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Author Topic: Why IS the bitcoin limited to 21 million?  (Read 11371 times)
Fuzzy
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June 28, 2011, 11:50:31 AM
 #1

Has anyone that is familiar with the source code behind bitcoin figured out why such an arbitrary number was chosen, and why it's so low to begin with?

21 million "scarce" bitcoins, to be the foundation of the new decentralized world currency?

Rumor has it that of the many iterations of bitcoin that the original dev had compiled, this just happened to be the one that snowballed, which explains why there is such a lack of built in security, and why the whole thing is so un-polished, it simply wasn't meant to be the final release/candidate.

Or maybe he got bored and just released whatever he had at the time and figured "let someone else figure it out".

Anyone have any reliable information not otherwise found on Wikipedia?
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June 28, 2011, 11:54:40 AM
 #2

Well some arbitrary number had to be chosen. Might as well make it 21 million  Smiley

Remember bitcoins can be divided up into really small fractions!

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June 28, 2011, 11:56:02 AM
 #3

Yeah, it's likely that it isn't an arbitrary number, but more related to the hashing algorithm chosen as the most efficient and secure.

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June 28, 2011, 11:57:12 AM
 #4

I seem to recall someone quoting Satoshi saying it was "an educated guess".
Whatever that means.

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June 28, 2011, 12:06:41 PM
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I seem to recall someone quoting Satoshi saying it was "an educated guess".
Whatever that means.

I think Satoshi has a very black sense of humour.


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June 28, 2011, 12:36:20 PM
 #6

I also don't understand the reasoning. If you're serious about a currency becoming a major player in the world, you'd at least try to keep the expected single unit value in the same order of magnitude as existing currencies. That's also what was done with the €. Once it exists it will lead its own life and establish natural exchange rate levels, but 21M can never do that.

In any case, we can always correct it. Just create a new currency, which is not minable, but only obtainable by exchanging BTC. The BTC that is exchanged will be lost from the Bitcoin circuit.

You could think of multiple coexisting virtual currencies, each based on its own economical model.
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June 28, 2011, 12:41:51 PM
 #7

move the decimal place, voila! Plenty of coins!
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June 28, 2011, 12:51:01 PM
 #8

I also don't understand the reasoning. If you're serious about a currency becoming a major player in the world, you'd at least try to keep the expected single unit value in the same order of magnitude as existing currencies. That's also what was done with the €. Once it exists it will lead its own life and establish natural exchange rate levels, but 21M can never do that.

In any case, we can always correct it. Just create a new currency, which is not minable, but only obtainable by exchanging BTC. The BTC that is exchanged will be lost from the Bitcoin circuit.

You could think of multiple coexisting virtual currencies, each based on its own economical model.
We can fix it just by changing the capitalization. Just as 1 calorie is 4.814 joules but 1 Calorie is 4,814 joules, if at some point in the future, 4.814 BitCoins is a fortune, we can call it 4,814 BiTcoins.

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June 28, 2011, 12:53:58 PM
 #9

The 21 million actually derive from a few other educated guesses, which may be a bit easier to relate to:
- 10 minutes between blocks (network propagation delay doesn't allow this to be much lower)
- 50 BTC per block (that's probably the most arbitrary)
- 4 years between block reward halving (that might come from expectations about the growth-rate of Bitcoin usage)

The 4 years were rounded down to 210.000 blocks probably just to have nicer numbers.

Pity he didn't chose 100 BTC per block to start with, because then we'd have a total of 42 million BTC Wink

I also don't understand the reasoning. If you're serious about a currency becoming a major player in the world, you'd at least try to keep the expected single unit value in the same order of magnitude as existing currencies.
That's not going to work because Bitcoin price is so highly volatile. Even an order of magnitude can be crossed quickly within weeks as we have seen. If you design it around the market capitalization of the whole world economy (or only the part which is accounted in USD) then we'd have to deal with immensely large numbers now or the inflationary phase of Bitcoin would be much much longer.

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June 28, 2011, 01:00:35 PM
 #10

Why 21 million specifically? I want to imagine that it's some nice fraction of the USD value of the money supply of all world currencies (21 trillion? glancing at Wikipedia) give or take. So if the value of the Bitcoin economy was valued at 1-ten thousandth of all existing currencies, it would trade at .01 USD, which looks good enough for it to be on par with the Yen and other currency's exchange rate and give it the potential to be taken seriously as a currency. And one-ten thousanth seemed very possible on the low end, so 21 million was decided. Complete guess.
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June 28, 2011, 01:20:08 PM
 #11

dude loved blackjack
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June 28, 2011, 01:23:24 PM
 #12

Keep in mind that "a Bitcoin" doesn't exist in any real sense in the code. What does exist is the satoshi (.00000001 BTC). In other words, there's not really such a thing as 21 million Bitcoins. Rather, in the technical sense there are 21x10^6*10^8=2.1x10^15 = 2.1 quadrillion satoshis. In comparison, according to Google, the world GDP is about $56 trillion, which is to say about 5.6 quadrillion pennies. (Yes, I know the whole world GDP is not actually measured in dollars, but go with me here.) So really, it's not that ridiculous a level of volume.
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June 28, 2011, 01:25:54 PM
 #13

