How many bitcoin are there? Bitcoin supply explained

A beginner’s guide to bitcoin's scarcity

In a world of excess and abundance, Bitcoin (BTC) stands as one of the few truly scarce assets. 

Since Satoshi Nakamoto first created Bitcoin, it has always had a clearly defined maximum supply of 21 million coins. 

The rules of the Bitcoin protocol state that when the number of bitcoin in circulation reaches the maximum supply limit of 21 million, no new units of bitcoin will be issued. While this may sound completely logical, it is starkly different from how government issued currencies operate.

Many feel Bitcoin's focus on scarcity is a fundamental aspect of its design that helps to distinguish it from government-issued fiat currencies.

While governments can freely choose to modify the amount of fiat currency in circulation, the hard-coded rules of bitcoin make it impossible for any single person or party to change its maximum supply limit.

Learning the reasoning and effects behind Bitcoin’s limited supply is an important part of understanding what makes the world’s largest crypto asset so popular.

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Why is Bitcoin supply limited to 21 million?

In an email sent in 2009 to another early Bitcoin contributor, Nakamoto admitted that their decision to set the maximum supply limit at 21 million coins was an “educated guess.”

Here, Nakamoto gives the impression that they were not principally concerned about what bitcoin’s maximum supply limit should be, but more that it had one.

While new units of any government issued currency can be created at will, the same is not true for Bitcoin’s issuance schedule.

Nakamoto recognized that scarcity is a key driver of value. Bitcoin's limited supply makes it a provably scarce asset class. Just as precious metals like gold have value due to their scarcity, the limited supply of Bitcoin makes it desirable to many investors.

In economics, scarce assets that are in high demand often attract higher prices in the market. This principle applies to all things from designer clothing and vintage cars to baseball cards and postage stamps.

Bitcoin’s scarcity, coupled with its public blockchain network, creates a transparent environment for supply and demand dynamics to play out.

This constant interplay between the supply of bitcoin and the demand for its functionality is ultimately what helps to determine the value of each bitcoin.

Is it possible to change bitcoin’s maximum supply? 

In theory, Bitcoin’s maximum supply limit could be changed if there was consensus from the majority of network participants. 

However, due to the importance of Bitcoin’s upper limit, it’s incredibly unlikely anyone, let alone the majority of the network, would agree to alter the number. 

Any change would likely undermine the integrity and the predictability of Bitcoin's monetary policy, making it far less attractive to institutional and individual investors.

How are Bitcoins created and released into circulation?

The Bitcoin protocol manages the creation and issuance of new bitcoin using a set of mechanisms and algorithms.

Consensus mechanism

Bitcoin operates using the proof-of-work (PoW) consensus mechanism. This blockchain-based system incentivizes Bitcoin’s users to work collaboratively in the best interests of the network.

More specifically, PoW involves a process known as “mining,” whereby network users compete against one another to earn the right to propose the next block of transactions in the Bitcoin blockchain. The combined computational power involved in mining is an important feature that helps to secure the network.

Check out our article What is Bitcoin mining? if you want to learn more about the proof-of-work mining process.

Block rewards

Whoever wins the mining competition receives a reward for their efforts. This “block reward” contains an amount of newly created bitcoin, plus whatever transaction fees were included in their block.

This newly minted amount of bitcoin is how new units of bitcoin enter into circulation. Once earned, it becomes the winning miner’s coins to hold, trade or sell.

When the Bitcoin protocol first went live, Nakamoto mined the very first bitcoin block — known as the Genesis block — and many other blocks that followed during the cryptocurrency’s initial launch.

The genesis block contained a block reward of 50 BTC. This meant the supply of bitcoins in circulation at that time was just 50 BTC. Today, it’s around 20 million.

That’s because each time new blocks are created and winning miners receive their block rewards from the protocol, which causes Bitcoin’s circulating supply to increase.

Here’s some other important information about Bitcoin mining: 

  • A difficulty algorithm automatically adjusts how challenging the mining competition is to ensure that new blocks are discovered approximately once every 10 minutes. This fluctuating mining difficulty helps to maintain the block time and even out the issuance of new bitcoin entering into circulation.
  • Bitcoin mining difficulty also rises in line with new miners joining the network and improvements to the sophistication of mining equipment.
  • Every 210,000 blocks, or approximately every four years, the amount of newly minted bitcoin distributed as part of the mining reward is systematically halved. Known as a “Bitcoin halving,” this tapered issuance system is designed to support bitcoin’s price over its lifespan.
  • Once the number of bitcoin in circulation reaches the 21 million supply limit, the protocol will no longer issue new bitcoin in the block rewards.
  • The last amount of bitcoin is expected to be mined near the year 2140.

You can learn even more about how new Bitcoin enters circulation and the halving process in our Kraken Learn Center article What is a Bitcoin halving?

How many Bitcoins are lost forever?

Forgotten passwords, misplaced hardware wallets and accidental transaction errors are easy ways to permanently lose bitcoin forever. That’s why it is important to know how to keep your crypto safe.

Digital currency transactions are typically irreversible, meaning once they’re sent there’s no going back. Only if a majority of the network agrees to roll back the blockchain can transactions be undone, but this rarely happens for network integrity reasons.

Chainalysis, a leading blockchain analytics firm, estimates as many as 3.7 million BTC (~17% of circulating supply) have been lost or are irretrievable. It’s also believed that Nakamoto — the largest bitcoin holder — still has around 1.1 million BTC in crypto wallet addresses that have remained untouched for over a decade.

Taking these lost coins into account, the true current circulating supply of Bitcoin may be significantly lower than the approximately 20 million that entered circulation.

How many BTC are there in circulation right now?

Today, there are approximately 20 million BTC in circulation,which accounts for more than 90% of the total supply. 

While this may seem like a large number given the relatively short amount of time Bitcoin has been around, the final 1 million coins will take a much longer amount of time to enter into circulation because of halvings.

Currently, the mining reward is 6.25 BTC per block. Sometime in April 2024, the next halving event will take place, reducing the reward to 3.125 BTC per block. 

This halving process continues until the maximum supply of 21 million bitcoins is created.

Why is Bitcoin’s scarcity important?

Understanding Bitcoin's 21 million coin maximum supply is an important part of understanding its role in the digital economy. 

Its inherent scarcity, along with the decentralized and immutable blockchain technology it relies on, underpins Bitcoin's appeal as a leading asset in the crypto market.

What is the difference between the circulating supply and total supply?

Circulating supply refers to the number of coins currently available to buy, sell and hold.

Total supply is the maximum amount of coins that can ever exist. This includes coins already in circulation, as well as those that have yet to be minted and issued through mining.

Understanding both how many coins exist today, and how many will every exist according to the rules of the protocol, is an important part of understanding how cryptocurrencies operate.

If you are interested in learning more about how cryptocurrencies operate, you might be interested in our article What is cryptocurrency tokenomics?

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