In a resounding testament to Bitcoin’s fixed supply model, approximately 90% of the total 21 million Bitcoin supply has already been mined. As of the latest data, about 18.9 million Bitcoins are now in circulation, leaving a mere 2.1 million yet to be added.
Bitcoin Scarcity
The inception of Bitcoin, by the mysterious Satoshi Nakamoto, included an embedded cap on the number of coins that could ever be created. Unlike fiat currencies, which central banks can print at will, Bitcoin was designed to be finite, with only 21 million coins attainable. Presently, this limit is rapidly approaching, a testament to the protocol’s strict adherence to bitcoin scarcity.
Bitcoin’s underlying technology, the blockchain, employs a proof-of-work consensus mechanism. Approximately every 10 minutes, a new block is created, containing bundled transactions. Miners, responsible for this vital network function, receive a reward of 6.25 new Bitcoins for their efforts. This equates to roughly 900 new Bitcoins entering circulation each day. Importantly, every 210,000 blocks, which translates to about every four years, this block reward is halved. The forthcoming halving event is slated for April, 2024, at which point the block reward will diminish to 3.125 Bitcoins.
Each halving has historically triggered substantial price surges. As the rate of new Bitcoin issuance decreases, the cryptocurrency becomes scarcer, thereby fostering increased demand.
The Genesis Block, Bitcoin’s first, was mined on January 3, 2009. At that time, the block reward was a bountiful 50 BTC. Fast forward nearly 13 years, and we’ve already mined roughly 90% of Bitcoin’s total supply.
Bitcoin’s journey to reach its maximum supply extends until 2140, owing to these successive halving events. After this date, miners will rely on transaction fees for their income. Given that smaller transactions will likely migrate to second-tier solutions like the Lightning network, on-chain transactions will primarily involve larger sums, leading to higher transaction costs for miners.
Huge number of lost bitcoins
However, the actual number of Bitcoins in circulation is somewhat lower than the mined quantity. This discrepancy is due to individuals losing access to their wallets’ private keys. Over the years, stories have emerged of early miners who, in the cryptocurrency’s nascent days, amassed sizeable Bitcoin holdings. Back then, Bitcoin had no market value, and transactions commenced in 2010 when the price was just $0.0008 per Bitcoin. Consequently, many early miners abandoned their holdings, and their wallets were lost or discarded, removing those Bitcoins from circulation permanently.
The New Yorker featured the poignant tale of James Howells, who, in 2009, mined around 7,500 BTC on his gaming laptop, initially valued at a meager €6. However, these coins have since skyrocketed in worth, reaching a staggering €350 million. Regrettably, Howells inadvertently damaged his laptop, rendering it unusable. Though he managed to recover some data, he left his wallet untouched, as there was no Bitcoin client for Apple at the time. In his quest to locate the hard drive, he’s explored various landfill sites without success.
Chainalysis, an analytics firm, estimates that roughly 20% of all Bitcoin is currently lost due to people’s inability to access their wallets. This often results from forgetting their private keys or self-created passwords.
Paradoxically, these lost Bitcoins contribute to the asset’s scarcity, bolstering its price and benefiting hodlers worldwide. As Bitcoin’s finite supply draws closer to its maximum limit, the cryptocurrency’s role as digital gold continues to solidify.
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