If you haven’t been hiding under a rock for the past few years, you know that Bitcoin is a phenomenon. What you may not know is that there are only 21 million Bitcoins that will ever exist. So, what happens to Bitcoin if there will eventually be an end to the supply?
In this article, we’ll show you why you can put this worry to rest and allow you to make an informed decision about your ongoing cryptocurrency investments.
When the Mining Will End
It’s challenging to determine when Bitcoin will reach its final coin mined. Some experts say that if Bitcoin’s mining power remains the same as when investors mined the first block, we’ll see the last Bitcoin mined in 2140. However, others believe that if Bitcoin continues to be used in similar functions as fiat money, it’ll become highly stabilised.
Today, Bitcoin is the most popular virtual asset. This fact gives hope that Bitcoin will be with us beyond this date. Some of the other factors that bolster optimism for the coin include market capitalisation, price, and how Bitcoin has made a beneficial contribution to improving the financial system’s state.
What Happens When the Mining Ends
Bitcoin is not an unlimited cryptocurrency. Once miners generate all 21 million coins, there won’t be any left for mining. The only way to create an additional supply is to alter Bitcoin’s protocol to provide a more abundant supply. However, there currently aren’t any ways to do so, in fact it would be against the general sound money principals the network is founded upon.
Bitcoin’s supply is now nearing its limits — 18.5 million Bitcoins have been mined in the last 10 years. Therefore it’s increasingly crucial to understand how this scarcity may affect you — especially if you hold Bitcoin as part of your portfolio.
What Effects the End of Bitcoin Mining will Have
The Bitcoin mining process allows miners to gain rewards for every successful block the network verifies. There are two types of rewards you can receive here. The first is a portion of Bitcoin for every block that’s confirmed. The second consists of incentives from transaction fees. These incentives are paid to the miner in exchange for taking the time to process and verify each transaction.
The End of Block Rewards
Higher incentives are gained when Bitcoin instills higher fees. This fee structure is used to prioritise any transactions that occur on the network. When you pay a higher fee, you’ll have your transaction included in a block faster.
Once all Bitcoin has been mined, these rewards will end, since additional coins cannot be generated. The only incentive for miners to continue securing the network will be the aforementioned fees. Some miners may not find this enough of an incentive for them to continue this task, for the network to maintain its high levels of security a significant appreciation in price would be necessary to cover the energy costs of mining transactions.
This event occurs after each set of 210,000 blocks is mined (approximately once every four years). Initially, miners would receive 50 Bitcoins for every block that they were able to verify. Once investors mined the first set of 210,000 blocks in 2012, miners received 25 Bitcoins. This incentive continued until 2020, when Bitcoin halving took place. Now miners are rewarded with 6.25 Bitcoins per block.
Increased Transaction Fees
Bitcoins’ price increase has resulted in increased transaction fees for miners. The average fee for each Bitcoin transaction is currently 5 USD. This fee increased by 3.60 USD since last year when it was 1.40 USD. Here you can see that the price tends to spike if certain events occur (e.g., a crypto boom).
Although miners may think that this is good news, there isn’t any guarantee that the mining process’ cost will remain high in the future. Unfortunately, this isn’t something that Bitcoin’s technology can predict.
The Start of an “Offshoot” Business
Hypothetically, if mining continues to develop and improve, it may become easy and expensive. If this happens, an “offshoot business” may come about.
It’s important to remember that Bitcoin mining is a process that requires a considerable amount of energy. Some criticism has been leveled against the community for the potential effect this may have on the environment. However, it is increasingly likely that this process will become more energy efficient over time, reducing its energy dependence and impact on the environment.
Currently there are only approximately 2.2 million Bitcoins remaining to be mined. Once mined, Bitcoin will become a more scarce and locked-down commodity. Eventually, this scarcity could cause Bitcoin’s price to increase.
This increased price is great news for investors. However, since Bitcoin is a very volatile asset, dramatic falls may also occur. The fluctuating prices should provide incentive for new investors to enter the market.
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