why only 21M bitcoins? edit: or more precise "why is there a limit?"

[viajero]

hi everybody!

i've been reading here for a while and by now i think i understand most of the aspects of bitcoin. but i really don't get, why the total amount of BTC is limited to 21M? as far as i know, there is no limited fiat currency out there!

if bitcoin refuses to fail and gets more and more accepted a limited amount means ever increasing deflation which rewards hoarding over spending?! sounds more like a bug than a feature to me. at least in the long run!

xx
viajero

[1715297508]

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[1715297508]

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[christop]

I think one theory is that a shrinking Bitcoin economy will also cause the value per Bitcoin to decrease (prices for goods increase), which would give hoarders an incentive to spend at least part of their savings. As the economy grows, the value increases (prices for goods decrease), giving a bigger incentive to save. There's a balance between saving and spending which an economy will find naturally.

[viajero]

i don't see, how it would "balance out naturally"!
either the bitcoin economy grows and we have ever increasing deflation or it decreases and BTC will fail eventually.

even without growing we'll have a slight deflation due to every day losses (hardware failure, lost private keys, etc) that happens to every currency and thats why central banks print money every day!

i understand, that mining for ever is problematic too.

but what i'm actually asking myself is this: has the limited amount of BTC any strong theoretical reason/explanation or is it only because there is no better solution for a decentraliced (crypto-) currency?

[dree12]

hi everybody!

i've been reading here for a while and by now i think i understand most of the aspects of bitcoin. but i really don't get, why the total amount of BTC is limited to 21M? as far as i know, there is no limited fiat currency out there!

if bitcoin refuses to fail and gets more and more accepted a limited amount means ever increasing deflation which rewards hoarding over spending?! sounds more like a bug than a feature to me. at least in the long run!

xx
viajero

Bitcoin's only method of money supply contraction is through destroyed coins, which are proportional to holdings. Holding coins effectively carries a risk and storage fee, so people will not have incentive to hoard.

[TorBroker]

The exact number of 21M is arbitrary and could be any number.

The limited supply mimicks gold which has worked as a money for human societies for many years. Economists disagree whether limited supply and deflation is good for society - on one side you have the neoclassics, keynesians, and the monetarists that believe some inflation creates more economic growth, on the other hand you have the Austrian school that argues market participants will anticipate inflation and it therefore doesn't help. They also argue that deflation doesn't hurt.

[viajero]

Bitcoin's only method of money supply contraction is through destroyed coins, which are proportional to holdings. Holding coins effectively carries a risk and storage fee, so people will not have incentive to hoard.

sure, as long as the costs and risks outweight the deflation, hoarding makes no sense. but providing appropriate technical know how, these risks and costs are pretty low. so the only significant risk is inflation which is not going to be expected, as long as BTC doesn't fail.

and isn't hoarding, growing acceptans, speculation, economic growth, etc some kind of money supply contraction too?!

[jwzguy]

If you think inflationary fiat is so much better, then just stick to that.

The topics you're mentioning have been discussed to death. Please do a little reading before rehashing something for the 10,000th time.

Welcome to the board.

[dree12]

Bitcoin's only method of money supply contraction is through destroyed coins, which are proportional to holdings. Holding coins effectively carries a risk and storage fee, so people will not have incentive to hoard.

sure, as long as the costs and risks outweight the deflation, hoarding makes no sense. but providing appropriate technical know how, these risks and costs are pretty low. so the only significant risk is inflation which is not going to be expected, as long as BTC doesn't fail.

If these risks are low, then money supply contraction will be low. If 2% of bitcoins are lost every year, you will, on average, lose 2% of bitcoins every year. There is no reason to hoard.

[AnonyMint]

You should rationalize this away and not pay attention. I will not be replying.

why only 21M bitcoins?

https://bitcointalk.org/index.php?topic=158111.0

[viajero]

If you think inflationary fiat is so much better, then just stick to that.

The topics you're mentioning have been discussed to death. Please do a little reading before rehashing something for the 10,000th time.

Welcome to the board.

well, i did a lot of reading over the past months and actually jumped on the BTC train fortunately long before it reached the 10€ mark believe me, i'm a strong believer in BTC! i was just wondering about the reason why and the theoretical background of the 21M

i did some research for this topic as well, before i posted my initial post but couldn't find any satisfying results. well... i did some more research and found that:

https://bitcointalk.org/index.php?topic=11627.0 and that:
http://bitcoinweekly.com/articles/one-apple-today-two-apples-tomorrow-or-how-i-stopped-being-afraid-and-learned-to-love-deflation

it doesn't really answers all of my questions, but it clarified a lot.

[MoonShadow]

i was just wondering about the reason why and the theoretical background of the 21M

There actually isn't one, it's an arbitrary number.  Actually, we come to 21 M because of how the block reward subsidy is issued.  50 BTC per block for the first 4 years (10.5 M BTC) and then it halves, and continues to half until it's too small to represent with a 64 bit integer.  No matter how long that takes, the total number of bitcoins issued will always approach, but never quite reach, 21 M BTC.

But that's actually inmaterial.  It could have been any number, as long as it had a maximum.  Bitcoins are infinately divisable under the protocol, and are presently divisable to eight decimal places.  It's really just a reference point.

