Lost Sats and Bitcoin’s True Max: A Formula Worth Remembering

Bitcoin’s widely known supply cap of 21 million has long been regarded as one of its defining features. But here’s the twist: the actual maximum supply of Bitcoin isn’t exactly 21 million. Instead, it is 20,999,999.9769 BTC. This fractional difference may seem negligible, but it holds a fascinating story about Bitcoin’s precise design and mathematical limitations.

This discrepancy arises from Bitcoin’s divisibility and the halving process that governs its block rewards. With each halving, the reward is reduced by half, eventually reaching amounts that cannot be further split due to Bitcoin’s eight-decimal precision. When the block reward drops below one satoshi (0.00000001 BTC), the protocol discards these fractions, as Bitcoin’s smallest unit cannot be divided further. This tiny discard, repeated over every halving cycle, adds up, resulting in a slight shortfall from the anticipated 21 million.

To understand the exact mechanics behind this, consider the formula that determines Bitcoin’s true maximum supply:

Image

This formula calculates the total supply by summing the rewards from all blocks, accounting for the halving schedule. Here’s how it works:

  •  represents the initial block reward of 50 BTC, expressed in satoshis (5 billion).
  •  reflects the halving process, where  is the halving index (from 0 to 32).
  •  is the total number of blocks mined between halvings.
  • The floor function  truncates any fractional satoshis that cannot exist within Bitcoin’s divisibility constraints.

The result of this summation is the exact maximum supply: 20,999,999.9769 BTC. The discrepancy arises from the floor function, which removes fractional satoshis during the halving process. Over time, 2,310,000 satoshis are effectively lost to this truncation.

This nuanced detail highlights the meticulous thought that went into Bitcoin’s creation. Rather than seeing the discrepancy as a flaw, it’s a testament to the elegance of the protocol. The use of the floor function ensures Bitcoin adheres strictly to its divisibility rules, maintaining the integrity of the system even as rewards diminish.

Bitcoin’s design is guided by mathematical precision, where every element serves a purpose. The maximum supply formula reflects this, encapsulating the protocol’s commitment to rules that are immutable and transparent. It’s a stark contrast to traditional financial systems, where discretion and ambiguity often leave room for manipulation.

The concept of scarcity is central to Bitcoin’s value proposition. Whether it’s the oft-quoted 21 million or the more precise 20,999,999.9769 BTC, the takeaway remains the same: Bitcoin’s supply is capped. This limit ensures that no more coins can be created beyond the predefined schedule, making Bitcoin a deflationary asset. As demand grows and the issuance rate decreases, the scarcity dynamic becomes even more pronounced, adding to its appeal as “digital gold.”

The story of Bitcoin’s maximum supply is more than just a mathematical curiosity. It’s a reflection of the protocol’s decentralised and trustless nature. In Bitcoin, every rule is encoded, leaving no room for human interference. The halving schedule, the floor function, and the resulting loss of fractional sats are all baked into the code, ensuring the system operates predictably and transparently.

For enthusiasts, the slight shortfall from 21 million is a badge of honour for the protocol’s precision. It serves as a reminder that Bitcoin is not just a financial asset but a technological innovation. The formula encapsulates the balance between theoretical concepts and practical limitations, creating a system that is both robust and elegant.

As the world continues to grapple with economic uncertainty, Bitcoin’s fixed supply stands out as a beacon of stability. While the exact figure may be 20,999,999.9769, the principle it represents remains unshaken. In a world of inflationary currencies and unpredictable monetary policies, Bitcoin offers something rare: predictability and scarcity.

So the next time someone quotes Bitcoin’s maximum supply as 21 million, you’ll know the real story. The fractional sats that were lost along the way are a small price to pay for the mathematical beauty of Bitcoin’s protocol—a design where even the smallest details reflect its unwavering commitment to precision.

Special thanks to Bob Bodily, whose insightful tweet sparked the creation of this article. His explanation brings to light the fascinating intricacies behind Bitcoin’s design.

Subscribe

Related articles

ODINDOG Takes a Bite Out of the Bitcoin Blockchain

ODINDOG, the latest digital asset to grab the spotlight,...

Dominic Williams on ICP: The Crypto Network Redefining Blockchain Utility

Dominic Williams recently posed a thought-provoking question on X:...

Runes DEX Brings DeFi Directly to Bitcoin

Runes Exchange Environment & Richswap have officially launched, marking...
Maria Irene
Maria Irenehttp://ledgerlife.io/
Maria Irene is a multi-faceted journalist with a focus on various domains including Cryptocurrency, NFTs, Real Estate, Energy, and Macroeconomics. With over a year of experience, she has produced an array of video content, news stories, and in-depth analyses. Her journalistic endeavours also involve a detailed exploration of the Australia-India partnership, pinpointing avenues for mutual collaboration. In addition to her work in journalism, Maria crafts easily digestible financial content for a specialised platform, demystifying complex economic theories for the layperson. She holds a strong belief that journalism should go beyond mere reporting; it should instigate meaningful discussions and effect change by spotlighting vital global issues. Committed to enriching public discourse, Maria aims to keep her audience not just well-informed, but also actively engaged across various platforms, encouraging them to partake in crucial global conversations.

LEAVE A REPLY

Please enter your comment!
Please enter your name here