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 ...
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, the total number of bitcoins matches the total amount of gold mined in human ...
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 ...
Disclaimer: At the time of this writing, I am a shareholder with ASICMiner.
Also be aware that the Bitcoin stock market is, like Bitcoin, very immature and not regulated. The risks involved are far greater than for a traditional stock market.
Like @Steven Roose just wrote, you can buy Pass-Through (PT) shares through two separate stock exchanges, BTC-TC ...
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 ...
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.
A Bitcoin Trust fund registration statement was filed today with the Securities and Exchange Commission. If approved it would be the first Bitcoin ETF you can trade in the market.
UPDATE: The Bitcoin ETF was not approved.
As discussed further below, the Commission is disapproving this proposed rule change
because it does not find the proposal to be ...
The simple answer is that there is a constraint on the total number of coins that will be generated.
In economy the fact that the supply of newly minted coins is either constraint by a constant rate at which they enter the market or, like in Bitcoin's case, even that the total number that will ever be in circulation be limited.
Due to how the amount of ...
For a good portion of its history the bitcoin network has seen continuous increases in difficulty, which warps the average block time to be below 10 minutes until the next difficulty adjustment. If the reverse were true the block time would be longer in kind.
This latency serves to protect nodes against isolation attacks where you could otherwise ...
I think that the "Euclidean Constraint" just refers to the hard limit of 21million. It's a line on a graph to which the number of bitcoins approaches but never reaches.
One of the problems with fiat currency is knowing how much to print.
If you don't print any then, over time, the currency is bound to get more and more valuable. That's because we are ...
This strongly depends on what you think makes a financial system healthy.
As long as there is no challenge to the core of Bitcoin, distributed no third party controlled transactions, there is no need to worry about any of the technical aspects. Stakeholders are the major problem here, the hashrate distribution being the clearest example. Stakeholder power ...
There is currently no ETF that allows the trading of bitcoins. The idea of a bitcoin ETF has been suggested before, however nobody has set one up as of yet. The main reason being that to do so would be very complex, requiring a large amount of money and legal advice.
As far as I know, there is no such ETF as of today. However, the recent spike is likely to spark even more the interest of the best ETFs issuers out there (Vanguard, iShares...).
It is not complex at all, actually it would be very cheap compared to setting up traditional ETFs. The fund would just have to keep bitcoins in an offline wallet held in a secure ...
42 is the Answer to Life, the Universe, and Everything.
Bitcoin block rewards are cut in half every 4 years. Half of 42 is 21.
Nearly every person can understand what x "million" means, but comprehension breaks down rapidly with larger numbers.
Therefore 21 million.
I suspect it has something to do with the M1 USD supply at the time Satoshi was developing Bitcoin. If you look at the decade prior to the white paper, inclusive of the quantitative easing period commencing with the 2008 housing bubble, the M1 money supply shows a trendline with a slope of ~58, using years as 4 digit integers. This means, that if ...
This was done based on production rate mostly. They did take some things into account but the number doesn't have a real economical explanation rather than the fact that they had to stop production somewhere to maintain a value.
In layman terms:
The 21M limit is programmed into all Bitcoin software
The number is arbitrary. It could have been 42 million, or 84 million, or 100 million, or any other number.
Now the number cannot be changed. If you changed your version of Bitcoin to follow a different limit, you would be creating a new currency. Example: Litecoin has a 84M limit.
It is an arbitrary decision made at the initial creation of the currency and is hard coded (literally) into the software. If there is a disagreement on the validity of the number of coins created, it is ignored by most clients. The agreement is a core part of the network and won't be modified in the near future because it can't be without the agreement of ...
Bitcoin itself has no returns: 1 Bitcoin is worth 1 Bitcoin, always. Presumably you actually want to discuss the returns of a Bitcoin plus ordinary currency pair, such as BTC/USD. In that case you'd would treat it the same as you would treat any other asset trading against USD and use some presumed near zero risk bond rate, like US treasuries, in your ...
Normally, ETFs define a "Creation Units" (CU), for which they are exchangeable electronically with the ETF administrator. If the size isn't be practical for a retail investor, then the value of any discrepancy is eventually captured by HFT arbitrageurs, thus forcing the prices into alignment. This tends to be very effective in keeping the prices within ...
You don't get the bitcoins themselves. Your investment fluctuates in response to the exchange rate. From the brothers W:
The investment objective of the Trust is for the Shares to reflect the
*performance* of a weighted average price of Bitcoins, less the Trust’s
In other words, if the average exchange rate USD/BTC is $230, and you buy $...
Look at the backgrounds of the top Bitcoin core devs.
Here are the top 3:
Wladimir J. van der LaanUniversity of Groningen
Institute for Mathematics and Computing Science (IWI)
Pieter Wuillecomputer science degree at U. of Leuven
Gavin AndresenBachelor's degree in computer science from Princeton
Generally, Bitcoin is a poor fit for the needs of most financial institutions. They want features which are incompatible with Bitcoin, or require unsupported workarounds:
Holding local currencies.
Keeping transaction information secret from the public, but available to regulators.
The ability to kick others off of their platform if ...
Financial experts do not hate Bitcoin. Some might hate Bitcoin -for several reasons including a conflict of interest as you suggested, but not all of them.
There are countless financial experts in the world including founders and investors in Bitcoin based businesses. Just do some more in depth research and you'll find them.
I looked at that page you ...
Lots of people that we know about and probably many more that we don't know about are developing a diversity of financial instruments for bitcoin. What instruments exactly will depend on your definition of instrument.
Here is an interesting one:
An effort to stabilize the bitcoin price by pegging a token backed by a basket of commodities to it.
If someone tries to pay you in cash, you run some basic validity tests on the cash before you accept it as payment. If the bills are just blank pieces of paper, you don't accept them. If they say "ten dollars" in magic marker on white paper, you don't accept them.
Bitcoins past 21 million are obviously not valid currency because that's what the rules say. ...
As for now (years after this question was published), there are metrics discussed and published on several sites trying to achieve that. Basically you would be googling for "fundamental analysis" metrics. Because searching for the health of the underlying product to the traded asset is basically fundamental analysis common in other spheres of trading and it ...
The Velocity and Dormancy of Bitcoin. It contains important observations and links to a research paper.
See also the comment I added to the bottom of that blog article, which should appear if the owner of that blog accepts my comment, which is quoted below.
You assume that only “change” needs to be removed from the total of
transactions when computing ...