Barring an unforeseen event, the 17 millionth bitcoin is likely to be mined in the coming day, data from Blockchain.info shows, a development that would mark yet another milestone for the world’s first cryptocurrency. That’s because as per bitcoin’s current rules, only 21 million bitcoin can ever be created.
Stepping back, the milestone, the first million-bitcoin marker to be crossed since mid-2016, is perhaps noteworthy as yet another reminder of the technology’s core computer science achievement – digital scarcity created and enabled by shared software.
In short, bitcoin’s code, since cloned and adapted by scores of other upstart cryptocurrencies, ensures that only a set number of new bitcoins are introduced to its economy at intervals. Miners, or those who operate the hardware necessary to track bitcoin’s transaction set, are rewarded with this scarce data every time they add new entries to the official record.
Others see the milestone as one that’s ripe for appreciation of the technology and its achievements.
“I think it is awesome,” Tim Draper, the venture capitalist who bought millions of dollars worth of bitcoin seized by the U.S. government at auction in 2014, said of the coming milestone.
He told CoinDesk:
“I would bet the founders wouldn’t have imagined how important bitcoin would become in their wildest dreams.”
Way with words
Others sought to suggest the milestone is one that should be considered as an opportunity for education about both the features of bitcoin, and those of cryptocurrencies broadly.
For example, unless all of the humans who operate the computers running the bitcoin software decide to make a change (a perhaps unlikely scenario today), there’s really no way to ever introduce more new bitcoin. This achievement, a technical reality, has played a key role in bitcoin’s association with money, economics and other scarce, naturally occurring assets.
In this way, the goldbugs and readers of Austrian economics who piled into bitcoin early on were quick to realize the value of the feature, perhaps giving rise to the term “cryptocurrency” itself.
Trace Mayer, one of this group’s most vocal members, summed up the philosophy in a recent tweet, in which he argued governments might seek to prevent users from holding bitcoin in the future.
“Increasing money supply is a means to confiscate through inflation which is a form of taxation without representation or due process of law,” he wrote.
Even the new way new bitcoins come into being, called “mining,” is a nod to the gold analogy.
Rather than being issued by a central bank, bitcoin is created by a network through the work of maintaining the blockchain. When a miner finds a valid hash for recent transactions, solving the bitcoin protocol’s puzzle, he or she is rewarded with a “coinbase transaction,” bitcoin credited to her account.
A little bit of cryptocurrency is created and deducted from the final supply.
The bitcoin supply curve
How participants have been rewarded has, of course, changed over time.
When bitcoin’s founder Satoshi Nakamoto mined the first bitcoin block on Jan. 3, 2009, he created the first 50 bitcoins. This reward stayed the same for another 209,999 blocks, when the first “halvening,” or reduction in rewards, took place.
It didn’t come as a surprise. Every 210,000 blocks, according to a hard-coded schedule, the network reduces the block reward by 50 percent. Following the most recent halvening, in July 2016, the reward is 12.5 bitcoin.
That means that while there are only 4 million bitcoin left to mine, the network will not reach its final supply in anything like the nine years it’s taken to get this far. As the halvenings halven, the rate of monetary inflation – supply growth – slows.
BashCo, a pseudonymous moderator on the r/bitcoin subreddit, has plotted the trajectory of bitcoin’s total supply (blue curve) against its rate of monetary inflation (orange line).
Assuming the bitcoin protocol remains the same (a new block is mined every 10 minutes on average and the halving schedule and supply cap are unchanged), the last new bitcoin will not be mined until May 2140.
The next 120 years
With this in mind, the chart hints at another common talking point when acknowledging the milestone – that bitcoin is programmed to run for a very long time.
Jameson Lopp, lead infrastructure engineer at wallet provider Casa, was quick to remind CoinDesk that bitcoins are divisible, and that as such, the smallest parts of each bitcoin can hold seemingly infinite value.
“While 17 million BTC may sound like a lot, it’s incredibly scarce – there won’t even be enough for every current millionaire to own a whole bitcoin. Thankfully, each bitcoin is divisible into 100 million satoshis, thus there will always be plenty to go around!”
But there are other quirks to the software as well.
For one, bitcoin will never actually reach 21 million units, as barring a protocol change, the total supply will fall short by at least one satoshi. That’s because on May 17, 2011, the miner “midnightmagic” – for reasons that remain unlear – claimed a 49.99999999 block reward, rather than an even 50.
