Bitcoin is like digital gold in many ways. Like gold, Bitcoin cannot be simply created at will. Bitcoin takes work to mine. While gold must be mined from the physical earth, Bitcoin must be “mined” through computing. Bitcoin also has a condition stated in its source code: the number of Bitcoin units must be limited. Because of this, only 21 million bitcoins will be produced. On average, these bitcoins are introduced into the entire bitcoin supply at a constant rate of one block every ten minutes. In addition, the number of bitcoins released in each of these mentioned blocks will decrease by 50% every four years.
Bitcoin supply is limited to 21 million.
In fact, there are only 21 million bitcoins that can be mined in total. Once miners have unlocked this number of bitcoins, the supply will be exhausted. However, the Bitcoin protocol may change to allow for more supply. What will happen when the global supply of Bitcoin reaches its limit? This is a topic of much discussion among cryptocurrency fans.
Currently, around 18.5 million bitcoins have been mined, leaving less than three million uncirculated.
While there is only a maximum of 21 million bitcoins, the actual amount of bitcoins in circulation could be millions less. Because people have either lost their wallet keys or died without leaving their private key instructions. Also, some people have entered the wrong address when doing bitcoin transactions, which has caused the bitcoins to be lost in the network.
Bitcoin mining rewards
The first 18.5 million Bitcoins have been mined in the ten years since the initial launch of the Bitcoin network. With only three million units left, it may seem like we’re in the final stages of Bitcoin mining. Even though most of the Bitcoin units have been mined, the remaining units take longer to mine.
After a block is successfully verified in the blockchain, the Bitcoin mining process rewards miners with some Bitcoins. This process adapts over time. When Bitcoin was first launched in 2008, a block reward was 50 Bitcoins. In 2012, that number was halved to 25 bitcoins. In 2016, it halved again to 12.5 bitcoins. Starting in February 2021, miners will earn 6.25 bitcoins for each new block mined – the equivalent of $294,168.75 based on the value on February 24, 2021. This effectively halves Bitcoin’s inflation rate every four years. to give
This reward is halved every four years until the last Bitcoin is mined. In fact, it is unlikely that the final Bitcoin will be mined until around 2140. However, the Bitcoin network protocol may change by then.
Effects of limited supply of Bitcoin on Bitcoin miners
It may seem that the group of people directly affected by the Bitcoin supply limit are the Bitcoin miners themselves. Some opponents of the protocol claim that once the Bitcoin supply reaches 21 million in circulation, miners will be forced to move away from the block reward they receive for their work. But even when the last bitcoin has been generated, miners will likely actively and competitively participate and confirm new transactions. The reason is that in every bitcoin transaction there is a fee that belongs to the miner.
These fees, although currently a few hundred dollars per block, could potentially reach thousands of dollars per block, especially as the number of transactions on the blockchain increases and the price of Bitcoin increases. Ultimately, the Bitcoin network will act like a closed economy where transaction fees are assessed much like taxes.
It is worth noting that it is expected to take more than 100 years for the Bitcoin network to mine its last cryptocurrency. In fact, as the year 2140 approaches, miners will most likely receive a small fraction of the final Bitcoin to be mined. A dramatic reduction in reward size may mean that the mining process changes completely before the 2140 deadline.
It’s also important to remember that the current Bitcoin network will likely change significantly. Given how much new things have happened to Bitcoin in a decade, new protocols, new ways of recording and processing transactions, and any number of other factors may affect the mining process.
Recent major events include the January 2021 letter from the Office of the Comptroller of the Currency (OCC) allowing the use of crypto as a payment method, the introduction of Bitcoin by Paypal, and the acceptance of Bitcoin by Tesla to purchase Tesla cars and solar roofs. Of course, Tesla suspended accepting Bitcoin as a payment method in May 2021 due to environmental concerns about the resources needed to mine Bitcoin.
Considering the above, although there are currently only 21 million Bitcoins available in the network, considering that every four years the block miners’ reward for mining this digital currency is halved, the probability of mining the last bit is also very high. is a lot The coin will last until 2140, until then it is not clear what changes and developments will occur in the crypto industry and the Bitcoin network and how it can be mined.
But if the current situation continues, due to the increased attention to the crypto industry and despite the fact that Bitcoin has fewer features compared to cryptocurrencies such as Ethereum, as the first digital currency and the king of cryptocurrencies, it will always keep the attention towards itself. In addition, its limited number also makes the price of this digital asset continue to rise in the long term.