Twenty-one million: this is the theoretical maximum number of bitcoins (BTC) that must be issued. Defined within the protocol, this number has caused much ink to flow and has become iconic in Bitcoin culture. But where exactly does it come from?
The limit of 21 million bitcoins
Unlike the euro and other traditional currencies, bitcoin (BTC) has a predetermined monetary policy. New bitcoins are distributed through mining , the process of reaching consensus on the network and securing the chain.
The amount of bitcoins is not meant to be unlimited and money creation is supposed to stop at a certain point. This plan was outlined by Satoshi Nakamoto early on in Section 6 of the Bitcoin Whitepaper :
Once a predetermined number of coins have been put into circulation, the incentive can be fully funded by transaction fees and no longer require inflation.
This policy was set in the code for version 0.1 of the software released on January 8, 2009. The miners‘ reward, which was initially 50 bitcoins per block, should be halved for every 210,000 blocks. Since the average block time is 10 minutes, this equates to a halving, or halving , every 4 years or so.
Bitcoin monetary policy code version 0.1 January 2009
On the same day, in his email announcing the software’s release, Satoshi first mentioned the 21 million bitcoin limit :
“The total quantity in circulation will be 21,000,000 coins. It will be distributed to the network nodes when they create blocks, the amount being halved every 4 years. “
In reality, this limit is not imposed in the code directly, but is deduced from the conditions imposed by monetary policy. This is very easy to calculate:
Nmax = 210 000 × 50 + 210 000 × 25 + 210 000 × 12,5 + …
= 210,000 × (50 + 25 + 12.5 + …)
Thus, the quantity in circulation naturally tends towards 21 million over time. Likewise, the rate of money creation is tending towards zero, making bitcoin increasingly hard to produce .
Where does this number come from?
The 21 million limit is part of Bitcoin’s identity and has been instrumental in its success. It is emblematic today, to such an extent that it is included in many names of projects such as the newsletter of Gregory Raymond or the English-speaking magazine Citadel21 .
But one wonders why this number of the 21 million was chosen. Why millions of bitcoins and not billions or trillions? And why the number 21 rather than a power than a round number like 10 or 100?
When he introduced Bitcoin to the world in January 2009, Satoshi Nakamoto did not explain his choice. Nonetheless, he provided an interesting response within his private correspondence with Mike Hearn. In an email sent on April 12, 2009, in response to a question from the Google engineer, Satoshi said:
“My choice for the number of pieces and the distribution schedule was an educated guess. It was a tough choice, because once the network was up, those settings were locked down and we were stuck with them. I wanted to choose something that would make the prices similar to existing currencies, but without knowing the future it was very difficult. I ended up choosing a middle ground. If Bitcoin remains a small niche, it will be worth less per unit than existing currencies. If we imagine that it is used for part of the world trade, then there will only be 21 million pieces for the whole world, so they will be worth much more per unit. The values are 64-bit integers with 8 decimal places, so a coin is internally represented by 100,000,000. There is a lot of granularity if the usual prices ever get small. For example, if 0.001 [Bitcoin] is worth 1 Euro, it may be easier to change where the decimal point is displayed, so if you had 1 Bitcoin, it is now displayed as 1000 and 0.001 is displayed as 1. „