Bitcoin, the first ever cryptocurrency, has gained immense popularity over the years due to its decentralized nature, security, and limited supply. However, one of the most common questions that arise in the minds of people is why the total number of bitcoins is limited to 21 million, and why can’t more bitcoins be created?
To understand this, we first need to understand the concept of mining in the Bitcoin network. Bitcoin mining is the process of verifying transactions on the network and adding them to the blockchain. Miners use powerful computers to solve complex mathematical problems, and in return, they receive newly minted bitcoins as a reward.
However, the rate at which new bitcoins are created is not constant. In the early days of Bitcoin, the reward for mining a block was 50 BTC, but this reward gets halved every 210,000 blocks or approximately every four years. This event is known as Bitcoin halving, and it is designed to ensure that the total supply of bitcoins does not exceed 21 million.
Currently, the reward for mining a block is 6.25 BTC, and it is expected to reduce to 3.125 BTC in the next halving event, which is estimated to occur in 2024. This means that the rate at which new bitcoins are created is gradually decreasing, and it will eventually reach zero when all 21 million bitcoins have been mined.
Now, the question arises, why is the total supply of bitcoins limited to 21 million? The answer lies in the design of the Bitcoin network. Bitcoin was created by an anonymous person or group of people known by the pseudonym Satoshi Nakamoto, and they designed the network to be decentralized and secure.
To achieve this, they needed to ensure that the supply of bitcoins was limited, so that no single entity or group could control the network by creating an unlimited supply of bitcoins. Moreover, a limited supply of bitcoins also makes it a deflationary currency, which means that its value is expected to increase over time due to its scarcity.
Another reason why the total supply of bitcoins is limited is that it ensures the stability of the network. If the supply of bitcoins was unlimited, it would lead to inflation, which would reduce the value of bitcoins and make it an unreliable store of value. Moreover, an unlimited supply of bitcoins would also lead to a decrease in the mining rewards, which would reduce the number of miners in the network and make it less secure.
In conclusion, the total supply of bitcoins is limited to 21 million due to the design of the Bitcoin network. This ensures that the network remains decentralized, secure, and stable, and it also makes Bitcoin a deflationary currency with a limited supply. While it might seem like a limitation, it is actually a feature that makes Bitcoin unique and valuable, and it is one of the reasons why it has become so popular over the years.