The 17 millionth Bitcoin is about to be minted. What does this mean?

According to Blockchain.info, barring unforeseen events, the 17 millionth bitcoin could be mined in the coming days, a development that would mark another major milestone for the world’s first cryptocurrency. That’s because under bitcoin’s current rules, there is a cap of just 21 million bitcoins that can ever be mined.

The milestone is significant, marking yet another million bitcoins mined since mid-2016, and is perhaps notable because it’s yet another reminder of the computer science achievement at the heart of the technology: shared software that creates and enables digital scarcity.

In short, Bitcoin's code, adapted by many other cryptocurrency upstarts, ensures that only a certain number of new bitcoins are introduced into its economic system at intervals. Miners, or people who have the hardware required to track Bitcoin's transaction records, get this scarce data every time they add a new entry to the official record.

Still, there are a lot of variations in the process.

It’s worth noting that due to the many tiny differences that occur when keeping the general software in sync, it’s impossible to predict exactly when the 17 millionth bitcoin will be mined or how it will be mined. That said, there is a relative predictability.

Each Bitcoin block generates 12.5 new Bitcoins, and since Bitcoin blocks occur approximately every 10 minutes, approximately 1,800 new Bitcoins are created every day.

As such, it’s best to view the event as a “psychological barrier,” said Alex Sunnarborg, founding partner at Tetras Capital, with different communities interpreting it differently.

For example, Sunnarborg tried to highlight another way to interpret the results: 80% of all bitcoins that will be created have already been mined. In other words, only about one-fifth of the remaining supply is available to miners and future buyers.

Others see it as a milestone in the maturity of the technology and its achievements.

I think this is great!

Venture capitalist Tim Draper said he bought millions of bitcoins at a U.S. government auction in 2014: I bet the founder (Satoshi Nakamoto) couldn't have imagined how important Bitcoin would eventually become in their wildest dreams.

Word choice

Some have suggested that this milestone should be seen as an opportunity to educate people about the capabilities of Bitcoin and cryptocurrencies in general.

For example, unless everyone who operates and runs the Bitcoin software decides to make changes (which is unlikely at this time), there is no way to introduce more new Bitcoins. This achievement is a technological reality that plays a key role in Bitcoin's relevance to money, the economy, and other scarce natural assets.

Through education, early Bitcoin supporters and readers of Austrian economics quickly realized the value of this feature and likely coined the term “cryptocurrency.”

Trace Meyer, one of the group’s main organizers, summed up this philosophy in a recent tweet, arguing that governments may try to prevent users from holding Bitcoin in the future.

He wrote: Increasing the money supply is a means of confiscation through inflation, a form of taxation without representation or legal process.

Even the new way Bitcoin is formed, “mining,” is a metaphor for gold.

Bitcoins are not issued by a central bank, but are created by the network through the work of maintaining the blockchain. When a miner finds a valid hash of a recent transaction, solving the Bitcoin protocol puzzle, he or she gets a "coinbase transaction" and the bitcoins are credited to her account.

A small fraction of the cryptocurrency is created and deducted from the final supply.

Bitcoin supply curve

Of course, how participants are rewarded will change over time.

When Bitcoin creator Satoshi Nakamoto mined the first Bitcoin block on January 3, 2009, he created the first 50 Bitcoins. When the first “halvening,” or reduction in the reward, occurred, the reward remained the same for another 209,999 blocks.

This is not surprising. According to a hardcoded schedule, every 210,000 blocks the network reduces the block reward by 50%. Following the most recent black market in July 2016, the reward is currently 12.5 bitcoins.

This means that, even though there are only 4 million bitcoins left, the network will not reach final supply in the nine years it will take to reach that goal. As half-life approaches, the monetary inflation rate will slow the supply growth.

An anonymous user named “BashCo” on the Bitcoin subreddit plotted a graph of the total supply of Bitcoin (blue curve) versus the monetary inflation rate (orange line).

Assuming the Bitcoin protocol remains unchanged (a new block is mined every 10 minutes on average, and the schedule and supply cap remain the same), the last new Bitcoin will not be mined before May 2140.

The next 120 years

With this in mind, and in acknowledging this milestone, the chart hints at another common argument – ​​that Bitcoin was programmed to run for a long time.

Jameson Lopp, lead infrastructure engineer at wallet provider Casa, reminds us that bitcoin is divisible, so the smallest part of each bitcoin can have seemingly infinite value.

He said: While 17 million Bitcoins may sound like a lot, it is very scarce, and for every current millionaire, it is not enough to own a full Bitcoin. Fortunately, each Bitcoin can be divided into 100 million satoshis, so there are always many other opportunities!

But Bitcoin enthusiasts have other quirks, too.

First, Bitcoin will never reach 21 million units because unless the protocol changes, the total supply will decrease by at least one. This is because on May 17, 2011, a miner "midnight spell" occurred, and for reasons that are unclear, the miner requested 49.99999999 bitcoins as a reward, not 50.

It must also be clarified that Bitcoin will not stop operating when 21 million Bitcoins are produced. At that point, the idea is that miners will be compensated purely through the fees they have already collected (although some scientists have tried to predict whether such a market would work in practice).

There are many unanswered questions, and this incident is yet another reminder that Bitcoin still has a long way to go.

In the words of long-time developer Adam Back:

Another one million has been achieved, and there are still four to be completed.

Another million down four more to go.