Even though the number of digital currencies is well into the thousands, Bitcoin (BTC) is still considered the dominant cryptocurrency ever since its creation in 2009 by the anonymous programmer known by their pseudonym – Satoshi Nakamoto. After over a decade of breaking new grounds in the fintech industry, Bitcoin is becoming accepted by more and more companies and individuals as an alternative payment method.
Cryptocurrencies are sometimes compared to the most valuable commodity, gold. For example, both types of assets are used as a medium of exchange and a store of value. Maybe the most significant similarity between Bitcoin and gold is that both of them have a finite supply and are obtained through mining.
However, Bitcoin mining is way different from mining gold. For one, it requires computational power and the mined coins only exist virtually. But Bitcoin’s finite supply implies that one day the well will dry out, which leaves a lot of Bitcoin enthusiasts worried about what happens when all the bitcoins are mined. This is exactly what our article is all about.
What Is Bitcoin?
Bitcoin is a decentralized cryptocurrency and payment system that doesn’t need an intermediary, such as a government or central bank, as it uses a peer-to-peer network of computers to verify purchases among users directly.
Fiat currencies, such as USD or AUD coins you hold in bank accounts, are regulated and backed by the government that issues the particular fiat currency. On the other hand, BTC is powered using a mixture of cryptographic algorithms and peer-to-peer technology. Therefore, created this way, the cryptocurrency is backed by cryptographic code rather than things of physical value – such as precious metals – or trust in central authorities.
How Does Bitcoin Work?
Every Bitcoin is a digital file that is stored in a digital wallet, also known as a Bitcoin wallet, on a mobile phone or a computer device. In order for you to comprehend how Bitcoin works, it will be helpful to comprehend the following Bitcoin-related terms:
- The Bitcoin blockchain.
The Bitcoin network operates on an open-source code, called the blockchain, which essentially represents a digital distributed ledger that’s open to the public. Every Bitcoin transaction is added to a block that is chained to the code, creating an eternal record of every transaction that took place on the network. Most cryptocurrencies, such as Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), and Ripple (XRP), are developed using this so-called blockchain technology.
- Bitcoin miners.
Bitcoin miners, the participants of the peer-to-peer network, are in fact the ones that have to confirm every BTC transaction in order for that transaction to be attached to the BTC blockchain, and for each confirmed BTC transaction they receive a so-called miner reward. They do this using miners with high computing power, such as ASIC (Application Specific Integrated Circuit) or GPU (Graphics Processing Unit).
- Public and private keys.
Bitcoins are stored in a Bitcoin wallet that contains the private and the public keys that the Bitcoin owner has to use together in order to initiate and digitally sign each BTC transaction. This way the owner provides proof of ownership.
There are two ways to get Bitcoin: you can buy them on cryptocurrency exchanges, such as Coinbase, or you can do some Bitcoin mining.
Bitcoin mining is a process of confirming the Bitcoin transactions and adding these transactions on the distributed public ledger, known as the blockchain. The Bitcoin transactions are confirmed by the BTC users, i.e. the members of the Bitcoin network. These members need to have enough computing and hardware power, and, of course, enough capital to pay the high electricity bills. The users that are doing the mining are known as Bitcoin miners.
The Bitcoin mining process is based on solving a complex math problem known as Proof-of-Work (PoW). The PoW is necessary in order for the miners to confirm the Bitcoin transactions and receive a Bitcoin reward. The miners are competing against one another to mine the new bitcoins and the miner who solves the problem first receives a mining reward, i.e. a particular amount of bitcoins.
Simply put, here is how the mining process goes:
- You send a transaction;
- Every pending transaction ends up in the Bitcoin mining pool;
- The miners pull out the transaction;
- A miner manages to solve the complex math problem that would verify the transaction;
- The rest of the network approves his solution;
- The transaction is added to the Bitcoin blockchain;
- The miner receives a Bitcoin reward.
How Many Bitcoins Are There?
The Bitcoin supply is limited at 21 million BTC, but the reasons why the developer of Bitcoin selected 21 million as a limit for the Bitcoin’s supply aren’t known, however, there are some guesses why that is so.
