Last updated: Wednesday, February 2nd, 2022
Bitcoin has a Limited Supply
Contrary to other cryptocurrencies like Dogecoin, Bitcoin has a finite supply. The maximum number of Bitcoins that can be created is 21 million. Why?
Satoshi Nakamoto, the name of the anonymous creator (or creators) of Bitcoin, chose a finite supply for Bitcoin for two big reasons. The first is to ensure that the prominent digital currency would have scarcity. Ensuring Bitcoin has scarcity gives it value as there will never be an endless supply. This is similar to other assets like gold and silver.
An unlimited supply of Bitcoin could also result in inflationary issues, so a finite amount was set to combat this potential issue down the road.
As of December 2021, 90% of all Bitcoins that will ever exist have already been created. That means 18,900,000 Bitcoins have already been mined (minted).
How are Bitcoins Created?
Bitcoins are created by miners – people who compete with others to produce Bitcoin on the Bitcoin blockchain. Specialized hardware is required. Since there is no central authority handling the creation of Bitcoin, it is up to these people (miners) to create Bitcoin.
But why? What’s the incentive? Bitcoin! Miners are compensated in Bitcoin when they create it. It’s similar to a gold miner getting rewarded with gold.
More on Bitcoin mining later…but a quick note: Bitcoin mining is a competitive endeavor. According to Bitcoin.org, “the Bitcoin protocol is designed in such a way that new bitcoins are created at a fixed rate. This makes Bitcoin mining a very competitive business.”
Why was the Supply of 21 Million Chosen?
As I was writing this, I was wondering why the founders of Bitcoin chose the number 21 million. I understand the reasons for ensuring a limited supply, but why 21 million and not a different number?
Some quick research has enlightened me. Satoshi Nakamoto chose 21 million because it aligned (at the time) with the “M1 money supply of fiat currencies like the euro and U.S. dollar” (source).
According to Investopedia,, the M1 money supply “is a narrow measure of the money supply that includes currency, demand deposits, and other liquid deposits, including savings deposits” and that M1 does not include financial assets like stocks or bonds.
At the time Bitcoin was created, the M1 money supply was apparently around 21 trillion, so that’s why Nakamoto chose 21 million.
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