The 19 millionth bitcoin has just been mined, data from bitbo shows, leaving less than two million BTC left for miners to put into circulation as the Bitcoin network grinds its way through a fixed issue schedule until it hits the 21 million supply limit and never creates a new bitcoin again.
This milestone demonstrates how Bitcoin’s creator, Satoshi Nakamoto, was able to bring together decades of research in different areas of computing to achieve scarcity in the digital realm, a unique feature central to Bitcoin’s value proposition.
Before Bitcoin, digital money suffered from the double-spend flaw. Until its inception, the only way to ensure that a party wouldn’t spend money twice was through a central authority that had to track coins sent and received, thereby updating user balances – much like the traditional financial system. However, Nakamoto’s invention, through the use of the proof-of-work (PoW) mechanism in a distributed ledger, allowed computers running software to enforce strict spend conditions that prevented a digital representation of the value is spent twice for the first time. time – or at least it made it cost prohibitive to do so.
As miners and nodes work together through the issuance and application of bitcoin, investors interested in acquiring increasingly scarce BTC must navigate their way through the limited supply of the asset. . Historically, miners used to offload their freshly minted bitcoins to the market to cover their operating expenses in US dollars. However, these days it has become common to see mining companies add their produced coins to their balance sheet and issue bitcoin-backed loans as needed. As a result, bitcoin has become even scarcer as a larger percentage of the total bitcoin supply is locked in for the long term.
Currently, a miner earns 6.25 BTC per block mined. The block reward, as it is called, has been halved every 210,000 blocks – approximately every four years – since Nakamoto first mined which yielded a 50 BTC reward. Now, fewer and fewer new bitcoins are distributed each era, further increasing the scarcity of the asset. Therefore, even though it took about a dozen years to mine 19 million bitcoins, the remaining 2 million will not be minted until 2140 if the protocol remains as it is today.
Curiously, the Bitcoin protocol’s 21 million supply cap is not written into its whitepaper or code. Rather, it is the ever-decreasing number of bitcoins rewarded by each block in conjunction with the decentralized network of computers enforcing that reward that allows the network to implicitly prevent bitcoins from being issued above the limit.
“Bitcoin implementations monitor new issuance by verifying that each new block does not create more than the allowed block subsidy,” cypherpunk and Casa co-founder and CTO Jameson Lopp wrote in a post. blog post.
By ensuring that bitcoin cannot be spent twice and that the block reward does not yield more than it should at any given time, the distributed network of bitcoin nodes can indirectly enforce the supply limit then that the block reward tends to zero over the next century.
In addition to bringing scarcity to the digital realm, Bitcoin therefore also enables predictable, pre-planned monetary policy, which breaks with the current monetary system where governments and policy makers can increase the issuance of money like us. have concretely experienced it in the past. a few years. As a result, currency depreciation is not possible in Bitcoin and the purchasing power of its users is protected.
Along with protecting people’s purchasing power, with its predictable policy, Bitcoin allows planning for the future as users can rest assured that no one will depreciate their money. Important developments in society are arguably made possible by a strong commitment to hard work and long-term investment, rather than short-term bets.
But given the paramount scarcity of BTC, why has its price traded in a range between $30,000 and $60,000 for the past year?
The price of Bitcoin in US dollars can be seen as a lagging indicator of humanity’s understanding of technology and its innovative value proposition. Currently, only a small percentage of the world’s population truly grasps the unique concepts of decentralized and scarce money programmatically, so while the price of Bitcoin may trend to infinity over the long term, it is unlikely to become a reality until that most of the world’s population – or most of the world’s capital – is beginning to understand this. When they do, a sharp supply shock can ensue where an unlimited amount of money flows into a limited amount of bitcoins.