Milestone - Seven Million Bitcoins Issued
When block 140,000 was generated recently, Bitcoin moved into a new phase. In a little over thirty months the issuance of the “early third” of all Bitcoins that will ever exist is now complete and behind us.
While this milestone is simply a psychological threshold, we are approaching another milestone — one that the Bitcoin source code specifically targets. After 10.5 million Bitcoins are issued — an event that will likely occur in the later half of 2012, the block reward will drop from 50 BTC per block to 25.
Once that happens, that pace of issuance will be sustained for about another four years, and then issuance will slow even further, to 12.5 BTC per block. And on and on, until the last of the nearly 21 million BTC has been issued.
That upcoming late-2012 milestone will start becoming more significant for those mining. The fact that mining proceeds (in terms of BTC issued per day) will in the not-too-distant future be cut in half is something that will likely start weighing with miners who are considering adding mining capacity and wondering if taking that action is worth the risk.
Those considering the outlook for the Bitcoin exchange rate will consider this milestone as well. Right now, Bitcoin currency is inflating at an annual rate about 37.5%. That rate is slowing. At the beginning of this year when just over 5 million BTC were issued the currency at the time was being inflated at an annual rate of about 52.5%.
When that last block of 50 BTC is generated, the rate of currency inflation will by that time be down to an annual rate of 25%. That rate will then drop immediately to a 12.5% annual rate and then will decline gradually again thereafter for the next four years.
While there is no shortage of economists who deride Bitcoin for its architecture based on scarcity, their arguments generally do not weigh bitcoin on where its real value lies: Bitcoin is the least expensive method for transmitting funds where those transfers cannot be reversed and the recipient has the ability to spend the funds within minutes after the transaction was made.
Until a real Bitcoin economy exists, exchanges are necessary as a bridge to get us to that future point in time. The latest problems through which Bitcoin is currently suffering come at the hands of immature and fraudulent exchanges and services but those are giving way to organizations that offer better security and provide a more professional user experience. Additionally, some of the same innovations that bring benefit to our primary financial markets are making their way to Bitcoin as well.
Now that Bitcoin is a known entity and the panic buying seen two months ago, followed by the panic selling in the weeks since are now behind us Bitcoin can resume its ascent towards becoming a widely used and preferred currency.
Innovation requires time to incubate and some more time is required for these innovations to reach the right targets. Because bitcoin is an open system and attracts a mass of collaborators globally, it is not far-fetched to believe that these seven million bitcoins and fragments thereof will become well used as each of these innovations increase bitcoin adoption futher.