Bitcoin can never be made arbitrarily. It has a limited and finite supply. Actually, there are only 21 million Bitcoins that will ever be invested in total, in fact, it is 20,999. Once investors have opened these many Bitcoins, the bitcoin supply of the world will basically be used, unless Bitcoin’s agenda is changed to permit for a bigger supply. Many people around the world are asking about reasons that give bitcoin a value. The “hard cap” or maximum supply has an important role in the appraisal of a cryptocurrency. This hard cap cannot be changed, it is part of Bitcoin’s ultimate characteristics and code. Bitcoin creator, Satoshi Nakamoto, founded Bitcoin with a maximum supply of 21 million for very good causes. Readers will learn in this article about what the hard cap is and why 21 million bitcoin?
1-Circulating, total, and maximum bitcoin supply:
The basic assumptions of value and price, or Market Capitalization, is the baseline for most people to calculate a cryptocurrencies value. To identify it, one should know exactly what a maximum supply is and why some coins have them and others don’t. It goes like this: Price x Circulating Supply = Market Capitalization
Circulating Supply indicates what is available at the moment. In other words, is bitcoins measure that is energetically out in circulation being commerced and turned on. Some projects have their total coins pre-invested, some publish every coin from the beginning, while others must invest the coins over time following a schedule.
Total Supply is the number of coins that are already bought and made, they are available at the moment and do exist but they are not necessarily in circulation.
Maximum Supply permits to one to discover that a coin does actually have a maximum supply, and therefore denotes the number of coins that will be in existence. For example, if the Circulating Supply is 16,676,337 BTC, and the Maximum Supply is 21 million then 4,323,663 million Bitcoin are left to come into existence through investment.
2-Reasons of such a maximum supply:
1- it is concluded from the previous section why 21 million bitcoin is a maximum supply.
It is theoretically because the more coins one has, the slower the price rise and the slower the infrastructure growth. There’s also a risk because of the slow growth, represented in the fact that Bitcoin may not catch up economically. A growth too fast would be detrimental to the Bitcoin economy. Then, even though one can divide a single Bitcoin, having fewer bitcoins make it less liquid, which is undesirable. Thus, the incentive is to make fewer coins, not more.
2- It is guessed that Satoshi constructed patterns.
using the present data from stock stores, which aid him to understand the number of bitcoins that will satisfy his projections of Bitcoin progress to be fulfilled. After comparing data from a number of his samples, it is clear why 21 million bitcoin. This amount might have been the medium number that Satoshi decided to set out with because of trusting the data that he owns and use 21 million bitcoin as the most suitable maximum supply.
Calculate the number of blocks per 4 year cycle:
6 blocks per hour * 24 hours per day * 365 days per year * 4 years per cycle = 210,240 ~= 210,000
Sum all the block reward sizes:
50 + 25 + 12.5 + 6.25 + 3.125 + … = 100
Multiply the two:
210,000 * 100 = 21 million.
3- Effects on the miners of bitcoin:
It may look that people who are most affected by the maximum Bitcoin supply are Bitcoin miners. If the hard cap accomplishes 21 million bitcoin in circulation, it is believed by Bitcoin disparagers that investors won’t win remunerations got for their jobs. In this situation, it is probable that these investors need to count on transaction fees to preserve processes, they will then learn that the operation is unbearable, guiding to a reduction in miners number, a bitcoin network centralization operation, and multiple disadvantages related to the Bitcoin system. That is a good reason explaining why 21 million bitcoin.
4-Price of Bitcoin
It is another cause why 21 million bitcoin. Bitcoin has already seen large raisings in price in just the last few months. While no one is totally certain how Bitcoin will continue to spread to the bigger financial world, it looks that a limited supply of the currency can result in a continued increase in prices.