Bitcoin: How Many Are There?

Bitcoin has a maximum supply of 21 million. However, that doesn’t tell the whole story. As time goes on, it becomes increasingly difficult to acquire bitcoin due to the asset’s economics. Here is a full breakdown of how bitcoin works and exactly why it has a limited supply.

Read: Looking To Diversify In A Bear Market? Consider These 6 Alternative Investments

Bitcoin Tokenomics: Proof of Work, Mining and Halving Cycles

Tokenomics, as one can imagine, refers to the economics of a token. Similar to how fiat currencies, like the dollar, are issued by governments and regulated through monetary policy, tokenomics refers to the rules and functions revolving around cryptocurrency. 

Here are all of the ins and outs of bitcoin’s tokenomics, why its supply is fixed and how it works.

Why Bitcoin Uses Proof-of-Work and Mining

Bitcoin uses what’s called a proof-of-work consensus mechanism. Essentially, this equates to expending a lot of energy in the form of computer hardware to solve complex mathematical problems. This process is known as “mining” in the crypto world. 

This function not only secures the network but it validates transactions and achieves bitcoin’s goal of wiping “double spending” from existence. Double spending is the concept of counterfeiting money and the inability to tell real currency apart from fake currency. 

The miners contribute to the network behind the scenes by validating transactions to fulfill this gap. In exchange, the first miner to verify all transactions on a block in the blockchain will receive a reward — approximately 6.25 bitcoins as of writing in 2022. However, this will change over time as a result of bitcoin’s “halving.”

How Bitcoin Halving Cycles Work

The bitcoin halving cycle is when the rewards miners receive for completing a block are halved. It occurs once every four years. 

The purpose behind halving is to limit supply and support the deflationary nature of bitcoin. As it becomes harder to mine bitcoin, the supply decreases which corresponds with an increase in demand. 

This is why bitcoin volatility usually picks up every four years or so. Currently, each block reward for miners is 6.25 bitcoins but this will drop to 3.125 bitcoins in the next cycle on March 21, 2024.

Why Does Bitcoin Have Limited Supply?

So, why can there only be 21 million bitcoins? Bitcoin has a limited or capped supply to fulfill its purpose as a monetary system. Limited supply accomplishes the element of scarcity. The other characteristics of money are:

• Acceptability — use as a medium of exchange
• Durability — the ability to withstand pressure, stress or damage over time
• Divisibility — the ability to be split into smaller and larger units
• Fungibility — the ability to be exchanged for goods of equal value
• Portability — ease of movement and storage

Bitcoin achieves limited supply through the use of its intelligent design: a proof-of-work consensus mechanism and crypto mining. 

How Long Would It Take To Mine One Bitcoin?

The simple answer is that it depends. Bitcoin mining is limited to those who can afford the expensive computer hardware and electricity costs. 

For example, a mining firm in China mines 3% of all bitcoin. It mines 650 bitcoins monthly with an estimated electric bill of almost $1.2 million. 

What’s a Satoshi in Bitcoin?

A satoshi is the smallest denomination of bitcoin. Each bitcoin can be split into divisible units, not dissimilar to the way $1 and a one-cent coin work. A single bitcoin is made up of 100 million “satoshis,” or “sats” as they’re sometimes called. 

Right now, one satoshi is worth roughly $0.00019. If one satoshi was ever worth $0.01, the price of a bitcoin would be $1 million.

How Many Bitcoins Have Been Mined So Far?

Current data shows that 19.1 million bitcoins have been mined to date. However, of that amount, it is estimated that between 3-4 million bitcoins have been lost forever. 

Many people have lost their private keys or seed phrases that gave them access to their crypto wallets that stored bitcoin. They are now irretrievable. 

Others such as Satoshi Nakomoto, the creator of bitcoin, are believed to hold as much as 1 million bitcoin. This anonymous person has not published any communication since 2010 and many presume the famed character has passed away.

Do All Cryptocurrencies Have Capped Supplies?

No. Not all cryptocurrencies have a max issuance. Some cryptos choose to limit the number of new tokens that come into circulation each year instead.

For example, some cryptocurrencies such as Ethereum have no limit to their token supply. The Ethereum network chose to put a cap of 25% — or 19 million ETH per year — can be produced on its blockchain.

Final Take

Bitcoin has maintained its leadership position for a reason. The governance policy and procedures around its economics are what make bitcoin unique when compared to most other cryptocurrencies. Its distinct procedures that follow traditional monetary systems while still remaining innovative among the pack are what separates it from other cryptocurrencies. All the same, anyone getting involved with cryptocurrency should aim to buy it as part of a balanced portfolio of investments for diversification.

Information is accurate as of Oct. 3, 2022.