The capping at 21 million units helps the value of each Bitcoin increase as it becomes popular.
Satoshi Nakamoto is known as the “father” of Bitcoin, the world’s first electronic currency. One of the things that makes many people wonder is why Bitcoin is limited to about 21 million units.
Some argue that limiting the amount of Bitcoin issued will help avoid inflation. However, the real reason for the above limitation was revealed in an email between Satoshi Nakamoto and developer MIKe Hearn.
According to an email shared by Hearn, Nakamoto initially estimated that 0.001 BTC would be worth the equivalent of 1 euro.
“I want to choose a landmark that can be converted to existing currencies. If Bitcoin becomes popular in the future, capping to 21 million will increase the value of each Bitcoin even more.” , email said.
According to a post on the StackExchange forum, the software stipulates that about 10 minutes, a new block will be added to the system, corresponding to a certain amount of Bitcoin is generated.
At the same time, the amount of Bitcoins gained after each new block is added will halve over time. Specifically, for the first block, you will receive 50 Bitcoins for each new block. This number will drop to 25 Bitcoins per block in the next turn and so on to 0. This cycle will run for about 4 years.
Thus, we will have the following calculation:
6 blocks / h x 24h x 365 days x 4 years = 210,000 (number of blocks per 4 year cycle)
50 + 25 + 12.5 + 6.25 + … = 100 (total Bitcoin gain)
Therefore, the number of Bitcoins will be limited to about: 210,000 x 100 = 21 million units.