What happens after all the bitcoins are mined?
So far, in the 12 years since the advent of bitcoin, more than 90% of its total supply of 21 million units has been mined. Satoshi Nakamoto, the individual (or group) who invented bitcoin, kept the supply of this entire digital currency constant so that it would always remain valuable.
Now that a very limited number of bitcoins remain to be mined, many questions arise as to what will happen to the bitcoin economic system after the extraction of all units. Based on that Report Written from the Cyanobi website, we will answer these questions.
What is the structure of bitcoin supply?
By embedding an algorithm in the Bitcoin source code, Satoshi Nakamoto has set a ceiling or, more simply, a limit of 21 million units for its total supply, and that number is never going to increase. Limited supply has made bitcoin a scarce commodity and could further increase the price of this digital currency.
Bitcoin supply has a fixed rate and by extracting one block every 10 minutes, a certain amount is added to the available bitcoins. However, the Bitcoin algorithm is designed in such a way that the block mining bonus is halved every four years; The event is called Halving.
About 19 million bitcoins have been mined so far, leaving only 2 million units for the future. Experts predict that the remaining bitcoins will be mined by 2140.
Also read: What is Bitcoin Hawing and how does it affect the price?
What will happen to the miners after extracting all the bitcoins?
The presence of miners is essential for the production of new units. They process network transactions by solving problems with encryption, authentication, and blocking. Miners receive a reward for their network activity, which includes freshly mined bitcoins and the total transaction fee paid in a block.
The only obstacle for miners is that the reward for extracting each block is halved almost every four years. In 2012, this amount reached 25 bitcoins and in 2016, it decreased to 12.5 units. As of May 2020, miners will receive only 6.25 bitcoins for each new block mined.
The process of extracting bitcoins involves solving complex mathematical problems. They need high-powered hardware that consumes large amounts of energy. Miners use the money they earn from each block extraction bonus to offset the extraction operating costs and earn a profit.
However, as bonuses are halved every four years, extraction costs will eventually outweigh the rewards miners receive. This can turn mining into an unsustainable business model.
On the other hand, transaction fees are gradually increasing; Because only a limited number of transactions can be confirmed every 10 minutes. While this can compensate for the lack of block mining rewards for miners, the amount of revenue from processing transactions depends on the state of the network in the future. Miners can also use new technologies to increase energy efficiency in extraction and reduce costs.
What effect will the end of the extraction process have on the network?
Networking is the most fundamental aspect of bitcoin, and the distributed general ledger model acts as the heart of any digital currency.
If the number of transactions on the network increases in the future, it is likely that their processing speed will be slower. Bitcoin network architecture is driven by speed, accuracy and integrity.
On the other hand, if the number of transactions on the network decreases, it is likely that Bitcoin will become a reserve asset. This will drive small traders out and replace them with large investors; An event that is likely to increase transaction fees and make transactions more expensive than before.
What will be the consequences of the end of mining for Bitcoin as a currency?
As mentioned, supply shortages are likely to increase the buying pressure in the bitcoin market. With the onset of guilty feelings about having the affair, in the first place, further zaps whatever energy the partner having the affair might still have left. However, digital currency legislation is also likely to help keep market volatile.