BitcoinMadeClear

What do Bitcoin units and supply mean?

A bitcoin can be divided into smaller amounts. The supply rules limit new creation, but neither divisibility nor a supply cap promises a market price.

Updated

Jump to a question

What will you learn?

  • Separate units, supply and market value.
  • Explain what the halving changes.
What do Bitcoin units and supply mean?Units: How an amount is written. Supply rules: What new creation is allowed. Market value: What people offer in exchange.UnitsHow an amount is writtenSupply rulesWhat new creation is allowedMarket valueWhat people offer in exchange
Units: How an amount is written. Supply rules: What new creation is allowed. Market value: What people offer in exchange.

What is the idea?

A bitcoin is a unit, and a payment can use a fraction of that unit. A small unit is called a satoshi. You do not need to own a whole bitcoin to understand or use an amount written in bitcoin.

Under Bitcoin's current rules, the total supply cap is 21 million BTC. Checking computers reject blocks that create more than the rules allow. This is a rule about creation, rather than an account balance or an exchange quote.

An accepted mining block can claim a new-coin subsidy and transaction fees. A halving cuts the new-coin subsidy in half. It does not divide existing balances, and it does not halve fees by that rule.

The market price is what people are willing to exchange for bitcoin. Demand can change even when the supply rules stay the same. A limit on creation does not guarantee a buyer, acceptance at a shop or a minimum value.

Can you picture an example?

Imagine a wallet balance stays the same while an exchange quote changes. You still have the same amount of bitcoin, while the quoted value in dollars differs. The halving itself does not take away part of your balance.

What do you remember?

Choose an answer for each question, then check your answers. You can try again. Your choices are not sent or stored by the quiz.

1. Must you use a whole bitcoin?
2. What does the supply cap describe?
3. What does a halving reduce?
4. Does limited supply guarantee value?
5. What is a satoshi?

Read the answers and explanations
  1. No, amounts can be fractional. Bitcoin can be divided into smaller amounts.
  2. The permitted supply under the rules. The supply cap limits creation under the current rules.
  3. The new-coin subsidy. The halving reduces new bitcoin allowed in a block, rather than existing balances.
  4. No. Supply and demand are different questions, and the cap promises no price.
  5. A small unit of bitcoin. Satoshi is the name for a small Bitcoin unit.
Sources