Bitcoin

21 Million Bitcoin Limit: What Happens When All the Bitcoins Are Mined? | Bybit Learn

Bitcoin continues to gain ground and popularity. Just a year and a half ago, techies and pundits were optimistic about its future growth, but few expected bitcoin to take off like it did in 2021. The trend may still continue unabated. More than 19 million bitcoins have already been mined. This brings us to the most perplexing question: what happens when all the bitcoins are mined?

Considering there are less than 2 million bitcoins left, this is a real concern for everyone involved. here is an explanation of what happens when all the remaining bitcoins have been mined.

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How many bitcoins are left to mine?

As of June 2022, approximately 19.07 million bitcoins are in circulation. this means there are only 1.92 million bitcoins left to mine, and over 90% of all bitcoins have been mined.

When bitcoin’s inventor satoshi nakamoto created the virtual currency in 2008, the total supply of bitcoin was estimated at 21 million. One of the reasons for the bitcoin supply cap was to ensure an inflation-free currency. Since bitcoins are intended for transactional use, just like paper money, too many bitcoins in the market could lead to wild price swings.

With that in mind, the inventor stipulated a limit of 21 million bitcoins to control the supply and thus future price fluctuations.

One way to control the mechanism was to release bitcoins gradually, without overwhelming the market with all 21 million bitcoins at once. To do this, the bitcoin code was designed to allow only a fixed number of bitcoins to be mined each year until the limit of 21 million bitcoins is reached.

new bitcoins come into circulation when a new block is mined and added to the block chain, and this bitcoin mining is programmed with a difficulty algorithm that helps keep the entire system stable by maintaining a duration of 10 minutes to find new blocks. this difficulty is updated every 2016 blocks or approximately every two weeks, since the network itself will determine if the activities of the miners have increased or decreased, and readjusting the bitcoin mining difficulty to keep each block in approximately 10 minutes.

bitcoin halved

To ensure the gradual flow of bitcoins, Satoshi Nakamoto introduced the concept of halving. this mechanism halves the number of available bitcoins that enter circulation every three years and nine months. If the trend continues, it means almost all of the 21 million bitcoins will be mined by the end of 2078. In other words, there will be no more bitcoins to mine then.

There is some confusion around the exact date the total supply of bitcoins will end for those wondering what happens when all the bitcoins are mined. If you google the answer, the date of this event will most likely come up as 2040, rather than 2078. This is in part because informal studies conclude that the halving takes place every four years. instead of every three years and nine months. Most likely, if the halving trend continues as it is and all else remains constant, the bitcoin supply cap will be reached around 2078.

the next bitcoin halving will take place in an estimated March or April 2024 when the protocol is set to repeat the halving once more, lowering the block reward to 3,125 btc.

the total supply of bitcoin

How many bitcoins are there?

Each day, fewer bitcoin blocks are available to mine as the bitcoin mining end date gradually approaches.

However, it is important to understand that not all bitcoins mined to date are in circulation, further reducing the total supply of bitcoins in circulation at any given time. there are many reasons why the existing supply of bitcoins does not correlate with the total bitcoins already mined.

One of the main reasons is the bitcoin storage method. Since the owner needs to protect their bitcoin using wallets and passwords, there is no way to access the stored bitcoins if the owner passes away without giving someone else access to the password. bitcoin can also become permanently inaccessible due to other mistakes on the part of its owners. bitcoin is different from other assets: it is almost impossible to recover it without the consent of the owner.

according to a recent new york times study, almost 20% of bitcoins are trapped in inaccessible wallets. the total value of these trapped bitcoins is estimated to be around $140 billion. these bitcoins will likely remain trapped indefinitely, affecting the total supply of bitcoins in circulation.

The next time someone asks you how many bitcoins are in circulation, the simple answer is to take the circulating supply, at the time of writing that number is around 19 million, then minus the bitcoins trapped in inaccessible wallets .

the final figure

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Even if there were no bitcoins trapped, it is theoretically impossible to reach the figure of 21 million once all the bitcoins have been mined. in reality, the final figure will be very close to the bitcoin supply limit. this is because the supply of bitcoins is never expressed in exact terms. instead, the bitcoin code uses decimal points rounded to the nearest integer. as a result, a supply of 6.2589 bitcoins is represented by 6 bitcoins.

Bitcoins are divided into smaller units, known as satoshis. one satoshi makes up 1/100 millionth of a bitcoin. Due to these smaller units, and the rounding of figures, experts suggest that the bitcoin supply limit will be capped at 20,999,999 instead of 21 million bitcoins.