The limited supply is based on the scarcity supply principle. This principle of scarcity supply, also known as finite supply, means that when you have a limited supply of goods, a surge in their demand will increase their price and vice versa. This theory implicates an unevenness among the supply and demand equilibrium, which affects the price of the goods.
But, how many BTC have been mined so far, and how many are there left to be mined? In September 2021, the number of bitcoins in circulation was around 18.8 million BTC, which means that there are around 2 million BTC left for miners to mine.
When Will the Final Bitcoin Be Mined?
Based on the present rate of mining and the Bitcoin halving process which happens every fourth year or so, analysts predict that the last Bitcoin will have been mined by 2140, which is a considerably long way to go.
Also, it’s estimated that millions of bitcoins have been lost because some of the Bitcoin owners have lost the private key that gives them access to their BTC assets. Moreover, some of the early owners of BTC have thrown away their old computer devices on which they held their BTC assets back in the time when BTC was worth practically nothing.
Other Bitcoin owners have kept their computer devices, but the hard drive on these devices has collapsed and therefore the recovery of their Bitcoin assets is impossible. There are cases where the Bitcoin owner has passed away without sharing their private keys with someone else.
Taking all of this into consideration, the limited supply of BTC and the fact that a large amount of BTC has been lost, some of the BTC investors say that Bitcoin’s price has a really good future as supply is finite and the number of mined bitcoins goes up by only 6.25 BTC per 10 minutes. The Bitcoin demand might continue growing, however, you don’t have to be concerned that the last Bitcoin will be mined in the nearest future.
What Will Happen When the Last Bitcoin Has Been Mined?
It’s crystal clear that once the miners generate the final Bitcoin, there won’t be any bitcoins available for mining. In order to have an additional supply of bitcoins, the Bitcoin protocol has to be modified to allow a more copious supply. However, there aren’t any signs that Bitcoin’s maximum capitalization will be increased in the near future, which is why it’s safe to assume that Bitcoin’s finite supply will remain capped at 21 million bitcoins.
The Bitcoin miners are very close to Bitcoin’s limit, so it’s reasonable to ask ourselves how this will affect Bitcoin users. Here are some of the most important implications you should keep in mind.
The Effect on the Miners
The Bitcoin mining process enables Bitcoin miners to get rewards for each confirmed and added Bitcoin block to the blockchain. The miners can receive two kinds of rewards from the mining process: a piece of Bitcoin for each verified block, known as a block reward, and an incentive for every processed and confirmed Bitcoin transaction, known as a transaction fee.
If the transaction fees are higher, the Bitcoin miners get higher incentives. This is why the miners always prioritize Bitcoin transactions with higher transaction fees. Meaning, if you want your transaction to be processed quickly, make sure you include a decent fee.
When the final Bitcoin is mined, Bitcoin miners won’t receive block rewards any longer, because there won’t be any bitcoins to generate. So, the miners will be left only with the incentive that comes from the Bitcoin transaction fee for every verified BTC transaction. The miners will still keep the Bitcoin network secure, due to the fact that they will gain some profit from the transaction fees. Still, this profit might not be sufficient for the resources that miners need to keep the network running.
The Effect on the Price of Bitcoin
We previously mentioned that there are approximately 2.2 million bitcoins waiting to be mined. Once all of these BTC have been mined, the supply of Bitcoin is going to be scarce. This limited amount of BTC can result in an increase in the price of Bitcoin, as the demand for the asset is expected to grow. This is of course promising for those who already own the coin, or would purchase some before they’ve all been mined, as they would be able to sell it and make great profits.
A Few Words Before You Go…
It’s obvious that mining the last bitcoins will have a huge impact on the overall Bitcoin ecosystem. For one thing, Bitcoin will become a scarce commodity and miners will depend on transaction fees only. Even though there’s always the possibility that Bitcoin’s protocol will undergo some changes that would allow the mining of extra coins, for now, it seems like miners would need an extra incentive to keep the network running.