right place to begin, we thought a simple place to start was discussing Bitcoin’s hard supply cap. There will only ever be 21 million bitcoin (when the B in Bitcoin is capitalized it is a reference to the software and protocol, when the B is lowercase it is a reference to the unit of currency). Each bitcoin consists of a smaller denomination called a satoshi. One bitcoin has 100,000,000 satoshis. As a result, the supply limit of satoshis is 2.1 quadrillion (21,000,000 * 100,000,000 = 2,100,000,000,000,000).
The Bitcoin supply has been released into the ecosystem in a regressive manner. A Bitcoin block is mined approximately every 10 minutes. The miner who successfully mines the Bitcoin block is given a reward for mining the block which is called a block reward. The block reward given to a miner started at 50 bitcoin. Therefore, in the early days of bitcoin, 50 new bitcoin were released into the ecosystem approximately every 10 minutes. However, the Bitcoin protocol reduces the block reward by half every 210,000 blocks. When the block reward is cut in half, the event is referred to as a halving. Applying simple math, it is easy to see that there are approximately six blocks mined in an hour, 144 blocks mined in a day, and 52,560 blocks mined in a year. Therefore, a halving occurs approximately every four years.
There have been three halvings that have occurred in Bitcoin’s history to date. The first halving occurred on November 28, 2012 and reduced the block reward to a successful miner from 50 bitcoin to 25 bitcoin. By the time the first halving occurred, half of the bitcoin that would ever exist, 10,500,000 bitcoin, were in circulation. The block reward was cut to 12.5 bitcoin on July 9, 2016. At the time of the second halving, 75 percent of the bitcoin supply that will ever exist, 15,750,000 bitcoin, were in circulation. The third bitcoin halving which reduced the block reward to 6.25 bitcoin occurred on May 11, 2020. At the time of the third halving, 87.5 percent of the bitcoin supply that will ever exist was in circulation. After the next halving, which is predicted to occur on May 2, 2024, the block reward will be 3.125 bitcoin and 93.75 percent of the bitcoin supply will be in circulation. The Bitcoin halvings will continue to occur every 210,000 blocks until the last bitcoin is mined in 2140. The bitcoin halvings have created a phenomenon known as the bitcoin market cycle.
Bitcoin has a hard supply cap of 21 million bitcoin. The release of the coins in circulation was heavily skewed towards the inception date of Bitcoin, January 9, 2009. As of the date of this publication, 19.27 million bitcoin of the 21 million bitcoin are in circulation. The remaining 1.73 million bitcoin will be released based on the halving schedules until the final satoshis are released in 2140. Fiat systems don’t have a hard cap, a fact that United States government officials admitted to during covid. While an unlimited amount of money may seem far-fetched in the United States, the problem of run-away inflation is occurring in countries around the world because of the endless money printing. Bitcoiners would argue a hard cap on the supply is one of the traits that makes bitcoin superior to the current fiat systems prevalent around the world.
