Thread by @YatharthArora8

Why are there only 21 Million Bitcoins?
A question that has always baffled me.

~ A THREAD ~

1/n Bitcoin is a decentralized currency and unlike fiat, government or central banks cannot print it.
In a centralized system, banks can create money to control the prices of goods.

2/n In a decentralized economy, there is no central authority to create more money. Bitcoin is anti inflationary. Hence as a result you never loose the value of money over time.

3/n According to an email purportedly shared between Nakamoto and contributor Mike Hern - "the figure was an educated guess. My choice for the number of coins and distribution schedule was an educated guess...

4/n ... It was a difficult choice, because once the network is going, it’s locked in and we’re stuck with it. I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that’s very hard."

5/n By limiting the maximum supply and slowing the rate of rewards, Satoshi intended each individual Bitcoin unit to appreciate in value over time.

6/n The Bitcoin protocol is designed in such a way that new blocks are added to the blockchain after every 10 minutes. The miner gets a reward for adding each block to the blockchain.
The rewards for the miners keep halving every 4 years

7/n Initially the reward was 50 BTC.
In 2012 It reduced to 25BTC,
12.5 BTC in 2016 and
it became 6.25 BTC in 2020.
Next halving will be in 2024 and reward will become 3.125 BTC.
Mining rewards are the only way to bring newly minted Bitcoins into the market.

8/n
Sum of block rewards
50 + 25 + 12.5 + 6.25 + ….. = 100 (sum of infinite GP)
Since every block is mined in 10 minutes -
Number of blocks per 4 year cycle -
(6 blocks per hour) * (24 hours) * (365 days) * (4 years) = 210,240 (roughly 210,000)

9/n

210,000 x 100 = 21,000,000 Bitcoins

Hence 21 MILLION Bitcoins.
The fact that these numbers align so closely would be a remarkable coincidence, if it’s not intentional.

10/n Another plausible reason is that at the time of creation of Bitcoin the world's money supply known as M1 money supply stood at $21 trillion. This included value of all the physical money in the world, including cash, coins, travelers' checks etc.

11/n There are 100 million satoshis in a Bitcoin indicating that there will be only 21 million bitcoins if it were to be replaced as the currency of the entire world.

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