What will happen to bitcoin when mining 21 million bitcoins?
An important question that many insiders have about the technical details of bitcoin and how it is limited to only 21 million coins, meaning when all bitcoins are mined and mined, it cannot be created above the limit set at 21 million bitcoins.
What will happen to bitcoin when 21 million bitcoins are mined
Bitcoin is the first digital asset in history to experience absolute mathematical scarcity. This rarity can be verified by any member of the network and is regulated by an algorithm in the bitcoin source code. This algorithm allows miners who create blocks to receive newly minted bitcoin. This support helps miners to cover the high costs of mining.
Every four years, the algorithm cuts the subsidy in half in an event called halving and splits the reward. This process will continue until about 2140, when the flow of new bitcoin from one Satoshi per block will decrease to zero. When the miner's bonus split occurs, the miner's revenue is almost halved as a result.
As with any industry, a 50% loss of revenue can force a company to go out of business. And in the case of bitcoin, mining directly provides security to the network, so the flight of miners from the network can endanger the bitcoin security model. That is, given the trend of Block support towards zero, bitcoin skeptics believe that a decrease in mining revenue may lead to a decrease in security and devaluation of bitcoin itself. Skeptics also expressed fears of currency deflation.
With bitcoin's inflation rate constantly falling, some economists have claimed that there will never be enough bitcoin to establish a monetary system, and that bitcoin will never support retail payments. But this scarcity and limitation of bitcoin is significant and has made many people compare bitcoin with gold for various reasons. Since bitcoin is like gold, people cannot create this digital currency arbitrarily. Instead, they have to extract it or work hard to earn it. People could extract gold from the Earth. While to mine bitcoin, miners need to use computational means to mine this digital currency.
Satoshi Nakamoto put a condition for bitcoin in the source code. The creator of this cryptocurrency stipulated that its supply should be limited and each period a limited part is extracted from it, that is, it is limited in time. Therefore, miners will produce only 21 million bitcoins.
It is worth noting that miners receive their rewards from bitcoins in each block, the extraction of which takes ten minutes. In addition, as we noted earlier, the number of bitcoins that miners receive as a reward for these blocks decreases by half every four years.
Limited supply of bitcoin
As previously hinted, miners can produce only 21 million bitcoins. After that, they will have exhausted the maximum bitcoin supply. However, there is a possibility to change the Bitcoin protocol, but this will happen only with the consent of most of the miners and the crypto community, and on the contrary, they see it as an advantage in bitcoin that distinguishes it from others and provides it with significant value.This is and many people wonder what will happen once the total supply of Bitcoin reaches its maximum.
Well, fans of cryptocurrencies consider this topic to be debatable. Currently, there are 18.8 million bitcoins in circulation in the world. This means that the miners have less than 3 million bitcoins left to extract. But although the world will have only 21 million bitcoins, some people died without sharing their key details with anyone.
Others have lost the private keys, and therefore cannot access their bitcoins. Thus, the world could have fewer than millions of bitcoins in circulation.
Bitcoin mining bonuses
Miners have produced 18.4 million bitcoins in the ten years since Satoshi Nakamoto introduced bitcoin. And since the miners have another 3 million bitcoins, this digital currency may be in the final stages of mining. And this may be true, although it is limited.
Although miners have produced the majority of this digital currency, its timeline is complicated. It rewards miners with a block of bitcoins as soon as each part of the transactions is verified. This process continues to adapt over time. During its launch, the network rewarded miners with 50 bitcoins. Then the network halved this bonus, that is, to 25 bitcoins in 2012. Then the halving happened again in 2016, with the two miners getting 12.5 bitcoins.
By 2020, miners are getting 6.25 bitcoins after mining each new block. Based on the value of bitcoin in October 2021, the mining bonus estimated at 6.25 bitcoins amounted to 395 thousand dollars. The halving process reduces the inflation rate of this digital currency by half every four years. The Bitcoin network will continue to halve the reward every four years until the miners create the final bitcoin.
It is unlikely that miners will mine the last bitcoin until about 2040. However, the Bitcoin network can change this protocol depending on how the cryptocurrency develops. However, the mining process rewards miners with new coins, in addition to benefiting from Bitcoin fees paid by bitcoin dealers.
The limited supply affected the miners:
The limited supply of bitcoin affects miners more than others. This is because instead of mining this digital currency, most people buy this cryptocurrency on platforms that provide it. Such platforms allow people to buy, sell or trade bitcoin using fiat money. However, this does not prevent some individuals and companies from mining bitcoin. Some critics argue that the network will force miners to move away from their block bonuses after reaching the level of 21 million bitcoins. But, miners are likely to verify transactions competitively and effectively even after the last bitcoin is produced. This is because every transaction comes with a transaction fee.
Although these fees represent a few dollars per block, they can increase to thousands of dollars as bitcoin transactions grow globally. In addition, the price of bitcoin continues to rise, however, how this will happen is a matter of time.