I did a really shit job explaining to my GF the reasons why Bitcoin can only ever have 21 million coins.
Anyone got a simple, succinct explanation for this?
The goal is to have it easy enough that even she could use it to explain the supply cap to people.
Because thatās how it works
Because it isn't fiat?
Just say "greed"
Then play Creed
That's what I do after saying every other word so I'm sure it'll work here too
Well said
Every block nets a miner some free Bitcoin for winning the lottery.
But that lottery becomes more and more nerfed over time until you don't get any more free Bitcoin.
No new Bitcoin = Supply cap
Yeah but the question is about how the supply is limited specifically
I don't think I understand it well enough to explain it simply.
You might say the Bitcoin code counts the number of blocks in the chain and accepts new blocks that have the correct mining reward in them based on that chain length.
Everyone running the same code makes sure that everyone accepts the same blocks and builds the same copy of the chain.
And in that process of only accepting blocks that lead to that slowly shrinking miner reward, the network as a whole imposes a cap on the total number of bitcoins that can enter the system.
š«
It is 5 lines of code. Nothing fancy. Go read it yourself.
tell her this: darling, bitcoinās supply is capped at 21 million because its code was designed that way by its creator, satoshi nakamoto, to ensure scarcity (just like digital gold). new coins are released slowly through mining, but the total stops at 21 million, making it more valuable over time.
Yeah but how is the supply limited is the question
Every node run this. Thatās it. If blocks keep being hashed then this equation terminates at ā21,000,000
Because it is created by math and code not bankers and politicians. "Thats just how it works." Is both ends of the bell curve meme. Don't midcurve it.
š¤£well said
Because demās da rulesš«”
Itās in the code. The code is distributed around the world on a zillion computers. No one has incentive to update their code with a change like that.
Bitcoin is just software that everyone runs, and the rules of that software say only 21 million coins can ever exist. Every computer in the network checks that rule, so if someone tries to create more, the rest of the network rejects it. To change the rule, basically everyone in the world who uses Bitcoin would have to agree, and since it would make everyoneās coins worth less, nobody has an incentive to do that. Thatās why the cap is unbreakable.
Great work here.
Amazing how few people understood the question
She can't give someone else what she does have.
If you can't articulate it, she's gotta rabbit hole.
Just a little.
Thanks for the help
LoL. Sorry man.
I'm actually a little jealous.
My wife is supportive of our Bitcoin accumulation.
She even has some understanding.
But she's never tried to orange pill anyone.
Or even defend her choice to HODL.
Sounds like a keeper.
All good š«”
She will eventually. Keep being a good leader
Imagine a grapevine with 21m trees. You can only harvest each tree once for a bottle of wine. š
When all trees have been harvested you can produce no more wine, and the wine in your wine cellar will increase in dollar value. Some people will spill bottles or drink them, decreasing the amount of bottles left which will make the wine left even more scarce.
The question is "how is it limited to 21 mil" specifically
God limited it to 21m trees.
You canāt reproduce them. You canāt use seeds. Just the 21m trees available and thatās it.
Consensus and incentives. Every participant in the network has an incentive to keep that 21M agreement. Those who have broke from that agreement or took issue with the network and made a new one trend to zero. Bitcoin cash, Bitcoin SV, etc
Bitcoin caps at 21 million because Satoshi said 'fuck inflation' and coded rewards that halve every 4 years until they hit zero.
Add up all those shrinking rewards and you get 21 million total.
Why exactly 21 million? Nobody knows - Satoshi never explained and then vanished.
But now it's locked in by math, not politicians who promise to stop printing money.
A limited supply of money curtails inflation and value debasement similar to how USD worked when we were on a gold standard.
The question is "how is the supply limited" specifically
Itās written into the original Bitcoin blockchain and cannot be changed without a hard fork which is highly unlikely given the amount of stakeholders that exist today. This is a good explanation from Coin Telegraph. https://cointelegraph.com/explained/can-bitcoins-hard-cap-of-21-million-be-changed
View it has a geometric series and not as a total bitcoins issued at any point in time. A geometric series sets a moving upper limit.
Because we donāt care about how many Bitcoinās actually exist as much as we care about there being fewer than the expected amount.
Loop has the best article on it IMO for more context and Iām paraphrasing his work here. But understanding the geometric series is an important part of getting it. He does a good job of breaking it down.
She's just gonna point at me and call me a nerd if I try this
Itās code and agreement.
The code says 21 million is the limit.
Tens of millions of computers, operated by node runners, all spend energy (money) to agree that 21 million is the limit.
How can it be trusted? Because people are spending millions in aggregate to agree that 21 million will be the limit.
Their reward for agree is immutable money, bitcoin. Paid in blockrewards or exchange fees.
The software has this set as the maximum amount.
In order to change this amount everyone that owns Bitcoin would have to willingly agree to be stolen from.
Human nature ensures that there will never be more than 21 million.
