What will happen when all 21 million Bitcoins are mined?
It is not a secret that the number one cryptocurrency Bitcoin (BTC) has a limited supply. Its creator Satoshi Nakamoto has fixed the total BTC number as 21 million. There is nothing unusual about that as many projects limit the token supply in contrast to fiat money. Potentially, central banks can print any quantity of banknotes depending on the governmental financial strategies. Crypto is quite a different thing, it is up to the project’s team if they decide to limit the supply or make it unlimited. But there is not yet an example of a coin that has already achieved its maximum permissible amount. BTC has a chance to become the first. What happens when Bitcoin reaches 21 million? And when will Bitcoin run out?
Why is the number of Bitcoins limited?
In fact, nobody knows why Satoshi Nakamoto decided on the number of 21 million. When all this amount is made, no more new coins will come into existence. This means that the BTC value will increase as fewer and fewer new coins enter circulation. This BTC feature differentiates this cryptocurrency from fiat money.
The fiat money stock is continuously increasing, and as a result, it undergoes inflation and loss of value. But Bitcoin is not subject to all these changes as no third parties can regulate its demand and supply and that is why it behaves not similarly to fiats.
Will Bitcoin ever reach the 21 million cap?
But is it possible that BTC reaches its upper bound in the nearest future? Some experts predict that the last BTC will have been mined by 2040. Miners get rewards in BTC for their support of the uninterrupted operation of the entire network and these new coins are extracted from the total amount of BTC remaining. The rewards are decreased by half every four years and it leads to the moment when the coin enters a new epoch of its existence is coming.
But other experts don’t agree that this is possible at all. For example, Andreas M. Antonopoulos, a well-known British-Greek Bitcoin advocate, supposes that a number of 21 million is an “asymptotic cap”. In this case, this bound will never be reached.
Which opinion will prove correct? We’ll see after 2040.
What will happen when all 21 million Bitcoin are mined?
Will the Bitcoin blockchain remain functional when the sacramental number becomes a reality? It is necessary to mention that the actual amount of BTC in circulation will be in any case fewer than 21 million. Some owners will lose their private keys, the others will die without transferring their crypto assets to anybody else. That is why a certain sum will be lost forever without any chance of return.
Cryptocurrency is not a fixed and closed system so it is quite possible that some changes will take place as the turning moment approaches. Generally, crypto is constantly changing adjusting to the current situation. The cryptocurrency was initially designed as a means of exchange and payment but now it gains more and more recognition as a means of hoarding and investing tool. That is why we can expect new transformations that would reveal new options and solutions.
But there are two main issues that are raised with reaching the limit, namely, miners’ performance and network performance. It is hard to predict how the Bitcoin ecosystem will be transformed to adapt itself to the new reality but these two issues cannot remain as they are now.
Miners’ performance issue
As any blockchain product, BTC heavily depends on miners’ performance. They support the security and functionality of the system and provide its smooth running. Today, their revenue consists of two parts: newly minted coins and transaction fees. Today, these fees are rather small but high prices for BTC encourage miners to participate in mining and thus in supporting the network.
When the last BTC is minted, supporting the network will become yet not so attractive for users. To make them interested, the transaction fees may raise to a level high enough to motivate the network participants. Obviously, transactions will become considerably more expensive.
Another possible scenario is that miners will form alliances to protect their interests. In this case, they might regulate the transaction fees maintaining them as high as possible. The examples of such alliances we can observe in offline big business when large groups restrict access to various commodities.
Network performance issue
Nobody knows what will happen to the entire network when there is no possibility to make more BTC on mining. It heavily depends on the BTC value and function after reaching its limit. One of the most comprehensible scenarios assumes that BTC will turn into a means of exchange. In this case, the number of transactions will increase, and you can forget about fast and accurate performance.
From another point of view, BTC will become a reserve asset being recognized by official authorities. In this case, the number of trades will reduce as this coin will be accumulated on the accounts of the biggest players on the market.
What happens after all bitcoins are mined?
When all 21 million Bitcoins are mined, several key dynamics within the Bitcoin ecosystem are expected to change. Let’s explore the potential implications:
Limited Supply and Increased Value: With the fixed supply of 21 million, Bitcoin is designed to be deflationary. As new coins cease to be minted, the scarcity of available Bitcoins may drive up their value over time.
Miner Rewards and Transaction Fees: Currently, miners receive both newly minted coins and transaction fees as rewards. As new coins become unavailable, miners will solely rely on transaction fees. This could lead to higher transaction fees to incentivize miners to continue validating transactions.
Lost Bitcoins: Not all 21 million Bitcoins will be in circulation due to lost private keys, deceased holders, or other reasons. The actual circulating supply may be lower, contributing to the scarcity and potentially impacting market dynamics.
Network Performance: The functioning of the Bitcoin network post the 21 million cap depends on its use case. If it continues to be primarily a medium of exchange, transaction volumes might increase, potentially slowing down the network. On the other hand, if it evolves into a reserve asset, transaction volumes may decrease.
Market Transformations: Bitcoin’s role may shift over time. It could continue as a medium of exchange, evolve into a store of value, or be recognized as a reserve asset by official authorities. These shifts could influence the number and nature of transactions.
Miner Alliances and Transaction Fees: Miners, facing reduced rewards, may form alliances to regulate transaction fees, possibly keeping them higher. This could resemble strategies observed in traditional offline businesses where large groups restrict access to certain commodities.
Bitcoin Price Impact: The anticipation of reaching the 21 million cap may drive increased demand, potentially impacting Bitcoin prices leading up to that point.
Network Security: The reduction in mining rewards might raise concerns about the security of the network. Higher transaction fees could provide an incentive for miners, but the network’s long-term stability may require adjustments.
Evolution of Bitcoin’s Role: The post-21 million era might prompt the Bitcoin community to explore and implement changes to adapt to new realities. This could include technological upgrades, consensus mechanism changes, or adjustments to economic incentives.
In conclusion, while the exact outcome is uncertain, reaching the 21 million Bitcoin cap will likely bring significant changes to the cryptocurrency landscape. The dynamics of miner incentives, transaction fees, and the role of Bitcoin in the financial ecosystem will be crucial factors in determining its future trajectory.
The bottom line
We can build up thousands of coherent theories on this problem. When will Bitcoin run out? What will happen to it after the limits are reached? There are no definite and clear-cut answers to these questions. Let’s wait for 2040 and see what will come down.