21 million cap

[Vanlife]

I've been reading about the cap, and how the mining gets decreased as the years go on, but I don't understand why this works. Is this just a rule, or is it actually impossible to mine after 21 million? If you can mine after 21 million what would stop people from doing so? The blockchain network wouldnt allow it or what?

By the way sorry in advance I am very new at this.

[littlejonney]

I would like to understand that too..

[maxmint]

The mining reward for each block halves roughly each 4 years. In the beginning it was 50 BTC per block, currently it is 25 BTC per block and soon it will be 12.5 BTC per block.
If you sum this up you approximate 21 million bitcoins.

Here's another thread discussing this topic: https://bitcointalk.org/index.php?topic=153330.0

[serp]

We all agree to a set of rules basically.  These rules are enforced by the software we use.  If we try to change our software to use different rules then everyone else on the network would ignore our changes and thus we'd not be part of the bitcoin network anymore but rather our little worthless fork.

The rule in question here is that the reward for creating a block is halved every 210,000 blocks found.  Unless something is changed (and we all agree on it) then eventually the reward will go down to 0 (since bitwise shifts are used to do the halving).  I put this blurb together to illustrate it for myself http://nandbit.com/bitcoin/reward

After the block reward goes to 0 (~120+ years from now) then people will still need to mine in order for transactions to be processed.  The only gain from doing so will be the transaction fees people pay when they send bitcoins.  Miners could simply choose not to include transactions with too low of fee if needed in order to justify mining at that point.

[zenrith]

It's like approaching the speed of light.. as you get closer to the 21st million coin... it becomes more and more difficult to get and eventually you need more power than is available anywhere to get it.

BUT:  It has been calculated to take another 130 years before the last coin will be mined.  This is due to a mathematical quirk of the process that allows only so many blocks of coins to be distributed at any single time.  The network autocorrects difficulty as we mine more and more.

EX:  If we all stopped mining for 15 day, then the next 15 day difficulty cycle would likely allow for CPU's to mine again.  

[Vanlife]

Alright, thanks for the info fellas.

This may sound stupid but am I understanding this correctly in that the mining of bitcoins is actually people doing work on the growing of the block chains' and are rewarded BTC for an amount of work performed.

If that is correct who is the agency responsible for the reward?

Noob question 2:  If you buy 100BTC or 2BTC or 1 BTC would in any of these scenarios you only obtain one private key, or would you receive 100 keys in the first case.

[gfoot]

The miners claim the reward themselves, but if they claim it wrong, the network will reject their block.  So in a sense it's the network as a whole that decides whether the miner has claimed the right reward.

The strength of the bitcoin network is having a larger number of nodes all running software which agrees on the rules of how the system works.  Changing the rules involves convincing as large a portion as possible of the network to agree to the changes, which makes the rules stable.

When you receive bitcoins into your private wallet, you ask the wallet to generate a private key and associated "address", and then you can transfer as much or as little as you like into that address.  Or generate multiple addresses and split things up.  It is up to you, regardless of the amount being stored.

Note that you never "receive" a private key - they should never be sent over the network, they are secret.

[tremtie]

Alright, thanks for the info fellas.

This may sound stupid but am I understanding this correctly in that the mining of bitcoins is actually people doing work on the growing of the block chains' and are rewarded BTC for an amount of work performed.

If that is correct who is the agency responsible for the reward?

My understanding: all clients know the public key for the new block reward. Successfully mining a new block means getting the private key. At that point, all clients recognize that you own the new btc -- whatever quantity is the current block reward.

More knowledgeable people can correct me if I'm wrong.

Noob question 2:  If you buy 100BTC or 2BTC or 1 BTC would in any of these scenarios you only obtain one private key, or would you receive 100 keys in the first case.

My understanding: Every client in the world knows that your address owns X number of btc. The fact that you have the private key for that address proves to everyone that you have the right to send btc from that address, up to the total amount stored in that address.

Again, more knowledgeable people can correct me if I'm wrong.

[maxmint]

This may sound stupid but am I understanding this correctly in that the mining of bitcoins is actually people doing work on the growing of the block chains' and are rewarded BTC for an amount of work performed.

Essentialy, yes. Miners are securing the system by providing computational power, they're making it harder for all others to mess around with the block chain.

If that is correct who is the agency responsible for the reward?

There's no agency. It's all in the software and you can look at the code here, it's open source:
https://github.com/bitcoin/bitcoin

Noob question 2:  If you buy 100BTC or 2BTC or 1 BTC would in any of these scenarios you only obtain one private key, or would you receive 100 keys in the first case.

A private key is like the password for your account (or your bitcoin "address"). Whether you send 100 bitcoins or just 1 bitcoin to your address, the private key for this address remains the same. So when you buy bitcoins at an exchange you most likely will send them to one of your addresses and there's only one private key per bitcoin address.

[serp]

The blockchain is just a chain of blocks.  A block is created when someone solves the math problem at the target (difficulty) level.  The target is set so that given the recent history of computing power (hashes/second) the miners have had that a block will be found approximately every 10 minutes.  Due to the random nature of trying to find these solutions via brute force sometimes that time is less and sometimes more.  Whatever miner finds that solution is granted the current block reward (because we all agree to it) plus any transaction fees that come with any pending transactions he/she chooses to include in that block.  This is how transactions are stored in the blockchain.

There is no agency or central authority here.  That miner gets that reward because we all agree to it.  The reward is essentially just a transaction in the block the miner found that rewards themselves with that amount of bitcoins.

What might be confusing you is that most people now mine on a pool.  This is software that basically splits the work up among everyone who participates in that pool.  When someone finds a block then the owner of that pool creates the block and gains the reward.  Then the software takes that reward and splits it up in some fashion based on the amount of work each person did.

As for private keys, your wallet creates addresses for you.  Each address has a private and a public key.  The public key is obviously the one you give out to someone so that they can send you bitcoins.  You should protect your private keys and never give them out because anyone that has those can spend any bitcoins stored on that address.  The amount of bitcoins stored on an address is all the bitcoins that address has received minus any that address has sent.  The amount of bitcoins in your wallet is the sum of the bitcoins stored in all the addresses in that wallet.

[Vanlife]

Thanks so much for all the information you guys, very informative.

[yvv]

We all agree to a set of rules basically.  These rules are enforced by the software we use.  If we try to change our software to use different rules then everyone else on the network would ignore our changes and thus we'd not be part of the bitcoin network anymore but rather our little worthless fork.

The rule in question here is that the reward for creating a block is halved every 210,000 blocks found.  Unless something is changed (and we all agree on it) then eventually the reward will go down to 0 (since bitwise shifts are used to do the halving).  I put this blurb together to illustrate it for myself http://nandbit.com/bitcoin/reward

After the block reward goes to 0 (~120+ years from now) then people will still need to mine in order for transactions to be processed.  The only gain from doing so will be the transaction fees people pay when they send bitcoins.  Miners could simply choose not to include transactions with too low of fee if needed in order to justify mining at that point.

Thanks for explanation!

[holy_cow]

Where have all the bitcoins gone?  Long time passing...