Litecoin is one of the first open-source altcoins based on the original Bitcoin code. It was initially a strong competitor to the first cryptocurrency. However, as the cryptocurrency market expanded, Litecoin’s popularity gradually declined.
The Mathematics of Bitcoin: Why 21 Million Coins
The essence of Bitcoin is that it is a new decentralized digital currency, a currency outside the control of states and corporations. It was created and functions only on the Internet, without having a physical embodiment.
Everything related to Bitcoin and cryptocurrencies is directly related to mathematics. Not so long ago, a question was asked about why the creator of the forefather of all cryptocurrencies, Satoshi Nakamoto, decided to issue exactly 21 million BTC, and not any other number. And why is Bitcoin limited?
In the global economy, there is a rule that each currency should have restrictions in its own quantity. Any money is also goods, and all goods are directly dependent on the market laws of supply and demand on the market. Everyone knows when a product is in oversupply – it simply loses its value.
Also, inflation is a common cause of currency depreciation. All this is due to the rapid growth of the quantity of money, but the unchanging total quantity of goods and services, as a result of which the representatives of services and sellers of goods react by increasing prices.
To avoid such unpleasant consequences, the creators of Bitcoin created the principle of limiting the number of digital coins. Perhaps that is why the total number of coins will never exceed the mark of 21 million. But why exactly this number, and not any other, and how many coins have already been purchased? We will find out below.
Bitcoin's Secret Formula
Mathematical Explanation
The limited issue of Bitcoin gives it unique properties: a deficit is created and inflation is prevented.
Sasha Fleishman (a trader from Arca, an asset management company dealing with cryptocurrencies and blockchain) has been thinking about this issue for a long time on Twitter and came to the conclusion that it's all about such a variable as time. This theory is only one of the possible ones. Its essence is this: Bitcoin is programmed in such a way that adding each new block to the block chain takes about ten minutes. At the same time, the time may change for a few seconds, but then everything is compensated during the adjustment of complexity, which occurs every two weeks.
Sasha writes that when blocks are broken into six blocks per hour over four years, then the total number of blocks in each cycle is divided by about 210,000. Bitcoin supply will drop from 12.5 units to 6.25 units during the next halving. Accordingly, before this block reward was 25 BTC, and before the previous halving – 50 BTC. The sum of all block reward sizes is 100. If we multiply 100 by 210 thousand blocks over the cycle of dividing the rewards of miners in half, we will get 21 million BTC. Fleishman's explanation seems to be quite logical.
Economic explanation
There is another opinion. Calculations in mathematics explain why the number of Bitcoins will never be able to exceed the mark of 21 million. To answer the question why exactly such a number, it is possible to analyze global economic indicators.
In the year when Bitcoin first appeared (2009), all the money in the world was worth approximately $50 trillion. If we divide the amount of $50 trillion into 21 million Bitcoin coins, we get an amount of about $2 million 381 thousand for one BTC. Accordingly, this is how much 1 Bitcoin could cost, provided that it became the most basic world currency. This is the "maximum plan" of Bitcoin.
There is also a possibility that all the numbers here are a simple coincidence, despite the fact that everything converges according to calculations. Perhaps the correct answer will never be known as well as the identity of the creator of Bitcoin. And while the truth has not been found, these theories are the most convincing for today. By the way, the number of Bitcoins purchased has already exceeded the mark of 18 million, which means that it will not be long before 21 million. Perhaps it's time to think about such an investment in order to have time? After all, who knows, perhaps when bitcoin coins reach the mark of 21 million, the rate will jump to the estimated amount of $ 2 million 381 thousand or even more?
