The limited coin supply of Bitcoin (BTCUSD) is one of its main features. The designers of the Bitcoin cryptocurrency created the cryptocurrency essentially as digital gold and set a limitation on its supply to delimit equal-sign of the limited amount of real gold.
21 million is the most bitcoins that can be issued or mined. The average time it takes to create a new block of Bitcoin is 10 minutes, thus fresh bitcoins are added to the supply of the cryptocurrency every so often. By design, after every 210,000 blocks, or roughly every four years, the number of bitcoins created every block is cut by 50%.
Do you think there will ever be 21 million bitcoins?
There won’t likely be 21 million bitcoins issued in total. Because the Bitcoin network employs bit-shift operators, which round some decimal points to the nearest lowest integer, this is the case.
When the block reward for creating a new Bitcoin block is divided in half and the amount of the new reward is determined, this rounding down may take place. One satoshi, which is equivalent to 0.00000001 bitcoins, can be used to represent this prize. A satoshi cannot be split in half because it is the smallest unit of measurement in the Bitcoin network. The Bitcoin network is configured to round down to the nearest whole integer when asked to divide a satoshi in half to determine a new reward amount. The overall number of bitcoins issued is anticipated to be a little under 21 million due to the systematic rounding down of Bitcoin block rewards, in fractions of satoshis.
The last bitcoin is anticipated to be created in the year 2140, with the number of new bitcoins produced every block dropping by half roughly every four years. When Bitcoin was first created, each block contained 50 new bitcoins, but as of May 2020, that amount had dropped to 6.25.
Although there is a cap of 21 million coins that can be created, the actual number of bitcoins in circulation is probably much lower. Owners of bitcoins may lose access to their funds for a variety of reasons, such as misplacing the private keys to their bitcoin wallets or dying without disclosing the password to their wallet. Up to 20% of the Bitcoin that has already been issued, according to a Chainalysis analysis from June 2020, may be permanently lost.
What Takes Place When the Entire 21 Million Bitcoins Are Mined?
No new bitcoins will be created after the maximum number of bitcoins has been achieved, even if that number ultimately falls slightly below 21 million. Bitcoin miners will still be compensated, but probably simply with transaction processing fees, for continuing to pool and process bitcoin transactions into blocks.
Bitcoin miners will undoubtedly be impacted when Bitcoin reaches its upper supply limit, but how much will depend on how Bitcoin develops as a cryptocurrency. Bitcoin miners might still be able to make money solely from transaction processing fees in 2140 if the Bitcoin blockchain handles a large volume of transactions.
Even with low transaction volumes and the elimination of block rewards, miners can still make money if Bitcoin in 2140 primarily serves as a store of value rather than for everyday purchases. In order to process high-value transactions or big batches of transactions, miners can impose significant transaction fees. More effective “layer 2” blockchains, such as the Lightning Network, work in tandem with the Bitcoin blockchain to make it easier for users to use bitcoin on a daily basis.
But if Bitcoin mining stops being consistently profitable in the absence of block rewards, various undesirable events could happen:
- Miners may band together to dominate mining resources and demand greater transaction fees, forming cartels.
- Selfish mining takes place when miners join together to conceal newly created valid blocks and then release them as orphan blocks that have not been verified by the Bitcoin network. This method can lengthen the time it takes to process a block and guarantee that hefty fees are charged when additional blocks are eventually added to the network.
In the year 2140, would Bitcoin behave like cash or gold bars? Because of the ongoing development of the Bitcoin ecosystem, it is feasible, if not likely, that Bitcoin will continue to change over the ensuing decades. No new bitcoins will be created after the 21 million coin cap is met, regardless of how Bitcoin develops. The majority of the effects of reaching this supply limit are probably going to be felt by Bitcoin miners, but it’s also feasible that Bitcoin investors could suffer adverse effects.