Bitcoin can be described as a digital gold in many respects. Bitcoin cannot be created arbitrarily like gold. It requires effort to “extract.” Bitcoin must be “mined”, just like gold.
Bitcoin’s source code also stipulates that it must have a finite and limited supply. There will never be more than 21 million bitcoins produced. These bitcoins are added to the Bitcoin supply at an average rate of one block per ten minutes. Additionally, each block releases half the number of bitcoins that it contains. This happens every four years.
Particulars
- Only 21 million bitcoins can be mined.
- The planet’s supply of bitcoins will be effectively tapped once all bitcoin miners have decrypted them.
- 18.638 million bitcoins had been mined as of February 24, 2021. This leaves 2.362,000,000 bitcoins to be released into circulation.
- Once all Bitcoin has been mined, miners will be incentivized for processing transactions with fees.
Bitcoin Supply Limits to 21 million
There are 21 million bitcoins available to be mined. It is possible that bitcoin’s protocol could be modified to allow for a greater supply. What happens when bitcoin’s global supply reaches its limit? This topic is a hot topic among cryptocurrency enthusiasts.
At the moment, 18.5 million bitcoins are mined. There are still less than three million bitcoins that have not been introduced to circulation.
Although there can never be more than 21 million bitcoins, people have lost or left no instructions on how to access their private keys. This means that the actual number of bitcoins in circulation could be thousands of times less.
Bitcoin Mining Rewards
In the ten years that have passed since the launch of Bitcoin, the first 18.5million bitcoins were mined. It might seem that we are at the end of bitcoin mining with only three million coins remaining. True, but only in a limited way. Although most bitcoins have indeed been mined, the timeline for mining them is much more complex.
Bitcoin miners are rewarded with a portion of bitcoin for successfully verifying a block. This process changes over time. The initial reward for bitcoin was 50 bitcoins. It was halved to 25 Bitcoins in 2012. It fell to 12.5 bitcoins in 2016, but it was back at half the level in 2016.
Miners now receive 6.25 bitcoins per new block that is mined, which equals approximately $294,168.75, based on the February 24, 2021, value. This effectively reduces Bitcoin’s inflation rate by half every four years.
The reward will continue decreasing in half every four years until the last bitcoin is mined. The year 2140 is the likely date that the final bitcoin will be mined. It is possible, however, that the Bitcoin network protocol could be modified between now and then.
Bitcoin miners receive Bitcoin rewards, but the amount of the rewards is reduced periodically to manage the circulation.
About every four years, the rate at which bitcoins are produced is cut in half
Bitcoin Miners’ Impacts on a Limited Bitcoin SupplyIt may seem that the group of individuals most directly affected by the limit of the bitcoin supply will be the Bitcoin miners themselves. Some critics of the protocol claim that miners may be cut off from block rewards for their work when the bitcoin supply reaches 21 million.
Even though the last bitcoin will be produced, miners will continue to participate in and validate transactions. Every Bitcoin transaction comes with a transaction fee.
While these fees are currently only a few hundred dollars per transaction, they could rise to thousands of dollars per block as more transactions are made and the price of bitcoin increases. Ultimately, it will function like a closed economy, where transaction fees are assessed much like taxes.
El Salvador declared Bitcoin legal tender on June 9, 20221.2. This is the first country to do this. Any transaction that the business can accept cryptocurrency can be made using the cryptocurrency. El Salvador’s main currency is the U.S. Dollar.
Remember!!
It is worth noting, however, that the Bitcoin network will take over 100 years to mine its last token. As the year 2140 nears, miners will likely spend many years earning rewards that are only a small fraction of the final bitcoin mined. This dramatic drop in reward size could mean that mining will change completely before the 2140 deadline.
Also, it’s important to remember that the bitcoin network itself will likely change dramatically between now and then.
Given the amount of Bitcoin’s history in a decade, it is likely that new protocols, new recording, and processing methods, and other factors will have an impact on the mining process.
Recent events include the January 2021 Office of the Comptroller of the Currency letter authorizing crypto as a payment method, PayPal’s introduction of Bitcoin, and Tesla’s acceptance of Bitcoin for purchasing Tesla cars and solar roofing. Tesla decided to stop accepting Bitcoin in May 2021 due to environmental concerns about the mining of Bitcoin.