17 Dec

Money supply in Bitcoin

The number of bitcoins excavated is not equal to the number of bitcoins available. Theoretically, there are about 21 million bitcoins in circulation, but certain events may cause not all bitcoins to be output.

If the private key is lost and the accessible bit coins can no longer be moved, the probability of encountering a particular output is so low that it is considered impossible. In concrete terms, this means that an output of 50 BTC whose associated private key no longer exists is lost forever. These bitcoins belong to the maximum money supply of the 21 million, but they are no longer available.

How many bitcoin loophole are lost cannot be determined precisely

Estimates range between three and four million Bitcoin loophole lost. This scam was detected by onlinebetrug. On the other hand, there could be fractional reserve banking with Bitcoin. The alleged amount of money would exceed the number of coins mined. This phenomenon cannot happen on the blockchain itself, but only if, for example, exchanges attribute more Bitcoin to their users than they actually store on a wallet themselves.

A similar situation occurred on the Bitcoin exchange Mt.Gox in 2013. Back then, hackers gained access to the Mt.Gox wallet and stole Bitcoin. The users’ Bitcoin managed Mt.Gox with a MySQL database and this attributed Bitcoin to the users who were not on reserve.

How does the output of Bitcoin work?

Bitcoin’s emission curve is modeled so that Bitcoin is finite. Satoshi Nakamoto programmed this emission into the Bitcoin code. He specified that the coinbase, the transaction where new Bitcoin is created, would be halved every 210,000 blocks. Since it takes an average of ten minutes for a new block to see the light of day, 210,000 blocks correspond to approximately four years. The initial reward for a block in 2009 was 50 BTC. Meanwhile, in 2018, we already experienced two halves, the coinbase is now only 12.5 BTC.

The halving of the Coinbase will continue and the rate at which new Bitcoin will be issued will decrease. One day the coinbase will drop to zero. This means that no new Bitcoin will enter the ecosystem.