Run the Numbers #21: Why 21 Million Bitcoin?

Bitcoin & Data Science

2021.01.23

Why did Satoshi Nakamoto choose 21,000,000 as the total supply of Bitcoin to ever exist? Is there some significance of this number? Was it a practical choice in order for their to be “enough” units to serve the economy? Or was it some technical reason to make the code work?

The truth is no one really knows the true reason, but that the number he chose doesn’t actually matter so long that it does not change. Having a fixed, finite supply is what gives Bitcoin its scarcity and hardness as a money. Since every 1 Bitcoin can be divided into 100 million Satoshis or Sats, there is plenty of units for the entire world economy to function on. If the Bitcoin itself was not divisible and was the smallest unit within the system, it would quickly become hard to price goods and services in Bitcoin as its value rose. But we can achieve a very fine and accurate level of pricing with 21 million Bitcoin * 100 million Sats!

Source: glassnode.com

The chart above shows the total supply of Bitcoin in existence (left) with an overlay of the spot price (right). We can see the curve flattens off over time as we get ever closer to the 21 million supply cap – estimated to be around the year 2140. As the hashrate on the Bitcoin network increases, the difficulty adjustments make it the mathematical operations involved in mining more complex, targeting an average of one block mined every 10 minutes. This keeps the supply rate predictably on schedule over a long enough period of time.

As of today there have been 18,608,681 Bitcoin mined in total, 88.6% of the 21,000,000 final supply. With each supply halving event once every four years, the block reward for miners is cut in half, causing the total supply curve to flatten out more.