Is the amount of bitcoins fixed?

the total supply of bitcoins and the maximum amount of bitcoins that can be mined are fixed, unless the interested parties decide to do something about it. when satoshi nakamoto invented virtual currency, he did it as an open source project. For those concerned about what happens when all the bitcoins are mined and what impact it could have if stakeholders decide to change the code and increase the bitcoin limit, it is possible if the majority agrees. despite the incentive to do so, the potential impact of such a change is highly debatable and controversial.

incentive to increase the total supply of bitcoins

Bitcoin mining is popular because there is a huge incentive for miners who can successfully mine the maximum number of bitcoins for their own profit. the incentive is paid in block rewards, which is a fixed number of bitcoins distributed to miners. In addition to receiving bitcoin, miners also receive a portion of the transaction fees associated with a block.

When the coin was launched, the reward was 50 bitcoins for confirming a block of transactions. after four years this was reduced to 25 bitcoins, and this cycle will continue until there are no more bitcoins left to mine.

Currently, after three halvings, miners receive 6.25 bitcoins for confirming a block. despite the reduced reward, the higher value of each bitcoin offsets the halving effect. transaction fees have also increased as a result of the widespread use of bitcoin. While bitcoin transaction fees are expected to increase, not all bitcoin transactions need to be settled on the blockchain. additional layers, like the lightning network, provide cheaper and faster ways to transfer bitcoins and likely help with mass adoption.

There is no doubt that getting block rewards is a great incentive for miners. This monetary incentive not only keeps miners interested in mining, but also helps the entire ecosystem thrive. Under these circumstances, it makes a lot of sense to wonder what will happen when all the bitcoins have been mined.

Some experts believe that the incentive is not a problem at all, because transaction fees, which represent only 6% of existing revenue for miners, will increase substantially, offsetting the loss of block rewards. Still, this is not a satisfactory answer for many stakeholders who are actively involved in the bitcoin industry. they still want to know what will happen when all 21 million bitcoins have been mined, and if there is anything they can do about how many bitcoins there will be in the future.

change bitcoin supply limit

In theory, it is possible to change the total supply of bitcoins by altering the underlying code. Since bitcoin itself is software, experts agree that it can be changed. doing so will require developers, stakeholders, and the community at large to agree to modify the code. if an agreement were reached, the developers would write code to integrate those changes into the bitcoin core.

For everything to work properly, the next step would be to make sure that all nodes on the bitcoin network accept the changes, or disassociate from the network. however, getting all nodes to accept changes is not a trivial task, as the bitcoin platform was primarily designed as a stand-alone system that requires no changes. at this stage, the developers would have to deal with a hard fork. a hard fork is a consensus change that makes previously invalid behavior valid. in the perfect scenario, all nodes would update to accept the proposed changes.

another scenario would have only a few bitcoin users in favor of the existing limit of 21 million bitcoins. in this situation, miners and nodes that did not accept the change would continue to operate on the existing bitcoin platform. these dissenters would likely compete with the new bitcoin platform for market share. this is known as a contentious hard fork as it would create another chain that would split the miner base, and an example of this is bitcoin cash.

what happens when all the bitcoins are mined: the impact on stakeholders

At this time, no one can accurately predict what will happen when all available bitcoins have been mined. Regardless of any future efforts to change the underlying core of bitcoin, pundits continue to speculate on the future once the hard cap is reached.

Several analysts favor the idea of ​​using higher transaction fees to compensate for the absence of block rewards. New technologies are likely to help lower the cost of mining, eventually leading to more profit for miners. Another theory suggests that bitcoin platforms will only be used for large, very high-value transactions, offering enough revenue to keep stakeholders satisfied. there are also other theories speculating about proof of stake and mining cartels.

From a stakeholder perspective, the following is a brief description of what will happen when all the bitcoins are mined.

miners

miners are responsible for keeping the bitcoin block chain alive and up-to-date through mining. mining is the process of verifying transactions and adding new blocks to the bitcoin network. To do this, miners have to solve complex math puzzles that today require expensive ASIC computers to produce huge computational powers and also use a lot of electricity.

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To compensate for their effort and cost to protect the network, miners receive block rewards (a fixed amount of bitcoins) and transaction fees.

Currently, most miners and mining companies use this block reward to offset the cost of mining and still make a profit. But with mining rewards halving every four years, bitcoin mining costs are expected to eventually exceed the bitcoin rewards miners earn, long before the fixed supply is reached.

However, if the price of bitcoin rises enough over time, it can offset a decrease in block rewards. Currently, using a regression model, the average cost of mining a bitcoin for miners is about $17,600, and the most efficient miners using antminer s19 xp can still mine at breakeven between $7,700 and $10,560 depending on the difficulty of the network and the cost of electricity. all the previous generation miners from 2016 to 2018 are no longer profitable and many of the mining rigs between 2019 and 2020 are also not profitable.

