Pay please! How many bitcoins are there actually?

Pay please!  How many bitcoins are there actually?

The cryptocurrency Bitcoin is making headlines: For a long time it was determined that the value only knew the way up, but it is currently under a lot of pressure. Reason enough for us to finally offer you our exciting background article on Bitcoin as a podcast in “Figures, please! classics”. The question of the total number of bitcoins remains highly topical. Have fun!

When Satoshi Nakamoto invented the cryptocurrency Bitcoin, he built some conditions into the code that controls the monetary system. One of them is the fact that there is a maximum number of bitcoins that cannot be exceeded. Once this maximum amount of bitcoins is reached, new units of the currency can never be created. This distinguishes the cryptocurrency from pretty much all currency systems that enable trade in modern countries – here the central bank can print new money and thus influence the value of the money.

With Bitcoin, the currency generation algorithm devised by Nakamoto has determined since its creation how quickly and when units of the currency are generated and how many there can be at most: 20,999,999 Bitcoin. [Wie viele dieser knapp 21 Millionen Bitcoins momentan bereits erzeugt wurden, kann man sich zum Beispiel auf dieser Übersichtsseite von ansehen.]

In fact, it is two quadrillion ninety-nine trillion nine hundred ninety-nine billion nine hundred ninety-seven million six hundred and ninety thousand satoshis. The number comes from the way data is stored in the blockchain. It is based on the largest number that can be stored in double-precision floating-point format on an x86 system.

In this section, we present amazing, impressive, informative and funny figures from the fields of IT, science, art, business, politics and of course mathematics every Tuesday.

It is commonly believed that Bitcoin’s limited number by design and time-regulated issue of the currency is a political statement by its inventor, Nakamoto. The first block of the blockchain he created contains the text “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”, the headline in the London Times of January 3, 2009. On the one hand, this should probably prove that this as Genesis Block means first block of blockchain created on or after this date. But it also seems to be a fairly clear criticism of the traditional banking system, whose crisis at the time is clearly reflected in the Times headline.

London Times headline, 3 January 2009.

(Image: Bitcoin Wiki)

Conventional currencies are subject to a natural inflation in their price level, which occurs when the central bank, which controls the issuance of the money, puts more of it into circulation. Bitcoin, on the other hand, is subject to constant deflation as there is a finite number of bitcoins and this number will become even smaller over time as bitcoins are destroyed by their owners or their wallets become inaccessible. This deflation is in the nature of things, because Bitcoin, as a decentralized currency, cannot have a central authority such as a central bank, which controls the issue of money and thus counteracts de- or inflationary trends. Thus, the decentralized cryptocurrency Bitcoin is an experiment of a deliberately deflationary monetary system.

But wait a minute: Destroyed bitcoins? Does that mean the real number of bitcoins will be even smaller? In fact, that’s true. Strictly speaking, the number of 20,999,999.9769 bitcoins that are to be put into circulation in total is not even correct. On the one hand, you have to deduct the 50 Bitcoins that were generated as a mining reward for the Genesis Block – because nobody can spend them. This is because transactions in a block are only considered valid and secure if it is a fixed, cryptographically secured part of the blockchain. And to do that, it must contain the hash of the previous block, and the following block in the blockchain must contain its hash. However, the Genesis block generated by Nakamoto breaks this rule because it is the first block in the blockchain and therefore does not refer to any other block. That is why the Genesis Block is part of the source code of most Bitcoin clients, i.e. it is firmly integrated into the software. The type of implementation ensures that the 50 bitcoins that were paid to generate the block were transferred to a bitcoin address, but that the money cannot be spent.

Projected maximum Bitcoin issuance amount

(Image: eMansipater / Stack Exchange)

Furthermore, there were always errors when creating the blockchain, which meant that parts of the reward paid for the creation of new blocks could not be spent. For example, in block 124724, a miner received one less satoshi as a reward than he was actually entitled to. As a result, there was one less Satoshi from this point in time and the number of maximum 2,099,999,997,690,000 Satoshis generated had to be corrected downwards by one. But there have been far more serious destructions of Bitcoin capital in the history of the currency so far. The block 501726 miner even destroyed 12.5 bitcoins because he failed to transfer the reward for mining the block to a valid address due to a botched implementation of the RSK smart contract protocol. This is one of the risks of mining bitcoin: if the miner provides an invalid address as the recipient of the reward, no one can issue the resulting reward. The bitcoins are theoretically generated, but like the 50 BTC from the genesis block, they cannot be spent.

Bitcoins are also disappearing from the system in other ways. Some are intentionally destroyed by their owners. This works by transferring an amount to a Bitcoin address that nobody has access to. Either because it is outside the range of valid ECDSA private keys, or because the address being transferred to has a private key that is believed to be virtually impossible to find. The Bitcoin address 1BitcoinEaterAddressDontSendf59kuE is a well-known example of such a “Bitcoin Eater”. Bitcoins transferred to this address are considered lost forever, since it is mathematically almost impossible (i.e. extremely unlikely) to calculate the appropriate private key for this address.

A third method of destroying bitcoins is to use the transfer scripting system built into the bitcoin protocol to generate an unsatisfiable condition. For example, the command provides scriptPubKey: OP_RETURN {zero or more ops} ensuring that the bitcoins contained in the transaction cannot be spent by anyone.

However, most of the bitcoins that can no longer be spent fall victim to the loss of private keys for bitcoin addresses. If a bitcoin user loses access to his wallet and has no backup of the private keys of his addresses, no one has access to the bitcoins available through these addresses. Nobody knows how many bitcoins have already fallen victim to digital oblivion in this way. It is also difficult to estimate due to the pseudonymous nature of the Bitcoin system. The only thing that is certain is that of the almost 20,999,999 Bitcoin, which are estimated to have all been created sometime around the year 2140, a large number have disappeared forever and irretrievably. However, since this circumstance was foreseeable from the beginning and deflation is an obviously desired aspect of the Bitcoin currency, this should not have a negative impact on the currency – except that a single Bitcoin is potentially becoming more and more valuable.

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