- Bitcoin has a supply of 21 million coins. However, this supply will run out by the year 2140.
- At the beginning of the cryptocurrency’s history, block rewards were 50 BTC, which is currently valued at $365,000.
- What happens to all of the miners once they run out of BTC to mine, and will prices surge with high demand?
BTC has been ‘coined’ digital gold for good reason. Like gold, Bitcoin is scarce and cannot be created arbitrarily. BTC must be ‘mined’ from a controlled, diminishing supply.
This ongoing mining process is what allows the network to be decentralised across thousands of computers around the world.
Essentially, miners provide the processing power for transactions to be completed, verified, and added to the ledger. All 21 million Bitcoin will be mined by 2140. After that, the supply will be fixed and its effects will be numerous.
In the beginning, 50 BTC were given as a reward for mining a single block, valued at roughly $365,000 today. Since then, mining rewards have been halved about every four years. Miners currently receive 12.5 BTC (roughly $91,000) for validating blocks.
This pattern will continue until 2140, when all 21 million bitcoins will have been mined. So, if the mining incentives are gone, what will happen to the miners? Logically, if the miners can’t be paid in new BTC then they will have to rely solely on transaction fees.
This poses a risk to the decentralisation of the network, and thus the security of the network, as transaction fees alone are not enough to offset the costs of running a mining operation.
Therefore, the consolidation of Bitcoin mining, either through mining pools or just an overall lack of miners, seems likely. Either the transaction fees would skyrocket or the centralisation of mining would presumably occur.
However, the possibility remains that advances in mining technology (i.e smaller, cheaper, more powerful mining chips) could make the mining process more passive and, in turn, lower the barrier for entry and the financial burden for miners.
These advances could potentially bring the lower mining incentives to an equilibrium by simultaneously lowering the cost of mining and the barrier to entry.
The Price of Bitcoin
As with anything else, a finite supply (scarcity) creates value. Once the supply of Bitcoin has been capped, the value of one Bitcoin could skyrocket.
If Bitcoin has infiltrated global commerce, and especially if global adoption for peer to peer transactions occurs, then demand could send the asking price for a single bitcoin soaring into the hundreds of thousands, if not millions.
In the future, BTC could also act as a potential store of value for global wealth, which would even further diminish the circulating supply. This hoarding effect, combined with some degree of global adoption, could bring about unimaginable prices.
It should be noted that the Bitcoin developer community is dynamic and could potentially solve mining and other issues on chain or through a fork to create a more scalable Bitcoin before 2140.
On the pessimistic side, hard forks could prove to be Bitcoin’s greatest adversary. A large number of hard forks could send Bitcoin’s community into a million different directions, simultaneously sending investors into a million different directions, and rendering the original BTC worthless, while diluting the value of any forked versions of the currency.