Here's a mathematical explanation:
Calculate the number of blocks per 4 year cycle:
6 blocks per hour
* 24 hours per day
* 365 days per year
* 4 years per cycle
Sum all the block reward sizes:
50 + 25 + 12.5 + 6.25 + 3.125 + ... = 100
Multiply the two:
210,000 * 100 = 21 million.
Economically, because the currency is effectively ...
I don't know if this was thought up ahead of time, but it sure makes sense in hindsight.
The reason 21 million is the right number is because people don't know how to value currencies.
For instance, right now a Euro is worth $1.30 USD and a Japanese yen is worth about a U.S. penny. Ask someone which currency they would rather hold right now and most will ...
A total of 174,100 tonnes of gold have been mined in human history,
according to GFMS as of 2012.2 This is roughly equivalent to 5.6
billion troy ounces or, in terms of volume, about 9261 m3, or a cube
21.0 m on a side.
Since Bitcoin is often compared to gold, total number of bitcoins matches total amount of gold mined in human ...
The exchange rate at any one point in time is determined by supply and demand at the markets.
The value of all bitcoins at the current market price is $80 million because the current market price is the point where the demand for bitcoins at a certain price meets the supply. You are describing introducing an artificial demand that would indeed cause ...
Some possible reasons I read:
Merchant adoption through payment processors
While merchant adoption is growing, it is currently mostly through payment processors, hardly any merchants keep a significant portion of their bitcoin earnings. With the broader selection of things to spend bitcoins on, more people are shopping with bitcoins, yet, not necessarily ...
With my only knowledge of the concept of "antifragile" being the slideshow I just read, my initial assessment is yes, Bitcoin is antifragile.
Antifragile benefits from randomness and gains from disorder.
Randomness in Bitcoin appears in the random generation of keys and in the whims of its users' spending habits. No one person controls the system, and a ...
You could explain the coin limit like this:
When Bitcoin started, its creator set a rule - "No more than 21 million Bitcoins will ever be created, and they will be given out gradually for creating blocks" (Add further explanation of block reward or proof-of-work here if needed). Everyone who joined Bitcoin knew about this rule, and they were all for it. As ...
The exact number of Bitcoins is not important. Whether the end result is 1 million or 100 billion makes little real difference.
The important aspect here is the process, not the quantity.
New Bitcoins enter the system in an orderly, predicable way.
Outside forces cannot arbitrarily flood the currency with new money.
An incentive is provided for people ...
I've read some of the linked discussions, and it seems some of the participants fail to understand the basic economic theory of the marginal cost. In any high fixed-capital business, the net present value (NPV) determines the ROI (IRR) and determines the opportunity cost where investors apply their capital. Thus, in normal functioning markets, the lowest ...
The process of attempting to buy all of the currency would drive the price up arbitrarily high.
For example, I have some bitcoins and plan to sell 10% of what I have left every time the price doubles. I will never run out of bitcoins to sell, no matter how high the price, so it is impossible for anybody to buy them all.
The US government could try to ...
The main issue with Bitcoin is not attracting late developers, but early developers. At its infancy, Bitcoin was an interesting curiosity - people would play around with it but not necessarily use it as money. But due to its scarcity and many benefits, Bitcoin came to be recognised as a digital currency.
At that point people could either wait and see if it ...
Are Bitcoin Days Destroyed a measure of hoarding?
Sometimes. But just because bitcoins changed addresses doesn't mean they changed hands.
Is it also possible to derive velocity of bitcoin (money) from bitcoin days destroyed?
Not directly. Although velocity of money and BDD are related, they are not entirely the same. velocity of money is based on a legal ...
Neither. The client chooses the best fit of coins for your spending. This is known as the knapsack problem.
The coins chosen will be the ones that yield the lowest amount of change, with exceptions for very recent (unconfirmed or newly confirmed) coins. Even when there are multiple solutions that yield the same amount of change, it will not necessarily ...
