Bitcoin was conceived as a decentralized hedging tool against the imperfect banking system
Almost 90% of all bitcoins have already been mined. Most of them are in circulation, something is lost
The emission of bitcoins will end approximately in 2140
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Limited emission is one of the main features of bitcoin (BTC) that distinguishes it from fiat currencies. It endows it with powerful deflationary characteristics, which is important in an environment where central banks print money uninterruptedly, provoking inflation
Bitcoin (BTC) was conceived as a decentralized hedging instrument against the imperfections in the banking system that emerged during the last economic crisis in 2008. Ten years have passed since then, and now problems are brewing in the world economy again, and central banks are trying to keep their economies on the brink of a financial abyss and are printing money under the motto “after us, even a deluge”.
Almost 90% of all bitcoins have already been mined. Most of them are in circulation, something is missing. This graph shows in a simplified form the projected emission rates and monetary base of bitcoin:
To understand why bitcoin has a limited emission, you need to go back a few years to its origins..
A Brief History of Bitcoin
The mysterious Satoshi Nakamoto started developing bitcoin in 2008. In October of the same year, he published a white paper titled “Bitcoin: A Peer-to-Peer Electronic Monetary System”.
In nine pages, he outlined the principle of operation and the purpose of the digital currency, which was to become the first anonymous, decentralized currency in history that does not require the participation of intermediaries. Quote from the bitcoin white paper:
“We need an electronic payment system based not on trust, but on cryptographic proof, which allows any two parties to transact directly with each other without involving a third party as an intermediary or guarantor.”.
Satoshi was not a fan of modern banking, especially the principles of fractional reserve banking. The bottom line is that the bank accepts deposits and uses this money to issue loans to other people or invest them in projects. At the same time, he is obliged to maintain reserves in his accounts, equal only to a part of his obligations on deposits.
At first, people sent bitcoins to each other for fun and just to test how it worked. The new coin was first used for a purchase in 2010, when Laszlo Hanjec bought a pizza for 10,000 bitcoins. For his bitcoins, he received pizzas worth $ 25. This is how the first ever exchange of BTC for tangible assets took place..
In the first year of Bitcoin’s existence, there were no exchanges where one could exchange it for fiat or vice versa. This need was soon closed by Jed McCaleb, who turned his domain mtgox.com into the world’s first bitcoin exchange – Mt. Gox. Initially, the platform, which appeared in 2007, was engaged in the exchange of Magic the Gathering game cards. Hence the name: The Magic: The Gathering Online Exchange.
By 2014, Mt. Gox handled 70% of all Bitcoin transactions, and its infrastructure began to crack, unable to cope with the growing cash flows. The exchange closed in 2014 after a hack that cost it 744,000 bitcoins.
However, the popularity of the cryptocurrency grew, along with it, the number of trading platforms allowing the exchange of digital coins increased. Bitcoin turned ten years old on January 3, 2019. By then, it had evolved into a recognized digital asset worth $ 3,870..
How many bitcoins are left to mine
At the time of writing, there are 18.6 million bitcoins in circulation, or 88.57% of the maximum issue size previously set at 21 million coins. This means that there are only 2.4 million BTC left to mine. Due to the mathematical model governing bitcoin issuance, it will take about 119 years to mine the remaining 11.5%.
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According to the release chart and hard-coded blockchain, the process will end in 2140. Every four years, the amount of bitcoins produced when a block is mined is halved.
Now one block costs 6,250 BTC, it takes an average of ten minutes to mine. In 2024, this value will drop to 3.125 BTC per block. After another four years, the reward will again be halved and so on until all the bitcoins are mined. Now about 900 BTC are mined per day.
This halving function has led to various pricing models such as inventory-to-flow ratio (S2F). The number of coins in circulation – the stock – is divided by the flow, that is, by the number of new coins generated. This concept makes Bitcoin a “hard currency” whose value increases over time..
