How many bitcoins are in circulation?
21 million. This is the number of units chosen by Satoshi Nakamoto when he created Bitcoin. Today, there are an estimated 19 million Bitcoins in circulation. As insignificant as this may seem, this information is essential to grasp the relevance of Bitcoin. When Bitcoin is compared to digital gold, most people fail to understand how it can be compared to gold. Precisely because they don’t know that there are only 21 million of them.
From currency to store of value
Bitcoin appeared as the very first crypto-currency in history in 2009, but is no longer considered a currency in the strict sense of the word. In other words, a stable medium of exchange that can be used for everyday purchases. As with euros or dollars, for example. That said, these days, Bitcoin is associated with a store of value. But how is this possible?
Creating a scarcity effect
The reason Satoshi Nakamoto decided to limit Bitcoin’s money supply to 21 million was to create a scarcity effect. This aspect, which is found precisely in rare metals (Gold, Silver, Bronze, etc.), makes it possible to reproduce a gold rush around Bitcoin, so that it becomes more valuable over time. In this way, Bitcoin avoids the inflation faced by many countries, including France, where inflation stands at 6.8% according to the French National Institute for Statistics and Economic Studies (INSEE).
The gold rush means miners
A bitcoin transaction
Imagine you want to send bitcoins to a friend. Let’s say you want to send €100 worth of bitcoins. When you trigger your transaction, you will automatically be presented with a complex mathematical problem.
This problem is designed to ensure maximum security for the transaction about to take place. So, for your transfer to take place, you need to solve this mathematical problem. But you don’t have the computing power to do it.
That’s when someone else steps in to solve the problem imposed on you, using their own computing power. Once they’ve solved the mathematical problem, you’ll be able to transfer €100 worth of bitcoins.
In exchange for allowing you to make a transaction to your friend, you’ll give a reward in bitcoin to the person who helped you (this is the transaction fee). This is known as “proof of work”.
Digital gold
Every 4 years, the difficulty of mathematical problems increases, and the rewards for solving them decrease. This is known as “halving”. As a result, obtaining bitcoins by solving problems, and therefore validating transactions, becomes increasingly complicated.
And what happens when the chances of finding bitcoin are slim? Its value increases dramatically. After all, there are only 21 million units. So much so that every 4 years, Bitcoin rises so sharply that it surpasses its former highs.
By analogy with the gold rush, the people who validate users’ transactions are known as “miners”. Their computational powers, which could be likened to picks and shovels, are used to search for Gold, in other words, Bitcoin.
But as gold becomes increasingly scarce, due to the growing number of miners exploiting it, finding Bitcoin becomes much more difficult (halving). With a limited quantity of 21 million, a single gold nugget has immeasurable value. And this value continues to grow over time.
Long-term growth
So, to hold gold, or at least Bitcoin, is to hold a reliable store of value that only increases over time. Today, an estimated 19 million Bitcoins have been mined since its inception in 2009. And, as you’ve probably guessed, the closer we get to the 21 million mark, the higher Bitcoin’s value will rise. Leaving room for several scenarios concerning its future evolution.
2030: Bitcoin at $1 million
Cathie Wood, CEO of the Ark Invest investment fund, stated at the Bitcoin 2022 event, held at the Miami Beach Convention Center, that by 2030, Bitcoin will be worth $1 million. Although this scenario is highly optimistic, it is nonetheless consistent. This is due to Bitcoin’s technical properties (halving, miners, 21 million units), which have meant that Bitcoin has grown almost relentlessly since 2009.
At the time of writing, Bitcoin is worth $21,533. Since November 2021, Bitcoin has experienced a major decline. From $60,000 to its current price. But if we assume that the next halving will take place in 2024, the previous one having taken place in 2020, it is highly likely that Bitcoin will rise again to exceed its former high.