Bitcoin Economics and Currency Creation - Media Gust

Bitcoins are “minted” during the creation of each block at a fixed and diminishing rate. Each block, generated on average every 10 minutes, contains entirely new bitcoins, created from nothing. Every 210,000 blocks or approximately every four years the cur‐ rency issuance rate is decreased by 50%. For the first four years of operation of the network, each block contained 50 new bitcoin.

In November of 2012, the new bitcoin issuance rate was decreased to 25 bitcoin per block and it will decrease again to 12.5 bitcoin at block 420,000, which will be mined sometime in 2016. The rate of new coins decreases like this exponentially over 64 “halv‐ ings”, until block 13,230,000 (mined approximately in year 2137) when it reaches the minimum currency unit of 1 satoshi. Finally, after 13.44 million blocks, in approximately 2140, all 2,099,999,997,690,000 satoshis, or almost 21 million bitcoin will be issued.

Thereafter, blocks will contain no new bitcoin, and miners will be rewarded solely through the transaction fees. In the example code in Example 8-1, we calculate the total amount of bitcoin that will be issued: 

A script for calculating how much total bitcoin will be issued # Original block reward for miners was 50 BTC start_block_reward = 50 # 210000 is around every 4 years with a 10 minute block interval reward_interval = 210000 def max_money(): # 50 BTC = 50 0000 0000 Satoshis current_reward = 50 * 10**8 total = 0 while current_reward > 0: total += reward_interval * current_reward current_reward /= 2 return total print "Total BTC to ever be created:", max_money(), "Satoshis" Running the script: Example 8-2. Running the max_money.py script $ python max_money.py Total BTC to ever be created: 2099999997690000 Satoshis

The finite and diminishing issuance creates a fixed monetary supply that resists infla‐ tion. Unlike a fiat currency, which can be printed in infinite numbers by a central bank, bitcoin can never be inflated by printing..