You may well have heard that there is a limit to the number of Bitcoins that will ever be produced. This is in fact true. But you may also be asking yourself just how many Bitcoins are left, and also what happens when all of them are distributed and in circulation? Well, this article aims to shed some light on the matter and answer all of those questions and more…
Why is there a limit in the first place?
Bitcoin’s creator, Satoshi Nakamoto, put a limit on the number of Bitcoins that will ever be produced and put into circulation. This limit is 21 million Bitcoins (21,000,000BTC).
This limit is actually hard-coded into the code and software behind Bitcoin and upon which the Bitcoin community is built. There are a number of reasons for limiting the total supply, and it’s a common practice. Elsewhere, in the world of fiat and traditional money – large government and banking institutions such as the Bank of England, and the US Federal Reserve, also limit and control the circulation of £GBP and $USD.
They typically do this to maintain a stable economy and influence the value of their own currency against other foreign currencies. In some cases they introduce more cash into the system by quite literally printing more dollar bills, pound notes, or minting more coins. On the flip side, if they deem it necessary – they may also withdraw an amount of cash from circulation. This is all done in an effort to control supply and maintain things like base inflation, interest rates, and ultimately the value of our currency.
It’s worth noting here though that there is a difference – theoretically fiat currencies such as the $USD or £GBP could have an unlimited supply (the US Federal Reserve or Bank of England would just have to decided to produce more). What they typically do in practice then, is control the supply, not necessarily limit it. However, with Bitcoin – the supply is limited, there is a fixed and finite amount of Bitcoin which will ever exist (21 million).
Over in the world of Bitcoin, no one really knows the reason why Satoshi chose to limit Bitcoin to 21 million (there are plenty of theories). What we do know though is the impact this has at the minute, and with that we can speculate as to the implications might be in the future.
Having a limited supply, whereby the maximum number of Bitcoins that will ever exist is capped at 21 million – introduces an aspect of ‘scarcity’. This in turn means that, so long as interest and demand for Bitcoin remains high, then the value of 1 Bitcoin should theoretically continue to grow. We see this same market dynamic and ‘scarcity value’ placed on countless other tradable goods. Just think of how the value of collectable goods, paintings or sculptures typically increases over time. Each time a classic piece is lot or destroyed – the ‘value’ of that artist and their remaining collection tends to appreciate and go up.
However there is also a second aspect to the way Bitcoin’s supply is controlled – not all 21 million Bitcoins are already in circulation. When he launched Bitcoin, Satoshi only made a certain number of Bitcoins available to start with. As is still the case – you could, receive, earn, purchase and trade these. As time passes however, more new Bitcoins are introduced to the system, as rewards for ‘Bitcoin Mining’.
Quick whistle-stop tour of Bitcoin Mining
This bit is really quite clever. It can be complicated, but to put it in simple terms:
- Bitcoin needs server nodes (computers) distributed in a network around the world – to run the Bitcoin software and confirm transactions.
- Bitcoin ‘Miners’ are users or groups of users who support the Bitcoin network by connecting their computing power and running the software,
- Over time, as they complete the computational puzzles required to confirm a ‘block’ of transactions on the Bitcoin Blockchain – these miners are rewarded with new Bitcoin.
- In that way, the process is likened to ‘mining’ for other precious commodities, and thus commonly called ‘Bitcoin Mining’
- The process is very expensive in terms of computer equipment and energy costs. The current value of Bitcoin which can be earned as reward, can outweigh this cost handsomely – making Bitcoin Mining a highly profitable prospect for some.
How many Bitcoins are there currently?
As of the start of 2018, there are currently approximately 16.7 million Bitcoins, which have already been ‘mined’ and put into circulation.
It’s worth noting though, that this doesn’t necessarily mean that all of those 16.7 million Bitcoins are still available in the market. Many Bitcoins are believed to have been lost forever. This can happen if people lose the cryptographic keys to access their Bitcoin Wallets, or if the storage device which they store their Bitcoin on, is corrupted, destroyed or lost.
Over in the world of ‘real’ or physical fiat money, it’s a bit like trying to guess at how many Dollar bills, Euro or Pound notes might have been lost or accidentally destroyed. No one really knows, but some estimates suggest that up to 30% of those 16.7 million Bitcoins might have been lost to date.
How many Bitcoins are left?
Subtracting those estimated 16.7 million from the total supply of 21 million, leaves us with approx. 4.3 million Bitcoins, which are yet to be put into circulation (as of beginning 2018).
When will there be no more new Bitcoins?
The same Bitcoin source code which sets the ‘21 million’ upper limit, also dictates how mining rewards should be distributed and how fast new Bitcoin will be introduced.
The ‘reward’ for mining and proving each block of transactions on the Bitcoin Blockchain was originally set at 50BTC. That means, if you were the miner, or belonged to the mining ‘pool’ who solved that block first – then you got the 50 Bitcoins. 50BTC! That was worth very little back then, but it’s sure worth a lot now!
Over time though, the reward rate is set to decrease, and has ‘halved’ twice since then. Meaning that the reward currently stands at 12.5BTC for each block.
The ‘halving’ of the Bitcoin mining reward occurs every 210,000 blocks on the Blockchain. With average block mining times of around 10 minutes, this occurs about once every 4 years. Doing the maths and extrapolating forwards – the Bitcoin community expect that the last reward of new Bitcoin will occur sometime around 2140. After that point, the upper limit of 21 million will have been reached, and no new Bitcoins will be introduced.
What will happen when there are no new Bitcoins?
A few things will happen when there are now more new Bitcoins left to add to the supply. For one, as we discussed earlier – if demand is still high, then the value of each Bitcoin will continue to appreciate and go up.
However you might also be asking yourself – if there’s no more Bitcoin reward, what happens to the miners and the Bitcoin network? It’s a good question…
Ultimately, there are other financial incentives for miners to continue to provide their computing power and support the Bitcoin network. Miners can (and currently often do) charge transactions fees. At present these fees tend to be very small, and in some cases you don’t even have to pay them yet. Miners often try to encourage a fee by offering to ‘prioritise’ your transaction in return.
As time passes however, these fees will likely increase, eventually reaching a value high enough to incentivise miners to keep mining. To ensure this happens though, and make fees lucrative enough for miners – the value of Bitcoin will also have to increase over time.
How can I get some Bitcoins myself?
There are a range of different ways to acquire Bitcoin and ‘dip your toe’ into the Bitcoin community. Fist time Bitcoin users can typically acquire Bitcoin through any of the following routes:
- They set up a Bitcoin wallet, and are then sent an amount of Bitcoin from a friend or relative who already has some
- They sign up to and then purchasing some Bitcoin from a reputable Bitcoin exchange (good examples include Binance, Coinbase, Liquid, or CEX.io)
- They win free Bitcoins through promotions, competitions or from Free Bitcoin Faucets
- They earn it, in exchange for running the Bitcoin software on their computer(s) or servers (aka Bitcoin Mining)