Only 21 million bitcoins can be mined. Find out what happens when all bitcoins are mined.
Bitcoin remains a popular cryptocurrency even today, and a large number of investors use it as their cash machine all over the world. However, due to its deflationary nature, a coin can be mined only in limited quantities.
Yes, only 21 million bitcoins can be mined, and this limit often initiates a new debate about what will happen when all bitcoins are mined. Before we dive into the details, let's first see where we are today.
On January 13, 2018, the Bitcoin ecosystem became a landmark, as the total number of mined bitcoins reached 16.8 million. This milestone really was of great importance, as it translated into 80 percent of the total number of bitcoins mined to date. According to forecasts, due to the fact that only 20 percent of mining is left, by 2040, miners will be able to reach the 21 million hard border.
So, the question again arises, what will happen next? Can bitcoin ecosystem survive afterwards? Will it still be beneficial for miners?
Before we get the answers, let's first find out how bitcoin mining actually works.
How Bitcoin mining works
Bitcoin mining is a hashing process in which computers are used to solve complex algorithms. With each successful solution, a new block of certain transactions is created, and also added to the blockchain. The blockchain is actually a public record that transfers all bitcoin transactions.
When Bitcoin transactions occur, they are first transmitted over the network, and then added to the blockchain through miners. Thus, the hashing process plays a crucial role in deciding which particular transactions will receive priority, since all transactions cannot fit in one block. If the mining process is stopped, the entire system may crash.
To compensate for the efforts made by miners, they are awarded new Bitcoins. In addition, miners also receive a certain transaction fee for all transactions confirmed by them in their particular block. This means that miners get paid twice:
Bitcoin remains a popular cryptocurrency even today, and a large number of investors use it as their cash machine all over the world. However, due to its deflationary nature, a coin can be mined only in limited quantities.
Yes, only 21 million bitcoins can be mined, and this limit often initiates a new debate about what will happen when all bitcoins are mined. Before we dive into the details, let's first see where we are today.
On January 13, 2018, the Bitcoin ecosystem became a landmark, as the total number of mined bitcoins reached 16.8 million. This milestone really was of great importance, as it translated into 80 percent of the total number of bitcoins mined to date. According to forecasts, due to the fact that only 20 percent of mining is left, by 2040, miners will be able to reach the 21 million hard border.
So, the question again arises, what will happen next? Can bitcoin ecosystem survive afterwards? Will it still be beneficial for miners?
Before we get the answers, let's first find out how bitcoin mining actually works.
How Bitcoin mining works
Bitcoin mining is a hashing process in which computers are used to solve complex algorithms. With each successful solution, a new block of certain transactions is created, and also added to the blockchain. The blockchain is actually a public record that transfers all bitcoin transactions.
When Bitcoin transactions occur, they are first transmitted over the network, and then added to the blockchain through miners. Thus, the hashing process plays a crucial role in deciding which particular transactions will receive priority, since all transactions cannot fit in one block. If the mining process is stopped, the entire system may crash.
To compensate for the efforts made by miners, they are awarded new Bitcoins. In addition, miners also receive a certain transaction fee for all transactions confirmed by them in their particular block. This means that miners get paid twice:
- One day with new bitcoins
- Once with a transaction fee
The process seems rather smooth and easy until it passes. Interestingly, there is a certain limit on the total number of mined bitcoins, and this raises questions that we talked about earlier in the introduction. So let's try to figure out some answers.
How mining of all 21 million bitcoins will affect miners?
It is likely that the direct impact of the bitcoin supply limit reached will be on the miners themselves. According to critics, as soon as we get the latest bitcoin, miners will no longer be able to get block rewards for all the work they do. And, if this happens, the miners may need to rely on fees for maintaining their operations.
There is an argument in favor of the fact that miners will find all this inaccessible and, therefore, only a few miners will remain. This argument is based on the assumption that transaction fees alone will not be sufficient to preserve the financial viability of miners after the mining process is completed. However, in the future it is possible that the costs of mining and transaction fees will be breakeven.
It is easy to imagine that mining chips will get high performance, as we will go several decades ahead. As a result, the burden on miners will be significantly reduced, which will allow mining at a low initial cost. In addition, it can be expected that the transaction fee will increase, which will facilitate the survival of the miners.
How it will affect the price of Bitcoin
There have already been several cases where the price of Bitcoin so sharply rose to see their highs in a few months. Although no one can be sure how exactly the cryptocurrency will continue to spread on a larger financial market, it seems that the limited supply of currency will lead to the fact that its prices will continue to grow.
In addition, piles of inactive coins are stored all over the world. And the maximum number of such coins belongs to Satoshi Nakamoto, the man who actually founded Bitcoin.
It was probably deliberately preserved for the time of the global surge in demand.
How can Bitcoin survive after all bitcoins are mined?
Well, in principle, there are three key pillars that, as you might expect, will keep the Bitcoin ecosystem working as soon as we get the latest bitcoin, and the Bitcoin offer will reach its maximum limit. All of them are described below, along with how they can help preserve the functioning of the ecosystem.
1. Transaction fees
Miners who are part of the Bitcoin network are paid not only for mining new blocks, but also for confirming transactions. Anyone interested in a Bitcoin transaction is required to pay a specific transaction fee. In addition, when someone is interested in making quick transactions when skipping queues, he must also incur additional costs.
As the Bitcoin network continues to gain popularity, we are also seeing an increase in these fees. Although they are far behind the hash rewards, we can expect them to grow over time. Thus, we can expect that in the future, transaction fees will grow enough for the miners to remain in the Bitcoin network and for the network to continue to flourish.
2. Cost Bitcoin
In the ideal scenario, there should be a significant increase in the value of Bitcoin. In fact, this will be the only option when transaction fees are a sufficient incentive for miners. And interestingly, the structure of Bitcoin is such that its value continues to grow, regardless of how many bitcoins were mined and how many of them remained.
With a limited supply of currency is guaranteed that its demand increases, and with increasing demand, the cost increases automatically. An increase in the value of the currency, in turn, will increase the fees that miners can receive. In addition, with the high cost of bitcoins, users will always be willing to pay more for prompt confirmation of their transactions.
3. Mining costs
It is also possible that as technology develops in the future, we can significantly reduce production costs. And, when this happens, it will also lead to a significant reduction in the investments that miners must make for trading. At lower operating costs, even lower remuneration than now will be very acceptable, since a higher return on investment will still make the business profitable.
In conclusion, it should be said that in fact there are several ways in which the mining of bitcoins can remain profitable, even if the total number of mined bitcoins reaches 21 million, and the reward for the block will no longer be. Since the reward for the block will gradually decrease with time, miners will have enough time to adjust to the dependence on the transaction fee, and not on the income received from their mined coins.
