Why a limit of 21 million bitcoins?

[crispy]

I didn't see a specific answer to this, so I'm bringing it up here. 

Yes, I know that each bitcoin can be divided to 8 decimal places, so that even with only 21 million of them, there is enough range go from 1 unit to 2 quadrillion (if I've done my math right).

The problem is that bitcoins themselves seem too coarse:  At the current exchange rate (about $14.50 per bitcoin), 21 million bitcoins comes to about $305 million USD.  If the "market cap" of bitcoins expands to 10 times that, so that bitcoins are over $145 each, then a $1.00 transaction would be on the order of BTC 0.007, a one cent transaction is about BTC 0.00007 (or 7e-5) and it becomes cumbersome to deal with 3 to 5 decimal places. 

It's not so much a technical objection, but a "human factors" one.  This is part of the reason why many stocks split when their price goes over $100.00 -- to make the stock seem affordable.

So, to rephrase the question, how was the limit of 21 million BTC chosen?

[1714910666]

1714910666

[1714910666]

1714910666

[whenhowwho]

pretty sure it is 21 million blocks which yield coins at a splitting rate of 50 each block every few years. In other words now its 50/ block in 2012 it will be 25 per block and etc. So total coins would be closer to 80 million or so (guesstimating) some one else correct me if im wrond

[NickW]

21 million seems like a lot when there's much less interest at the start and you have to put a limit somewhere. Maybe if the limit was at 21 billion, the value of one coin would have been so tiny a year ago that it would seem ridiculous and maybe it would have taken off much more slowly.

As far as I'm aware, I think it will be possible in the future to "move" the decimal point meaning that it becomes 210 million maximum  and the value of each coin becomes a tenth of what is was previously.

Sort of like the reverse of what happens in countries where there's been hyperinflation and maybe 1 trillion of a currency becomes the base of a "new currency". So $1 NewDollar = $1 trillion OldDollar. Could be the same with Bitcoins but in the other direction. Maybe 100 NewBTC = 1 BTC.

[cinos11]

21 million because clients can move the decimal places.

Say the price of 1 BTC becomes to low/high, then we can consider 0.1BTC to be 1 BTC instead.
Note that we are still in the beta stages of the Bitcoin client. (This allows lee way for the above change)

[r00tbeer]

21 million because clients can move the decimal places.

Say the price of 1 BTC becomes to low/high, then we can consider 0.1BTC to be 1 BTC instead.
Note that we are still in the beta stages of the Bitcoin client. (This allows lee way for the above change)

This.

[crispy]

In another discussion along the same lines, there a reasonable solution aside from changing the valuation of bitcoins.

Using the same prefixes as the metric system, one can avoid excessive decimal places in prices.  For example, one milli-bitcoin (mBTC?) is about $0.014 USD at today's prices.  If the value of bitcoins went up a hundredfold or more, a unit of micro-bitcoin (uBTC?) could be used.

[WakiMiko]

pretty sure it is 21 million blocks which yield coins at a splitting rate of 50 each block every few years. In other words now its 50/ block in 2012 it will be 25 per block and etc. So total coins would be closer to 80 million or so (guesstimating) some one else correct me if im wrond

Blocks are unlimited (otherwise there would be no way to keep track of transactions after all coins have been generated), but generated coins are not. Right now, you get 50 coins per block, but this amount halves every 4 years, until no more coins are generated.

[oic0]

Just imagine the US currency but in reverse. People used to buy things with coins and bills were to cover large amounts where a precious metal coin would be unwieldy. You get a bank note to represent that precious metal held in reserve elsewhere. Next thing you know the gold standard is gone, the coins aren't made of solid precious metals any more, and most people won't bend over to pick up a quarter. But that's beside the point

[Furyan]

Interesting.  I thought the reason for the limit had something to do with the math.

Nice to see the real reason!  Off to do more research...

[whenhowwho]

pretty sure it is 21 million blocks which yield coins at a splitting rate of 50 each block every few years. In other words now its 50/ block in 2012 it will be 25 per block and etc. So total coins would be closer to 80 million or so (guesstimating) some one else correct me if im wrong

Blocks are unlimited (otherwise there would be no way to keep track of transactions after all coins have been generated), but generated coins are not. Right now, you get 50 coins per block, but this amount halves every 4 years, until no more coins are generated.

What i meant was that blocks will have a monetary reward until they reach 21,000,000 thereafter the reward was transaction fees. Unless i missed something there will be quite a bit more than 21 million coins. As there are already close to 7 million at the current block count.

[WakiMiko]

What i meant was that blocks will have a monetary reward until they reach 21,000,000 thereafter the reward was transaction fees. Unless i missed something there will be quite a bit more than 21 million coins. As there are already close to 7 million at the current block count.

Blocks will generate coins until a total of 20,999,999.9769 coins have been generated. After that it's transaction fees only. The last block that will generate coins will be block #6,929,999.

[sadycz]

What i meant was that blocks will have a monetary reward until they reach 21,000,000 thereafter the reward was transaction fees. Unless i missed something there will be quite a bit more than 21 million coins. As there are already close to 7 million at the current block count.

Blocks will generate coins until a total of 20,999,999.9769 coins have been generated. After that it's transaction fees only. The last block that will generate coins will be block #6,929,999.

that would be end of mining?

[marcotheminer]

What i meant was that blocks will have a monetary reward until they reach 21,000,000 thereafter the reward was transaction fees. Unless i missed something there will be quite a bit more than 21 million coins. As there are already close to 7 million at the current block count.

Blocks will generate coins until a total of 20,999,999.9769 coins have been generated. After that it's transaction fees only. The last block that will generate coins will be block #6,929,999.

that would be end of mining?

No! Mining would continue to confirm transactions and miners would be rewarded by transaction fees.