This is good
The Bitcoin software has a math equation that cuts the block reward in half every four years. This creates a situation where eventually you are dividing a infinitely smaller number in half that gets so small it can't add a meaningful amount as a reward for mining a block. Thus no longer issueing anymore measurable sats.
21 million is fixed because a vast majority of users agree - just like the word "million" in English.
Try changing the definition of the word million in the English language, it's an almost impossible task.
"Honey, I was wrong. There will in fact NEVER be 21 million bitcoin. I'm sorry that I was misinformed."
The main point is itās fixed
If someone tryās to change it they get a slap from the ghost of Hulk Hogan.
āBecause I say soā
But seriously, itās true. Your own node validates the rules, including the limit. By running your own node, you declare the rules youāre willing to accept.
The universe has rules dictated by math. Bitcoin is the same.
Itās like adding a new constant to the International System of Units (7 are defined for meter, luminosity, etc.).
Satoshi decided that he needed to define a constant for overall monetary value, so he decided on 21m bitcoin. Gradually, this will become the 8th constant of the International System of Units representing overall monetary value.
Sorry guys, but can you please help my geyserfund šš» itās for my son šš»
If I give you 50 milkbones each week, but halve this number every week. Eventually that weekly milkbone allowance will fall to 0.
The number of milkbones you will receive was set up front, when I gave you the allowance, the frequency, and the halving frequency.
I'm not sure if this attempt at an explanation was overly simplistic or overly complex... š
Iāve found it easier to tell people 21 million coins can and already has actually changed (eth, bcash, dogecoin, etc)ā¦ but in doing so, that creates a new āblockchainā. No need to go into detail of forks beyond that.
The hard part for the people that change the supply is convincing people to use their new version. Thereās no financial incentive because the supply cap is what guarantees ngu as more people adopt.
Idk if thatās āeasierā but more people seem to catch on when I explain it that way.
Tldr: changing the supply creates a new āblockchainā and itās already happened hundreds/thousands of times.
The number of Bitcoins will always be less than 21 million.
I canāt explain it any further than that.
Itās really simple š§” if you do a bit of research, you can understand it.
This is a great idea for video.
The supply is limited to 21m by lines of code. Just like everything we use controlled by software (phones, internet, cars, coffee makers, electrical grids, etc) we donāt have to understand the code to use it. Because Bitcoin is so valuable, many software developers who do understand the code watch it constantly and will let us know if anyone tries to change the code. Everyone who has moved their value to the Bitcoin network will never switch to a new code that diminishes our value by allowing more than 21m bitcoin. Because the bitcoin code is open source and widely distributed, there is no one in the world that can force Bitcoin users to run code changes they oppose. Thus, the amount of available Bitcoin will never exceed 21m.
Next time you have wine and cheese with your girlfriend, try this:
Take a piece of cheese and say that it represents the current Bitcoin block subsidy, which is issued roughly every ten minutes when a miner finds a block. Bla bla bla, difficulty adjustment, bla bla bla, Satoshi invented time!
After 210,000 blocks, roughly four years, the code says to cut that in half. So, keep cutting that same remaining piece of cheese in half while romantically feeding half of the cheese to your girlfriend. You'll reach a point where you can't cut it in half anymore, because the cheese will pretty much disappear.
"What would the miners do if there's no more cheese?" I'm glad you asked! Bla bla bla, fees, bla bla bla...
What specifically are you explaining? Why a hard cap at all, or why specifically 21 million as the hard cap? Iāll attempt to answer both:
Why is a hard cap a good thing? The supply of any good can either be increasing, decreasing, or unchanging. Bitcoin is a good thatās defined and controlled by its holders, who each want to maintain the most value of their coins. An increasing supply means holders are getting diluted, which they donāt want. A decreasing supply means some or all holders must be confiscated from, which they also donāt want. That leaves a fixed supply, where people are neither diluted nor confiscated from.
Why specifically 21 million? Satoshi picked a10 minute block time somewhat arbitrarily, and a halving cycle of 210,000 blocks so that a halving cycle was almost exactly 4 years (off by only 0.2% if block times are exactly 10 minutes). AFAIK 4 years was another arbitrary choice. He also picked a starting block reward of 50 coins, and a halving every cycle rather than a quartering orā¦ thirding? Is that a word? Both of those decisions are also arbitrary AFAIK. Anyway, 210,000 blocks * 50 coins per block for the first cycle, plus 210,000 blocks * 25 coins for the second cycle, and so on, adds up to exactly 21,000,000. But since Bitcoin isnāt infinitely divisible, halving the block reward will eventually lead to decimal places being rounded off, meaning that the 21 million figure isnāt actually true, and the final number will actually be 20,999,999.9769 coins.
Were those concise? Iām not really sure š
Because every time the number of coins gets 50% closer to 21 million, the rate of coin creation is cut in half.
Imagine starting on a 10km hike at a rate of 10km/hour... after 30 minutes, you will have walked 5km. Then, you cut your rate in half to 5km/hour... so, after another 30 minutes, you will have walked another 2.5km for a total of 7.5 km, so you cut your rate in half again, and so on. By continuing to cut your rate in half every 30 minutes, you'll continue to be cutting the distance to your 10km target in half - which means you'll never actually ever reach it (let alone exceed it).
