Most money can be created whenever someone decides to create more. Bitcoin works differently. Its rules, built into the software that users around the world run, say there will never be more than about 21 million bitcoin. Here is how the limit works, why new bitcoin slow down over time, and where mining fits in.
Key Takeaways
- Bitcoin’s supply is capped at just under 21 million coins, a rule built into the software everyone runs.
- New bitcoin are created as a reward for miners, and that reward is cut in half every 210,000 blocks, about every four years.
- The reward has been 3.125 bitcoin per block since the April 2024 halving.
- Changes to Bitcoin only happen if users, miners, and node operators adopt them, so the cap is very hard to change.
The 21 million cap
New bitcoin enter circulation each time a miner adds a block to the blockchain. The number created per block is set to shrink on a fixed schedule, so the total can never pass slightly less than 21 million. The exact limit works out to 20,999,999.9769 bitcoin because of how the software stores amounts.
Why 21 million? Nobody knows for sure. The Bitcoin wiki notes that Satoshi never explained many of these constants and lists a few guesses. What we do know is that the creator, Satoshi Nakamoto, compared the steady addition of new coins in the Bitcoin white paper to gold miners spending resources to add gold to circulation.
The halving schedule
Roughly every four years, or every 210,000 blocks, the reward miners receive is cut by 50%. This event is called the halving. Here is how it has played out so far:
- 2009: 50 bitcoin per block
- November 2012: 25 bitcoin per block
- July 2016: 12.5 bitcoin per block
- May 2020: 6.25 bitcoin per block
- April 2024: 3.125 bitcoin per block
The next halving, to 1.5625 bitcoin per block, is due at block 1,050,000, about four years after the 2024 halving, or around 2028. Because each cut is half the last one, the new supply keeps shrinking. Estimates put the last bitcoin being created around the year 2140, though that date depends on assumptions about mining.
What scarcity means
Scarcity means there is a limited amount of something. Bitcoin.org lists scarcity among the characteristics of money, alongside durability, portability, fungibility, divisibility, and recognizability. With Bitcoin, the limit comes from the software’s rules, not from a company or a central bank.
A limited supply does not stop small payments. One bitcoin can be split into 100,000,000 pieces, and the smallest piece is called a satoshi. As our book quote from Jack Mallers puts it, Bitcoin has a monetary policy that is “the hardest ever”.
Mining in plain English
Mining is the process of spending computing power to process transactions, secure the network, and keep everyone in sync. Miners bundle transactions into blocks and must show a mathematical proof of work before the network accepts their block. Blocks arrive about every 10 minutes on average, and the difficulty of the puzzle adjusts about every two weeks (every 2,016 blocks) to keep that pace steady.
Miners earn transaction fees plus newly created bitcoin under a fixed formula. Once the last bitcoin is created, miners will probably be supported by transaction fees alone, and mining will still be needed to run the network.
Who can change the rules?
No one person or group decides. Changes to Bitcoin are proposed publicly, reviewed by developers, and only take effect if users, miners, and node operators choose to adopt them. Changes that users do not accept simply do not happen.
Related reading: Learn how to keep your bitcoin safe in What Is a Bitcoin Wallet? A Beginner’s Guide.
Sources
- Bitcoin Wiki: Controlled supply
- Bitcoin.org: Frequently asked questions
- Bitcoin.org: Vocabulary
- Satoshi Nakamoto: Bitcoin white paper
- Bitcoin Developer Guide: Block chain
- Bitcoin.org: Some things you need to know
Watch on YouTube
Want the math in video form? Watch Why Bitcoin Stops at 21 Million: The Halving Math or browse the Satoshi & the Timechain playlist. Subscribe to Bitcoin Basics on YouTube
Learn more in the book: Bitcoin Basics: Understanding the Future of Money Through Quotes is on Amazon and Apple Books.
This post is for educational purposes only and is not financial advice. Bitcoin only, no altcoin coverage.
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