[viajero]

it seems my subject is missleading.

"why is the total amount limited" would be more precise.

Bitcoins are infinately divisable under the protocol, and are presently divisable to eight decimal places.  It's really just a reference point.

that's interesting! so the satoshi isn't the smallest possible piece? is it really infinately divisable?

[AnonyMint]

If you think inflationary fiat is so much better, then just stick to that.

The topics you're mentioning have been discussed to death. Please do a little reading before rehashing something for the 10,000th time.

Welcome to the board.

"Discussion to death" is a measure of correctness in which logic system?  

[AnonyMint]

that's interesting! so the satoshi isn't the smallest possible piece? is it really infinately divisable?

He failed to tell you why that is irrelevant to your theoretical question.

Probably he doesn't even have a clue what I mean.

[kslaughter]

No one know why, because the Creator(s) are not know.  However, a fix amount make scene,  because no one has control over the system, so who would make that decision to increase the coins.  Anyway Bitcoin is divisible to 8 places at the moment, so there is enough to go around

[AnonyMint]

No one know why, because the Creator(s) are not know.  However, a fix amount make scene,  because no one has control over the system, so who would make that decision to increase the coins.  Anyway Bitcoin is divisible to 8 places at the moment, so there is enough to go around

The system could make the decision mathematically.

[MoonShadow]

that's interesting! so the satoshi isn't the smallest possible piece? is it really infinately divisable?

He failed to tell you why that is irrelevant to your theoretical question.

Probably he doesn't even have a clue what I mean.

I certainly do.  The real question is, "why is there a limit?"  The simple answer to that question is that Bitcoin was designed as a digital approximation of a finite natural resource, such as gold.  Actually, precisely as gold.  Every decision concerning an arbitrary metric within the bitcoin protocol was intentionally biased to approximate the mining of gold as best as was reasonablely possible.  My point was that the limit isn't a problem in the same manner that a limit on a fiat currency would be, because a BTC is (potentially) infinately divisable, so there cannot ever be a liquidity crisis as a result of a limited currency base.

[MoonShadow]

Bitcoins are infinately divisable under the protocol, and are presently divisable to eight decimal places.  It's really just a reference point.

that's interesting! so the satoshi isn't the smallest possible piece? is it really infinately divisable?

Yes, but clients cannot use more than 8 decimal places because of a technical limitation.  Specificly, the value of any address is stored as a 64 bit integer.  All bitcoin addresses store only satoshis, not BTCs, and the clients  present the totaled values to the user with the decimal point added for human readability.  The decimal point doesn't actually exist in the current address structure, but the protocol permits new kinds of addresses to be created for any number of reasons.  The first ascii character of your bitcoin address denotes the address type, which is why all currently valid bitcoin addresses start with a "1".  The addressses designed for testing features on testnet are identical except that first character is different.  I believe that it's an "a" IIRC.  An address that used a floating point variable for the value could store sub-satoshi values.  Future address versions could also use different encryption algos than is currently used, or be different in a number of other ways.

[username57913]

Bitcoins are infinately divisable under the protocol, and are presently divisable to eight decimal places.  It's really just a reference point.

that's interesting! so the satoshi isn't the smallest possible piece? is it really infinately divisable?

Yes, but clients cannot use more than 8 decimal places because of a technical limitation.  Specificly, the value of any address is stored as a 64 bit integer.  All bitcoin addresses store only satoshis, not BTCs, and the clients  present the totaled values to the user with the decimal point added for human readability.  The decimal point doesn't actually exist in the current address structure, but the protocol permits new kinds of addresses to be created for any number of reasons.  The first ascii character of your bitcoin address denotes the address type, which is why all currently valid bitcoin addresses start with a "1".  The addressses designed for testing features on testnet are identical except that first character is different.  I believe that it's an "a" IIRC.  An address that used a floating point variable for the value could store sub-satoshi values.  Future address versions could also use different encryption algos than is currently used, or be different in a number of other ways.

I find your comment very interesting. I didn't know that the software only sees satoshis (0.00000001 BTC). But how could this be implemented? Is it feasible to do this? Or would it have to be in another altcoin?

[dree12]

Bitcoins are infinately divisable under the protocol, and are presently divisable to eight decimal places.  It's really just a reference point.

that's interesting! so the satoshi isn't the smallest possible piece? is it really infinately divisable?

Yes, but clients cannot use more than 8 decimal places because of a technical limitation.  Specificly, the value of any address is stored as a 64 bit integer.  All bitcoin addresses store only satoshis, not BTCs, and the clients  present the totaled values to the user with the decimal point added for human readability.  The decimal point doesn't actually exist in the current address structure, but the protocol permits new kinds of addresses to be created for any number of reasons.  The first ascii character of your bitcoin address denotes the address type, which is why all currently valid bitcoin addresses start with a "1".  The addressses designed for testing features on testnet are identical except that first character is different.  I believe that it's an "a" IIRC.  An address that used a floating point variable for the value could store sub-satoshi values.  Future address versions could also use different encryption algos than is currently used, or be different in a number of other ways.

8 decimal places seems to be a design flaw, as a 64-bit integer can store 11 decimal places at Bitcoin's current limits. Testnet addresses begin with 2.