Scarcity also stimulates demand, as is clearly demonstrated by the behavior of institutional funds in 2020, which were buying up assets in unprecedented quantities. If Bitcoin is used as a hedging tool against the policy of printing money or injecting liquidity into the economy, then such institutional players are more likely to keep it in the hope of a price increase in the long term. This further enhances the asset shortage property.
In 2018, industry experts estimated that at least 4 million BTC were “lost” and 2 million coins were stolen..
An estimated 4m BTC lost, 2m BTC stolen. @lopp at #BuildingOnBitcoin pic.twitter.com/xsXayfKiaP
– Willy Woo (@woonomic) July 4, 2018
Thus, there are actually about 14.5 million coins in circulation, available for trading and use. The Wall Street Journal estimates that about 20% of all existing coins have been “lost” and are unlikely to return to circulation..
There are other data as well. For example, Timothy Peterson, manager of Cane Island Alternative Advisors, conducted a study in April 2020 and found that 1,500 bitcoins are lost every day, which means that there will hardly ever be more than 14 million coins in circulation..
Significance of 1337
The number 1337 is widely used on the Internet to refer to the term “LEET”, which means “Elite”. It is often associated with Bitcoin on the assumption that owning as little as 0.1337 BTC will make you part of the global investment elite of investors if the asset reaches seven figures over the next decade..
There’s currently a dip happening in #Bitcoin.
This is the best time to buy 0.1337 BTC to hold for 2030! # 1337Bitcoin
That should be your minimum target amount of Bitcoin to hold for 10 years minimum.
If you hold 0.1337 BTC until 2030, you’ll be part of the global elite.
– Brad Mills (@bradmillscan) January 10, 2021
At an all-time high near $ 42,000, that amount would be roughly $ 5,600. Nowadays, few people can afford to buy a whole bitcoin. It costs too much for the average working-age person who doesn’t have tens of thousands of dollars in savings..
Who are bitcoin whales
There is a high concentration of wealth in the bitcoin market. This means that most coins are concentrated on several addresses. The situation has been exacerbated lately as huge institutional funds like Grayscale and MicroStrategy are buying up thousands of coins. In addition, it is reported that the creator of Bitcoin Satoshi NakamotoIn 2009, someone (one person or group of developers), hiding under the pseudonym Satoshi Nakamoto, revolutionized the digital … More mined about 1 million BTC, and none of these coins have not moved in the last decade.
According to the list of the largest bitcoin addresses, 14% of all coins in circulation are stored at 101 addresses. That’s about $ 90 billion at the current exchange rate. Another 30% of all bitcoins are stored on whale addresses with a balance of 1,000 to 10,000 coins.
Another interesting fact: about half of all addresses contain less than 0.001 BTC. Thus, over 85% of all bitcoins currently in circulation are stored on addresses containing more than ten coins..
If this trend continues – and the whales show no intention of disposing of their savings – the amount of coins available to the average person will be negligible..
Supply and demand
In conclusion, in 119 years only 2.4 million bitcoins remain to be mined. Since almost 90% of all BTC that ever existed is already in circulation or lost forever, these new coins will be in demand..
137m users, 18.6m BTC, 3.8m lost
=> 0.11 BTC per person
1b users (estimated), 19.8m BTC, 3.8m lost
=> 0.016 BTC per person
At full global adoption:
8b + users, 21m BTC, 3.8m lost
=> 0.002 BTC per person
That’s how early you are.
– Willy Woo (@woonomic) January 4, 2021
The current market cycle suggests that institutions are buying coins in unprecedented amounts and, given the economic conditions in the world, this trend is unlikely to change anytime soon..
Over its twelve years of life, Bitcoin has regularly updated highs, forming rising lows in bear markets. Bulls and bears have formed four distinct market cycles, but overall, the long-term trend remains upward..
In the future, this trend is unlikely to change in the future, unless, of course, the Internet as we know it, does not cease to exist..
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