Bitcoin supply is on a fixed schedule that was published when Bitcoin was created. That schedule caps the total supply at 21 million.
Half of them were mined in the first four years, from 2009 to 2013
In the following four years, half of the remainder were mined
In the following four years, half of *that* remainder were mined.
... and so it shall continue
Because anytime someone would try creating bitcoin that has more coins, all the computers on the network will see it as invalid and they will ignore it.
To all the computers it's immediately obvious if someone created such invalid/fake bitcoin that doesn't follow the rules.
Bitcoin is like a Birkin bagā¦
They are valuable because not many exist and they are hard to hand make.
If you mass produced the bags then the value of them goes down.
Hermes may make a lot of money if they did thisā¦ but with bitcoin, there is no person or company in control.
Therefore, the people who utilize bitcoin wouldnāt vote to devalue themselves.
Imagine Bitcoin is a special treasure chest with 21 million gold coins inside. The person who made the chest put a magic lock on it that nobody can ever break.
You can earn these coins by solving math puzzles ("mining"), but the magic lock has a rule: Every time 210,000 puzzles are solved, the reward gets cut in half.
So, first you got 50 coins for a puzzle, then 25, then 12.5, and so on. If you keep cutting the reward in half forever, you eventually can't get a full coin anymore. If you add up all the coins that will ever be given out from these shrinking rewards, the total is exactly 21 million.
No one can ever add more coins because the magic lock's rule can't be changed.
Bitcoin is ultimately computer code. It is hard-coded so that no more than 21 million coins can ever be created. True value in a currency is created by scarcity: when we had a gold standard, value was based upon the fact that gold is a rare metal.
With Bitcoin, because the code says that no more than 21 million will ever be created, we will reach a point when all of those coins are in the hands of SOMEBODY, and that means that anybody who trades in Bitcoin will be trading in the value of an increasingly rare resource, meaning its value will only continue to increase and improve the wealth of all who hold it in the process.
At least, that's how I'd explain it... I'd also be sure to explain how KYC ruins all privacy and ownership aspects, as well as the fact that it's certainly not a perfect solution and I wouldn't claim it's unstoppable as some do.
āBabe, Satoshi said so.ā
The current implementation of this current fork of "Bitcoin" has a supply cap but future forks of Bitcoin might not, and if that's what necessary for "Bitcoin" to grow, innovate, and stay relevant as a peer-to-peer electronic cash system then by all means so be it.
"the creator of #Bitcoin had a stupid knee-jerk reaction to unrestricted money printing and decided to make a hard cap on the amount of money in circulation."
"yeah, it doesn't make any sense unless you're talking to other Bitcoin maxis."
The total supply is an infinite series of halves.
1/2 + 1/4 + 1/8 + 1/16 ... On to infinity. Add all of them up and they'll never equal more than 1 whole.
The whole supply of 21,000,000 can never be exceeded as the supply is generated as an infinite series of halves every 4 years.
First four years 10,500,000 coins were mined (1/2 of 21,000,000) and the first halving cut the issuance rate in half, which also cut the total issued over the following 4 year period by half as well. So the second set of 4 years see 1/4 of the total supply (5,250,000 coins) issued which now totals 1/2 + 1/4 = 3/4 of total issued in the first 2 periods. This continues until the code doesn't allow the halving to continue (currently 2140, so we have time).
Essentially, the total number of the supply will always be approaching 21,000,000 but it will never actually reach 21,000,000.
The primary and possibly only purpose for a digital currency like bitcoin is to pay node operators in the native currency for securing the network through verification of transactions on the blockchain. There is no intrinsic value.
There are two methods of payment: transaction fees, paid by the current holders of the digital currency and system rewards of new units or coins being issued.
When the code was written the transaction fees were initially zero and the system reward was coded to be a decreasing amount over a fixed interval of time: resulting in a fixed supply. All to encourage node participants, usage of the network and value creation.
As the first invention of its time the design decision could have resulted in any fixed supply as the 21 Million is the result of starting the block reward at 50 bitcoin along with a fixed length of 210,000 blocks before decreasing the reward by half.
It could have been any fixed supply but 21 Million definitely has a good vibe.
Had Satoshi started with 100 we could have had the answer to the ultimate question of life in 42 Million.
Because you as an individual will never run a software that says otherwise.
- If you take a very big bucket of sand and see this as the total supply of bitcoin that will ever be mined.
- Then you start "mining" by taking a shovel of sand out of the bucket every 10 minutes.
- This shoveling never stops.
- The start you have a big shovel to take out the sand from the bucket.
-In the beginning you managed to get most of the sand out the bucket. with the big shovel.
- But every 4 hours the shovel gets smaller. This halving of this shovel happens every 4 hours.
- After some time the shovel is so small it will take pretty much forever to get that last bit of sand from the bucket.
Does it make sens?
