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Bitcoin's supply limit is a hot topic among Bitcoin enthusiasts. Many believe that there is a hard cap of 21 million Bitcoins, but the truth is a bit more complex than that. Let's break it down in simple terms.
The Bitcoin Code
The code that controls Bitcoin's supply is a set of rules that determine how many new Bitcoins are created with each new block. That's it. That is the hard cap.
This code includes a function called "GetBlockSubsidy," which calculates the maximum subsidy a miner can claim at a given block height, as a reward for their work. This exact function controls Bitcoin's inflation schedule and how many new Bitcoins are created.
The 21 Million Approximation
While you often hear the "21 million" limit, it's more of an approximation. The code doesn't explicitly set a cap at 21 million. Instead, it defines how many new Bitcoins are created every 210,000 blocks (about every four years).
Here's how it works:
- The first 210,000 blocks when Bitcoin started allowed miners to claim up to 50 Bitcoins in subsidies for each new block.
- The next 210,000 blocks allow 25 Bitcoins per block.
- This pattern continues, with the subsidy halving approximately every four years.
- After 33 halvings, the subsidy for miners becomes 0
The Real Limit
When you add up all these subsidies over time, the result is approximately 20,999,999.9769 Bitcoins, not exactly 21 million.
This represents the theoretical upper limit, assuming flawless operations where miners collect all rewards without errors or anything else. The actual figure is lower, but delving into those details warrants its own dedicated blog post. If you're feeling extra curious or a bit skeptical, it might be time to don your metaphorical tin foil hat and explore the intricacies here.
The Bitcoin code contains a constant called "MAX_MONEY," which is set at 21 million Bitcoins. But this is more of a safety check than a strict limit.
In Simple Terms
In simple terms, Bitcoin's code controls how many new Bitcoins are created, and it's designed to slow down the rate of creation over time. This is why it's often said that there will only be 21 million Bitcoins. However, due to the way the code works, the actual number is slightly less than 21 million, after you add up all the rewards from the start to the final 33rd halving.
So, while the 21 million figure is a good approximation, it's essential to understand that Bitcoin's supply isn't fixed at that number in the code itself.
Remember, Bitcoin's code is open for everyone to see and verify, which is one of the things that makes it so trustworthy. It's all about transparency and decentralization.
If you want to read the original post, that was the inspiration for this blog article, written by none other than Bitcoin core developer Pieter Wuille, please click here.
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