What Happens When All Bitcoin Has Been Mined?
In the year 2140, the last Bitcoin is expected to be mined. How will the cryptocurrency continue to function with no more mining rewards or increasing supply?
Max Bibeau | Texas Blockchain
When Bitcoin was founded in Satoshi Nakamoto’s infamous whitepaper, he specified that only a fixed number of the currency would ever be created. In the official release, that number was set at 21 million, with Bitcoin being minted into existence through block rewards for miners.
Bitcoin miners are the backbone of Bitcoin’s ecosystem, providing confirmation that the estimated 300,000 transactions performed on Bitcoin’s blockchain daily are legitimate. By running complex code, miners ensure that currency is not double-spent, taking part in Nakamoto’s original proof of work concept, built to prevent individuals from taking over Bitcoin’s blockchain.
Miners are rewarded for their efforts through block rewards. Each successfully mined block added to the Blockchain rewards the miner that confirmed the block with a specified number of Bitcoin. When Bitcoin was created in 2009, the block reward was 50 Bitcoin per block. However, for every 210,000 blocks mined (about 4 years), the block reward is set to be cut in half.
In late 2012, the block reward was cut from 50 Bitcoin to 25. In mid 2016, the reward was halved again, dropping down to 12.5 Bitcoin. In summer of 2020, the reward is scheduled to halve again to 6.25 Bitcoin. Eventually, in 2140, the block reward will be 0, and all 21 million Bitcoin will be in circulation.
So, since the primary incentive for miners is the block reward, which offsets the expensive costs of hardware and electricity, why will miners continue to confirm transactions when the block reward disappears?
While this seems like a significant obstacle for Bitcoin to overcome, the truth is that not much will change. In the status quo, Bitcoin miners charge small transaction fees based on a percentage of the Bitcoin transferred in order to combat spam and create a way to ration out the limited block space on the blockchain.
When the block reward dips down to zero, miners’ current primary source of income will cease to exist, and their only way to reap profits will be transaction fees. Some, including Roger Ver’s Bitcoin.com, believe that transaction fees will be insufficient to maintain many mining operations, and that there will be a large scale reduction in the number of Bitcoin miners, significantly centralizing the network. Others, however, argue that since this won’t be an issue until the distant future, we can assume that technology will develop rapidly enough to make the technology and energy required for mining cheaper, which will allow miners to keep transaction fees low, and remain in the market. Even others claim that while Bitcoin will continue to function, Bitcoin’s transaction fees will rise dramatically in order to retain miners’ profits, acting as a “tax” of sorts to keep the network running.
While there are many differing opinions on how the Bitcoin network will develop to solve this problem, there is no doubt that the disappearance of a block reward will have significant impacts on the mining population, potentially radically transforming the current system used to confirm transactions and maintain decentralization on the blockchain. Bitcoin’s limited supply, while intended to combat inflation and provide scarcity to the currency, could have some unintended consequences regarding the mining ecosystem.
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