21M is not a hard limit where the supply will suddenly stop. it's a limit process and the 21M will never actually be reached! therefore, this is somehow mathematically equivalent to an infinite supply ... thank's to the number of decimal digits, it's also no problem at all.
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June 28, 2011, 01:28:37 PM
 #14

Has anyone that is familiar with the source code behind bitcoin figured out why such an arbitrary number was chosen, and why it's so low to begin with?

a little over a year ago one bitcoin was worth just $0.006   (see laszlo's pizza as evidence)

here's why that is relevant:

unfortunately most people don't grasp the basics.  ask someone around you this question:
  right now general motors stock (nyse:gm) is trading at $30 a share
  ford (nyse:f)  is trading at $14 a share.
  which company is "better" (or "worth more").

if the answer comes back gm, now you know why 21 million bitcoins was the perfect number.  

notice when bitcoin's "tipping" point started.  about the time it hit parity with the dollar.  too many people think bitcoin is superior because it trades more than a dollar.  not that i don't agree bitcoin is superior, but that comparative value should hardly be a factor.

(incidentally, ford's market cap at $51 billion is greater than gm's at $47 billiion.  but that doesn't matter, as the only correct answer to the "which is better" question is "don't know, how many shares are there?")
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June 28, 2011, 01:40:51 PM
 #15

21M is not a hard limit where the supply will suddenly stop. it's a limit process and the 21M will never actually be reached! therefore, this is somehow mathematically equivalent to an infinite supply ... thank's to the number of decimal digits, it's also no problem at all.

Not quite accurate. The 50 BTC reward figure divides by two every 210,000 blocks (about four years, depending on network growth). Let's see, 50 BTC = 5*10*10^8 satoshi = 5^10 * 2^9. The division is performed by bitshifting, so the 5s are really identical to 4s or 2^2 for these purposes, so all together 2^29. So the fee will entirely disappear in 30 cycles of 210,000 blocks, or about 120 years.[/nitpick]
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June 28, 2011, 01:41:07 PM
 #16

Why Satoshi chose 21? Dunno. Could be as explained above. But this is interesting: http://www.ridingthebeast.com/numbers/nu21.php

Includes things like

  • Number of the perfection by excellence, 3 x 7, according to the Bible.
  • Symbol representing the unknown superiors or the great spiritual Masters of the humanity.
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June 28, 2011, 02:49:59 PM
 #17

21M is not a hard limit where the supply will suddenly stop. it's a limit process and the 21M will never actually be reached! therefore, this is somehow mathematically equivalent to an infinite supply ... thank's to the number of decimal digits, it's also no problem at all.

Not quite accurate. The 50 BTC reward figure divides by two every 210,000 blocks (about four years, depending on network growth). Let's see, 50 BTC = 5*10*10^8 satoshi = 5^10 * 2^9. The division is performed by bitshifting, so the 5s are really identical to 4s or 2^2 for these purposes, so all together 2^29. So the fee will entirely disappear in 30 cycles of 210,000 blocks, or about 120 years.[/nitpick]

In 120 years (assuming bitcoins are still around) it is possible that the system has been extended to include more decimals. In that case it might make sense to continue the rewards at increasingly small values.
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June 28, 2011, 05:17:29 PM
 #18

It's easy, all you have to do is google it....


Search Results

Immigration increases Australian population - 21,000,000

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June 28, 2011, 05:39:19 PM
 #19

This got me to thinking... given the total pool of money in the world, if everybody suddenly ditched their currency (dollars, yen, euro, whatever) and adopted BTC, how much would 1 BTC be worth in your native currency?

Mousepotato
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June 28, 2011, 06:45:27 PM
 #20

I would've gone with '42', in tribute to Douglas Adams Smiley

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June 28, 2011, 06:51:04 PM
 #21

Well, at the current market rate of 17.0397 the full amount of bitcoin equals to :$357,833,700
If certain ideals are correct that they will be worth 1,000 then:21,000,000,000.
That seems like a good number.
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June 28, 2011, 07:59:59 PM
 #22

Well, at the current market rate of 17.0397 the full amount of bitcoin equals to :$357,833,700
If certain ideals are correct that they will be worth 1,000 then:21,000,000,000.
That seems like a good number.

If BTC became the new world reserve currency, try: 2,000,000,000,000,000

2,000,000,000,000,000/21,000,000 = 95,238,095 per BTC.
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June 28, 2011, 08:49:36 PM
 #23

2,000,000,000,000,000/21,000,000 = 95,238,095 per BTC.

2,000 trillion? That's high I think. USD M3 estimates are like 15 trillion IIRC.
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June 28, 2011, 08:54:40 PM
 #24

eh, I think a market cap somewhere between 100 billion to 1 trillion is possible.  Not holding my breath of course.

It would mean the bitcoin economy was somewhere between morocco and south korea yearly GDP.  (of course that's not how calculations of GDP and market caps work, but it's fun to be lazy)

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June 28, 2011, 08:55:52 PM
 #25

2,000,000,000,000,000/21,000,000 = 95,238,095 per BTC.

2,000 trillion? That's high I think. USD M3 estimates are like 15 trillion IIRC.

I'm just playing with numbers but if you took all outstanding derivatives (1.4 quadrillion) and all money and debt instruments and collapsed them into BTC 2,000 trillion would be conservative.
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