At the time of writing, companies that had ambitious growth plans in 2021 and placed large orders for bitcoin mining equipment and built expensive infrastructure may not be profitable and may have to continually sell off their bitcoin reserves. bitcoin or take loans against your bitcoin, asian miners or even infrastructure to stay afloat.

21 Million Bitcoin Limit: What Happens When All the Bitcoins Are Mined? | Bybit Learn

In the next Bitcoin halving around 2024, these breakeven prices will double if more efficient mining rigs are not created or cheaper sources of electricity are not found, and this could spell trouble for miners if Bitcoin does not increase enough to reach those levels, creating a potential death spiral for Bitcoin. A Bitcoin death spiral is where too many miners stop mining as it becomes unprofitable and there is not enough hashpower to mine sufficient blocks for the mining difficulty to readjust within 2 weeks, however this is a highly improbable event. If other miners are forced to shutdown due to the halving, miners who managed to remain profitable should see increased returns because their relative share of the total hash rate has risen. When the total hash rate declines, the difficulty of mining declines as well. For miners who continue to mine, a halving can increase profitability by weeding out competition and increasing their likelihood of finding a block and claiming the reward.

The only question is what happens when all the coins are mined. In theory, if a miner validates enough transactions, the fees earned can help make up for any missing block rewards. but the amount of the transaction fee will depend on the network status in the future.

miners need some kind of incentive to keep their interest in bitcoins. In addition to increasing transaction fees as mentioned, another way is to change the underlying code and release over 21 million bitcoins.

if the current limit of 21 million is not exceeded, one of the existing scenarios will need to occur: higher transaction fees and reduced operating costs should be enough to keep things going; Or, at the opposite end of the spectrum, miners can form cartels to control the supply and demand for bitcoins, as is practiced in the oil production and diamond mining industries.

retail investors and hodlers

As bitcoin mining approaches its limit, the value of bitcoin is expected to rise. Assuming bitcoin remains popular, the limited supply and investment value will tempt people to use bitcoin as an investment product that acts as a store of value rather than transactional use.

the bitcoin price chart favors this extrapolation because the price of bitcoin has risen steadily, despite the declining block reward. hodlers and retail investors will hoard bitcoins in their wallets instead of releasing them. these actions will further decrease the supply and keep the value of bitcoin high.

In the future, whenever a new crisis arises, it is likely that central banks around the world will print more money to combat the crisis, which will cause a devaluation of the currency. citizens of that country can choose to use their highly inflationary local currency to buy bitcoin, a disinflationary digital currency that cannot be controlled, as a store of value, regardless of bitcoin’s supply, as long as it remains fixed.

institutional investors

More and more companies are eager to test the crypto waters. Already, Tesla, Square, Morgan Stanley, and many other brands have long-term plans to adopt crypto. even goldman sachs is looking to buy cryptocurrencies. If the popularity of cryptocurrencies continues unabated, the interest is likely to attract more institutional investors who will be ready to seize first mover advantage.

according to philip gradwell, chief economist at chainalysis, institutional investors are treating bitcoin like digital gold. Due to bitcoin’s mining limit, scarcity, and potential price increase, institutional investors will use the virtual currency as a hedge against inflation, just as they have used precious metals in the past.

governments

Bitcoin and other cryptocurrencies have proven to be a double-edged sword for governments around the world. While many countries do not accept bitcoin as legal tender, they are closely watching bitcoin’s impact on the global economy. As of now, El Salvador is the first country to legally adopt bitcoin, but more countries are likely to become more bitcoin-friendly, or follow suit and legally adopt bitcoin.

Instead of a take-it-or-leave-it approach, lawmakers will likely prefer a middle ground, such as approving a bitcoin ETF. governments will adopt bitcoin, but will try to regulate all aspects of its operations. Instead of waiting to find an answer to what happens when all the bitcoins have been mined, there is a strong possibility that individual governments, including the us. In the US, create their own versions of digital currencies to compete with Bitcoin, also known as CBDC or Central. bank digital currency.

the end result

Given the popularity of bitcoin, we can safely assume that the future of bitcoin will continue to attract interested parties even when the full supply of bitcoin is reached. reaching the maximum number of bitcoins will not create a doomsday scenario unless bitcoin loses its demand and traction. In a likely scenario, the bitcoin ecosystem will continue to adapt to the changing patterns of the global economy, giving it a stable outlook for the future.

See also: Better Buy: Bitcoin vs. Cardano | The Motley Fool

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