How the number of bitcoins is limited

In some of the previous posts, we did already hit upon the file chainparams.cpp in the source code of the bitcoin reference client. It is interesting to go through this and understand the meaning of the various parameters defined there. One of them should catch your attention:

class CMainParams : public CChainParams {
public:
    CMainParams() {
        strNetworkID = "main";
        consensus.nSubsidyHalvingInterval = 210000;

What does this parameter mean? It is in fact not used awfully often, apart from some unit tests I could only locate it once, namely in validation.cpp.

CAmount GetBlockSubsidy(int nHeight, const Consensus::Params& consensusParams)
{
    int halvings = nHeight / consensusParams.nSubsidyHalvingInterval;
    // Force block reward to zero when right shift is undefined.
    if (halvings >= 64)
        return 0;

    CAmount nSubsidy = 50 * COIN;
    // Subsidy is cut in half every 210,000 blocks which will occur approximately every 4 years.
    nSubsidy >>= halvings;
    return nSubsidy;
}

The output of this function plays an important role when a new block is mined by mine.cpp – this is the amount (in Satoshis) that a miner earns in addition to the fees! Put differently, this is the amount of bitcoins that are created when a block is mined.

What this code tells us is that the amount of bitcoin added during mining starts with 50 and is divided by two every 210.000 blocks. So the amount of bitcoins mined is a given by the formula

210000 \cdot 50 + 210000 \cdot 25 + 210000 \cdot 12.5 + \dots = \sum_{n=0}^\infty  210000 \cdot 50 \cdot  \frac{1}{2}^n

The mathematicians among us will recognize this as a geometric series

210000 \cdot 50 \cdot \sum_{n=0}^\infty q^n

with q = 0.5. This series converges, and its value is

210000 \cdot 50 \cdot 2 = 21 \cdot 10^{6}

Therefore the amount of bitcoins that are created by mining – and thus the overall supply of bitcoins –  can never exceed roughly 21 million bitcoins. You might have heard that before: bitcoins are by designed with a controlled supply which is guaranteed by the continuous reduction of the subsidity as the number of blocks increases (and not because the value of a bitcoin transaction is stored in a 64 bit integer – in fact this would explain why the value of a single transaction output cannot exceed a certain value, but not why the total sum of all ever issued bitcoins is limited). This is the point in the source code that is responsible for this.

Of course I am cheating a bit – the value of a bitcoin is discrete, not a real number. Mining will stop if the value of the block subsidity falls below one Satoshi, as this is the smallest number that can be represented. Let us see when this happens. The subsidity is given by the formula

s = \frac{5 \cdot 10^{9}}{2^n}

where n is obtained by dividing the block height (i.e. length of the chain) by 210000 and converting to an integer. Solving s = 1 for n, we obtain

n = \log_2 (5 \cdot 10^{9}) \approx 32.2

Therefore the bitcoin amount created with a block will drop to zero with block

m = 210000 * 33 = 6.930.000  .

The total number of bitcoins created until then can be approximated (ignoring rounding) by the partial sum

210000 \cdot 50 \cdot \sum_{n=0}^{32} q^n = \frac{50 \cdot 10^{9}(1 - q^{33})}{1 - q}

which gives 20999999.997 bitcoins, i.e. almost exactly 21 million bitcoins as expected. We can also estimate when this will have happened. Looking at blockchain.info, we see that at the time of writing, approximately 513.000 blocks have already been mined. So we still need 6.418.000 blocks. A block is generated roughly every 10 minutes, so there are 6 additional blocks per hour and therefore 52560 blocks being added per year. Thus it will take roughly 122 years from now until all these blocks have been mined, i.e. this will happen somewhere around the year 2140. So still some time to go until then…

If you do not trust the math, you could also simulate this in a little Python program. In fact, this will give you a bit less than what we have calculated above, as the subsidity is rounded to an integer during the calculation, which our geometric series above does not properly reflect.

COIN = 10**8
nHeight = 0
btc = 0.0
while True:
    halvings = nHeight // 210000
    subsidity = (50*COIN) >> halvings
    btc += subsidity
    if subsidity < 1:
        break
    nHeight += 1

print("Total bitcoin amount: ", btc / 10**8 )

You can also easily determine how many bitcoin are available at each point in time. At 513.000 blocks, these are roughly 16.9 million BTC, which, at a price of 10.000 USD, is equivalent to a market capitalization of roughly 160 billion USD.

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