Thread by @DeFi_initiate

Here is a hard question for #bitcoin maxis (and plebs):

Why will we end up with 21 million coins in the end?

You think this is easy? Let's see... 🧵 of 21 👇

1. We all know the easy answer: because in its first halving cycle, #bitcoin created 10.5 million coins (50 block subsidy coins * 210,000 blocks), and half that in the next, etc. After a number of cycles, we will have close to 21 million coins.

But I'm asking why, not how.

2. Let's dig in. #Satoshi was (partly) a coder, so he was obsessed with the powers of 2. Many generations of computers have been built on these powers: 8 / 16 / 32 and 64-bit computing and operating systems - to mention just the most obvious.

3. So #bitcoin inherited 8 digits of precision. 18 digits is more customary these days, but #Satoshi would have never chosen this or any other number that is not a power of 2. Then why did he choose 8 and not 16 for example?

4. Let's imagine that it's many decades after genesis, and $BTC is worth $1 million. At the time, this would have been very far-fetched. A single cent would be a logical choice for the smallest unit of #bitcoin (now called 1 #sat), which would lead to 8 digits of accuracy.

5. #Satoshi wanted to reduce inflation, since this was one of the main issues plaguing fiat currency. Creation of new coins had to be scaled back over time as a result, and cutting the rate in half every once in a while is the simplest solution (power of 2). But how often?

6. #Satoshi's motive for creating #bitcoin was not just financial but also political. Elections at the time were held every 4 years in the US, every 5 years in the EU, and every 4-5 years in the UK. It was a choice between 4 years and 5 years, and he chose 4 (power of 2).

7. Next question: how many halving cycles should there ever be? #Satoshi wanted #bitcoin to outlast him, so 8 or 16 cycles (32 and 64 years) were not long enough. What about 64 or more cycles (256+ years)? These timeframes are much too long. Let's go back in time to see.

8. 256 years before the #bitcoin #whitepaper (1752), Benjamin Franklin proved with his kite experiment that lightning is electrical in nature.
256 years before that (1496), Leonardo da Vinci unsuccessfully tested a flying machine.
Imagine 256 or 512 years into the future.

9. The size of the initial block subsidy is a direct result of the number of halving cycles (32). A little math here:

Minimum size = 2^32 sats ÷ 10^8 sats/coin = 42.9 coins

#Satoshi selected the first round number above this, which is 50 coins. Later we will find out why.

10. Next is selecting the average block time. #Satoshi casually supposes 10 minutes in the #whitepaper for calculating disk space needed to store block headers, but never explains or justifies this value.

11. As per later discussions, #Satoshi considered making #bitcoin transactions irreversible within an hour or two (i.e., after 6-12 confirmations) sufficiently speedy compared to the time it takes to clear cheques and the window for contesting credit card transactions.

12. Since #Satoshi considered confirmations speedy enough, making the average block time much shorter had no practical advantages. At the same time, it had to be much longer than the network propagation time. These boundaries give a range of about 5 to 30 minutes.

13. The 10-minute block time not only satisfies practical criteria but is also significant for another reason as we will see. Consolidating the 4-year halving cycle, the 128-year halving span, the 50-coin initial block subsidy, and the 10-minute average block time, we get:

14. Numbers...

Days in 4 years: 4 years * 365 days/year + 1 leap day = 1,461 days
Blocks in a cycle: 144 blocks/day * 1,461 days = 210,384 blocks

#Satoshi rounded this number down to 210,000 blocks for practical reasons on one hand and for reasons we will come to on the other.

15. The initial halving cycle created 10.5 million coins (50 coins/block * 210,000 blocks). The second cycle created half that amount (5.25 million coins), and the third one half that (2.625 million coins), and so on, with each cycle generating half of what the previous one did.

16. This is a geometric series that would sum to 21 million coins if it continued infinitely. For #bitcoin, the total amount of coins will be slightly less than that because block subsidy stops after 32 cycles.

17. Now we come to the interesting part. We have:

Total blocks in one halving cycle = 21 * 10^4
Total coins ever generated = 21 * 10^6
Total coins = 100 * blocks/cycle

Do you notice something unusual here? Is this just a meaningless and lucky coincidence? Nothing to see?

18. Taking the last number above, this is a direct result of #Satoshi choosing the number 50 for the initial block subsidy: total coins ever created will be 2 * 50 = 100 times the number of blocks per cycle. He could have chosen 60 or 100 or anything else.

19. So what about the number 21? Did this just randomly fall out of the equations? Does it have anything to do with the number 42 (The Hitchhiker's Guide to the Galaxy by Douglas Adams)? Yes, but the answer is not the obvious 21 = 42 ÷ 2. To find out, we need see who #Satoshi is.

20. Huge topic, and there is not enough space here to explain everything. Suffice it to say that the number 21 had special significance for #Satoshi, and he is connected to Adams through this number. Cutting emissions in half (instead of gradual reduction) was also on purpose.

21. To conclude, #Satoshi chose every single parameter consciously in order to end up with the number 21 as the foundation for #bitcoin, to synchronize political cycles with halvings, and to create something that would outlive him and all contemporaries. #Sats will live forever.

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