Idealists might argue that Bitcoin was developed to forever change the financial landscape, and would be affronted at the suggestion that Satoshi was out for profit. Skeptics might call the whole thing the most elaborate Ponzi scheme ever envisioned. Realists might suggest that Satoshi, emotionally traumatized by the recent unceremonious departure of his ...
The upper boundary for energy usage can be described with a function of the profit and energy costs. Miners won't ever pay more for energy than they get from profits. The actual energy usage formula will also have to count for the hardware costs.
The formula will look something like this :
max energy usage = (profit - hardware costs) / energy cost per unit
There are huge differences between FIAT and Bitcoin.
Fiat is created out of thin air "with fractional reserve banking" and other mechanisms, there is no stop on how many will be created.
Another problem is that every country is FORCED to create more of it.
Since otherwise the value of their money would increase to much, ending all export industry and ...
Assuming blocks are solved at the targeted rate of one block every six minutes going forward from today, the date the block block reward subsidy drop will occur happens in late November.
Currently the target rate is 7,200 BTC per day. Starting with block 210,000, this will drop to a targeted rate of 3,600 BTC per day.
There are many causes for inflation, but the two most often agreed upon, according to Investopedia, are these:
Demand-Pull Inflation - This theory can be summarized as "too much
money chasing too few goods". In other words, if demand is growing
faster than supply, prices will increase. This usually occurs in
There were only about 2 million Bitcoins mined when the system was fully announced and opened to the public. They are owned by Satoshi and other early adopters. While they have a huge present value, that's because their value increased.
Long after the Bitcoin system was public, Bitcoins dropped down to $2. At that time, the value of the early adopters ...
Bitcoin Days Destroyed weights the past dormancy of coins that have been transferred over any chosen period. The histogram of the percentage of Days Destroyed graphs distribution of dormancy over the measured period.
The graph is a histogram showing the percentage of total Days Destroyed from the measured period for each block. Thus it is a ...
You download a program that "generates" random numbers again and again and again (millions of times per second depending on your computer speed). Think lottery.
Two different people will not get the same random number, because each person has his own predefined set.
For a very simplified example, numbers from 1 to 1000 belongs to "me", ...
There are some important shortfalls of traditional currency that Bitcoin addresses:
There can never be more than 21m bitcoins in existence. Bitcoin will never be vulnerable to the quantitative easing or printing of additional currency which devalues the existing funds of holders of traditional currency.
There is no central authority. A collapse of any ...
TL;DR: Change of computer calculation power doesn't affect the price at all.
Market Price of anything determined by supply and demand, bitcoin is not exception the only difference is that the supply side is constant, 50 BTC per ten minutes at the moment. Regardless of how much computer power used to generate bitcoins the rate of produced bitcoins will not ...
The four basic laws of supply and demand are:
If demand increases and supply remains unchanged, then it leads to higher equilibrium price and higher quantity
If demand decreases and supply remains unchanged, then it leads to lower equilibrium price and lower quantity.
If demand remains unchanged and supply increases, then it leads to lower equilibrium price ...
Each entity's weight in the economic majority is closely related to its ability to devalue the coins in the protocol version they are against.
People (and their proxies) who are willing to offer goods or services (including traditional currencies) for Bitcoin can refuse to accept coins of the "wrong" protocol, while people who hold bitcoins can sell coins ...
It is the result of a 50 bitcoin reward half life of 210,000 blocks.
Reward starts out at 50 bitcoins and halves ever 210,000 blocks. This works out to be 2.1 quadrillion monetary units of currency (satoshi). This is probably the largest number estimated to be needed for a global currency and some padding for attrition.
The puzzle is to find ordering and choice of pending transactions with certain restriction of hash and put the into a block. Therefore the puzzle is part of system. The verification is done by everyone - every time you connect to bitcoin you verify that block chain you have received is valid. If it is not you just reject it.
No one awards them. Simply the ...