Further, to be clear, bitcoin does not stop running when 21 million bitcoin are produced. At that point, the idea is that miners would be compensated purely through the fees, which they already collect. (Though some scientists have sought to project whether such a market would work in practice).
With so many questions left unanswered, if anything, the event serves as yet another reminder of how far bitcoin has come, and just how far it has to go.
In the words of long-time developer Adam Back:
“Another million down four more to go.”
$10,000 Bitcoin Will One Day Be Considered Cheap
As Bitcoin becomes more scarce and as investor interest continues to grow we could see the price of Bitcoin skyrocket. A recent Thompson Reuters survey shows 1 in 5 investment firms are said to be considering trading cryptocurrency, JP Morgan and several banks are scrambling to set up cryptocurrency trading after Goldman Sachs announced it is setting up a crypto trading desk, and just this week the Nasdaq CEO Blesses Cryptocurrency, as Investors See Bigger Future For Bitcoin & cryptocurrencies.
There is also said to be a wall of institutional capital waiting to enter. George Soros has announced his plan to trade cryptocurrency around the same time the Rothchilds & Rockefellers announced they would soon be trading digital assets.
More investors are taking it seriously and using it as a portfolio diversifier.
There has seen a fundamental shift in the types of investors interested in Bitcoin. For the last few years, it’s mostly been ultra high-net-worth individuals, family offices and smaller institutions or tech-type investors who can more easily wrap their head around Bitcoin.
“What we’re starting to experience now is unprecedented interest from the financial advisor community as they are seeing a tremendous increase in the fielding of questions and inquiries from their clients and their clients’ children and relatives about Bitcoin — should this be something that they are looking at to invest?”
As previously mentioned, there has been a huge uptake in institutional interest due to heavy-hitting financial institutions investing in this space.
“When people start seeing the Visas and MasterCards and the American Expresses of the world beginning to get involved with Bitcoin and blockchain technology, it suddenly wakes up in a lot of people that this is something they too should be looking at,”
In addition, people who have been affected by global market gyrations in China or Greece are turning to digital currency as another portfolio diversifier.
BlockWealth Capital CEO Matt Siebenthal, cautioned hedge funds opening doors in 2017, calling for a possible correction to 7500 or lower before resuming it’s bull run has stated “the institutionalization of this space is coming, and it’s coming quickly.”
The revolutionary nature of blockchain technology coupled with it’s potentially infinite use cases have been what’s driving a lot of the hype over the past year. Industry veterans have stated that in 2018- utility tokens and assets with working platforms, requiring both a blockchain and their own token, are more likely to appreciate in value.
Ronnie Moas of Standpoint Research makes an excellent point: “there is $200 trillion that is currently invested in global capital markets today, including all major asset classes: cash, stocks, bonds and gold.” Moas, who also does traditional equity analysis, begins his market breakdown with stocks, which he believes are currently overvalued.
According to Moas, three-quarters of the names in the S&P 500 are trading at least 18 times earnings, which is higher than his value threshold of 12 times earnings. He also adds that we haven’t had a stock market correction in 20 months.
On the currency front, the U.S. dollar is currently losing 1 to 2 percent per year due to inflation. Moas also points out that the dollar has lost half its value since he was in high school 35 years ago.
From a global perspective, where most people don’t have access to U.S. dollars, Moas believes the case for cryptocurrency is even more compelling:
“Now, imagine what they think of their own local currencies elsewhere in the world. Imagine you live in Venezuela and you’re keeping your money under the mattress. Would you rather leave it there in Venezuelan bolivar or would you rather put it in bitcoin? It’s not going to take you very long to make that decision.”
Breaking his thesis down further, Moas believes that a conservative estimate is that at least 1 percent of the $200 trillion now tied up in stocks, cash, gold and bonds will migrate into cryptocurrencies over the next decade.
In that case, he says, “Bitcoin could end up with a market capitalization that is more than Amazon and Apple combined.”
Under this scenario, that would mean that the current market capitalization of all cryptocurrencies would naturally grow.
And if Moas’s market capitalization targets are correct, investors would then receive a 1,250 percent return on their cryptocurrency investments made today.
But he adds one major caveat to that prediction. Simply, “You’ve got to be in the right names.”
He went on to add that while there are certainly risks involved in investing in cryptocurrency, those risks are, in his view, outweighed by the possibility of 10-to-one or 20-to-one payout to the upside experienced by tech stocks.
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