In today’s climate of ICOs with 100 billion token supplies, it can be easy to forget that the total supply of Bitcoin is incredibly low – 21 million.
The 17 millionth Bitcoin has been mined, and there are only 4 million left. The built-in artificial scarcity is one of the most important characteristics of the currency, and the reason for the high price – Bitcoin is rare!
Every ten minutes, a new Bitcoin block is created by Bitcoin miners, which is a subgroup of the people running computer nodes that keep Bitcoin operational. Powerful computers store all Bitcoin transaction data and update it as new transactions are added. Mining nodes are needed to verify transactions, and miners are rewarded for this with Bitcoin. Each new block of data (verified Bitcoin transactions) rewards the miners with 12.5 Bitcoins at the moment, meaning 1800 Bitcoins are created each day – but that won’t always be the case.
Miners used to receive 50 BTC per block mined, but the rewards are halved with every 210,000 blocks that are mined. It was reduced to 25 BTC in 2012 in an event known as a halving, and then to 12.5 BTC in 2016. The next halving is due to take place in late 2019/early 2020. This is referred to as a halving, and it exists to help account for the possibility of Bitcoin becoming more valuable over time due to the limited supply, keeping rewards relatively proportional and ideally preventing miners from controlling too much of the supply. This also means that the rate of Bitcoin mined decreases over time, slowing down the process as time goes on.
Bitcoin mimics gold in this sense, which is where the mining terminology comes from – of course, the mining process with Bitcoin is actually quite different. Bitcoin blocks are encrypted in such a way that the miners need to use computer processing power to guess the correct number, essentially, in order to reap their reward. This is to stagger the supply of Bitcoin so that it doesn’t fall under the control of one person or group immediately and maintain the deflationary price.
A moderator on the r/bitcoin subreddit called BashCo made a chart to represent the monetary supply of Bitcoin (blue) against the rate of monetary inflation (orange), which has been steadily decreasing since the currency was released. Based on the current rate of mining, the last Bitcoin will be mined in approximately 120 years.
Of course, that won’t have an effect on the running of Bitcoin – just as its possible to use gold after the last remaining nugget has been mined, Bitcoin can be spent regardless of whether the demand has overtaken the supply.