Bitcoins work like gold in different ways. Just like gold can’t be created artificially, bitcoin can’t be created whenever you want. While gold is extracted from earth, bitcoins are mined by using a supercomputer with high mining capability. Bitcoin also has a limited and finite supply. The supply of bitcoins is capped at 21 million. Thus, no more bitcoin will be mined after the 21 million supply is over. At present almost 18.5 million bitcoins have been mined and less than 3 million bitcoins are left to be mined.
Thus, most people think, what will happen when all bitcoins will be mined. Some people are speculating that the new bitcoin protocol will be implemented that will extend the supply of mined.
The supply of bitcoins
As per the present rule, the supply of bitcoins is limited to 21 million. This means that only 21 million bitcoins will be mined in total. Once miners unlock this amount of bitcoins, the supply will be exhausted. Only 21 million bitcoin will be in supply at any point. This is because many people will lose their private key and many people will also die without leaving their private keys and instructions to anyone else. Thus the actual supply of bitcoin at any points of time will be few millions less than 21 million.
Bitcoin mining and rewards
The first 18.5 million bitcoins have been mined within a decade of the invention of bitcoins. With only three more millions bitcoin now, it seems that we are at the final stage of bitcoin mining. This is true, but in a limited sense. It is true that most parts of bitcoins have been already mined, but the timeline is much more complicated than this.
When miners mine bitcoins, they get a chunk of bitcoin as their reward. This reward is offered to miners upon successful verification of the bitcoin blocks. This process of rewards have been adapted over time. Initially, when the first bitcoin was launched, the reward was 50 bitcoin. But, within a few years, in 2012, the reward was halved and it was reduced to 25 bitcoins. In the year 2016, the reward was again halved and it was reduced to 12.5 bitcoins. In may 2020, again bitcoin halving was done and the reward was reduced to 6.25 bitcoins. Bitcoin halving happens every four year and it will continue to happen till the final bitcoins are mined. As per the expectation, the final bitcoin will be mined in the year 2140. But, there is a possibility that the bitcoin protocol will witness lots of changes by then. The Bitcoin mining process rewards miners but the reward size is continuously decreased to control the circulation of new tokens.
Impact of less bitcoin supply and rewards on miners
People think that few people who will be impacted by the reduced supply of bitcoins will be miners. Many people also opine that miners will be forced away from the block rewards for their work when the bitcoin supply will reach the 21 million in circulation. When the miners will not be incentivized for mining bitcoins at the end of the rigorous mining process, the miners won’t continue their support to the bitcoin network. This may have a disastrous impact on bitcoins.
Most people don’t get this point, but mining is not just a process by which new bitcoins are introduced to the network and system, But it is the first way by which the decentralized system of blockchain is maintained and supported. If the miners won’t perform their function, the network may not work and the system will move towards centralization or it will collapse completely. But, most probably, the miners will continue to actively participate in the process till all bitcoins are mined. The reason behind this is that every bitcoin transaction includes a small fee and reward attached to it. When the supply of bitcoin will be reduced, the transaction fee will rise very high and thus, the miners will get their expected incentive.
No matter what happens to bitcoins after all 21 million bitcoins are mined, the truth is that the three million bitcoin mining will take more than 100 hundred years and thus, you should not wait much before making an investment in bitcoins. If you want to get additional information about bitcoins, you can check the platform bitcoin up to get more details and knowledge.