Recently, I’ve seen people compare Bitcoin to digital gold again, and the analogy is actually quite fitting. When you think about it carefully, Bitcoin and gold really do have something in common—both have a value-preserving function because of scarcity. But Bitcoin’s scarcity is written into the code, which makes it even more remarkable.

Bitcoin’s total supply is permanently capped at 21 million coins. This is not some marketing slogan; it’s a hard limit explicitly set by the founder, Satoshi Nakamoto, in the white paper. Why that number? There’s actually a clever piece of mathematical logic behind it. Satoshi designed a mechanism that decays in a geometric series: every time 210,000 blocks are mined (about every 4 years), the bitcoin reward for new blocks is cut in half.

At first, each block paid a reward of 50 bitcoins, producing 10.5 million coins in the first four years. Then the reward became 25, then 12.5, then 6.25… Following this sequence, the limit converges to 21 million. This is why Bitcoin will never exceed 21 million—it’s locked in by the mathematical convergence of an infinite series.

Speaking of halving, several of these events have already taken place over the years. The first halving was in 2012, the second in 2016, the third in 2020, and by spring 2024 the fourth halving arrived, with the reward falling from 6.25 BTC to 3.125 BTC. This cycle happens roughly every 4 years, and it has a fairly significant impact on the market.

So why does Bitcoin have to be produced through mining? This comes down to the blockchain’s decentralized design. Bitcoin has no central bank and no central server. All transaction records are distributed across countless nodes. To ensure the system is secure and trustworthy, someone must verify and record every transaction—this work falls to miners.

Miners’ job is essentially to take part in a computational contest. They continuously try to solve complex hash algorithm puzzles (also called proof of work). Whoever first finds an answer that meets the protocol’s requirements earns the reward for the new block—including newly issued bitcoins and transaction fees. It’s this incentive mechanism that keeps the entire blockchain network running securely and smoothly, while also ensuring that Bitcoin’s supply gradually decreases according to the planned schedule.

In addition to the total supply limit, Bitcoin also has an interesting unit system. The smallest unit is called “satoshi,” named after its founder, Satoshi Nakamoto. From largest to smallest, they are: Bitcoin (BTC), Bitcent (0.01 BTC), Millibit (0.001 BTC), Microbit (0.000001 BTC), satoshi (0.00000001 BTC). Although most people today mainly focus on the BTC price in whole units, this unit design is actually quite thoughtful and leaves room for future broad applications.

The brilliance of this design is that it uses mathematics and cryptography to ensure Bitcoin’s scarcity can never be changed. No country, institution, or individual can increase Bitcoin’s supply—this is the real reason it’s called digital gold.