As you know, Bitcoin operates on a distributed network that allows users to make use of the network without needing intermediaries, such as central banks, for payments. Apparently, Bitcoin stands as one of the few truly scarce assets, and unlike other traditional currencies with limited supply, Bitcoin’s maximum supply is permanently capped at 21 million coins. This was designed by its creator, Satoshi Nakamoto, to mimic precious metals like gold and to prevent inflation. It is believed that Bitcoin’s full 21 million supply won’t enter full circulation soon because of its built-in halving mechanisms that slow down the creation of new coins. It is estimated that the final Bitcoin won’t be mined until 2140. This article will further discuss why Bitcoin has a limited supply, so keep reading to learn more.
What Happens When Bitcoin Reaches Its Limits?
The truth is, the exact reason why Satoshi Nakamoto decided to limit Bitcoin’s supply to 21 million is unknown. From an email sent in 2009, it is evident that his decision to set a maximum supply was an ‘educated guess’. However, the chief characteristics of Bitcoin happen to be that it has a limited coin supply. This is likely to cause scarcity over time, which will eventually increase demand and price. Note that new Bitcoins are added to the Bitcoin supply approximately every 10 minutes, which is the average time it takes to create a new block on the Bitcoin blockchain. Additionally, it is designed in such a way that the number of Bitcoins minted per block is reduced 50% after every 210,000 blocks, or about once every four years.
As of now, out of the 21 million total Bitcoins, around 19 million have already been mined, which leaves roughly 2 million remaining. When the remaining supply decreases, the mining rewards diminish through the periodic halving events. However, Bitcoins are likely to be produced before reaching the limit. With every halving event, the rewards will be reduced, and the process will become even slower, thus leading to the consumption of more resources. Since the last Bitcoin is expected to be produced and launched by the end of the year 2140, it ensures that the mining process will slow down over time.
Regarding how long it takes to mine new Bitcoins, on average, it takes around 10 minutes to mine a block and incorporate it into the blockchain or chain structure. This time frame is controlled properly in the Bitcoin network as it balances the harsh rate at which new Bitcoins are released. Additionally, it recalculates every two weeks, depending on the network’s total computational power. This change assures that the time to mine each block remains the same because more Bitcoin miners will join the network. Understand that every Bitcoin halving event in mining decreases the number of new mining rewards, which in turn slows down the process. Currently, miners are generally paid 3.125 Bitcoin per block, and as the block reward decreases, the rate of new Bitcoin entering circulation also slows down.
What Happens When The Last Bitcoin Is Mined?
Keep in mind that the number of Bitcoins in existence cannot surpass 21 million because this is built into Bitcoin’s protocol. The creator, Satoshi Nakamoto, implemented this supply mainly to create scarcity, similar to precious metals like gold. However, lost keys and inaccessible wallets indicate that the actual circulating supply may be slightly lower than 21 million. Regardless of its well-established finiteness, reaching the maximum supply will indeed take some time. Mining Bitcoin rewards will be reduced by half every four years, and the very last Bitcoin would be earned. After that, instead of new Bitcoins, miners will earn transaction fees.
As said above, the last Bitcoin is expected to be mined by the year 2140, and after the mining is completed, no new Bitcoins will be issued in the market. Miners will be forced to rely on transaction fees to validate transactions in order to maintain the blockchain. When there are no block rewards, miners can cover the expenses through higher transaction fees. This allows the system to remain secure, and miners will continue to help approve transactions.
Conclusion
As Bitcoin nears its 21-million supply limit, its mining, its value, and transaction fees will continue to evolve, and as mining rewards decrease, transaction fees will become the primary incentive for miners to maintain network security. Even though the Bitcoin critics claim that Bitcoin’s rules can be easily altered by changing its source code, it is governed by the software run by nodes and not by the source code. This means it cannot be changed. Also, removing the strict limit on the Bitcoin supply would destroy its value as a system and alienate investors and long-time believers.
