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Bybit Learn
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2022年6月26日

21 Million Bitcoin Limit: What Happens When All the Bitcoins Are Mined?

Bitcoin continues to gain traction and popularity. Just a year and a half ago, tech experts and pundits were optimistic about its future growth, but few expected Bitcoin to take off like it did in 2021. The trend may yet continue unabated. Already more than 19 million Bitcoins have been mined. This leads us to a most perplexing question: What happens when all Bitcoins are mined? 

Considering that there are less than 2 million Bitcoins left, this is a real concern for everyone involved. Here is an explanation of what happens when all of the remaining Bitcoins have been mined.

How Many Bitcoins Are Left to Mine?

As of June 2022, approximately 19.07 million Bitcoins are in circulation. This means that there are only 1.92 million Bitcoins left for mining, and more than 90% of all bitcoin has been mined.

When Bitcoin’s inventor, Satoshi Nakamoto, created the virtual currency in 2008, the total Bitcoin supply was pegged at 21 million. One of the reasons for the Bitcoin supply cap was to ensure a currency without inflation. Since Bitcoins are intended for transactional use, just like paper currency, too many Bitcoins in the market could generate wild price swings.

With that in mind, the inventor stipulated a 21 million Bitcoin limit to control the supply and, thus, future price fluctuations.

One way to control the mechanism was to release Bitcoins gradually, without overwhelming the market with all 21 million Bitcoins at once. To do this, the Bitcoin code was designed to allow only a fixed number of Bitcoins to be mined every year until the 21 million Bitcoin limit is reached.

New Bitcoins enter circulation when a new block is mined and added onto the blockchain, and this Bitcoin mining is programmed with a difficulty algorithm that helps to keep the entire system stable by maintaining a 10-minute duration for finding new blocks. This difficulty is updated every 2,016 blocks or roughly every two weeks as the network itself will determine if the activities of miners has increased or decreased, and readjusting the bitcoin mining difficulty to keep each blocktime to roughly 10 minutes.

Bitcoin Halving

To ensure the gradual flow of Bitcoins, Satoshi Nakamoto introduced the concept of halving. This mechanism reduces the number of available Bitcoins entering circulation by half every three years and nine months. If the trend continues, it means that almost all 21 million Bitcoins will be mined by the end of 2078. In other words, there will be no more Bitcoins to mine then.

There is some confusion surrounding the exact date when the total Bitcoin supply will end for those wondering what happens when all Bitcoins are mined. If you search Google for the answer, chances are that the date of this event is listed as 2040, instead of 2078. This is partly because informal studies conclude that the halving takes place every four years, instead of every three years and nine months. Most likely, if the halving trend continues as it is and everything else remains constant, the Bitcoin supply cap will be reached around 2078.

The next bitcoin halving will take place estimated in March or April 2024 when the protocol is set to repeat the halving once more, dropping the block reward to 3.125 BTC.

The Total Supply of Bitcoin

How Many Bitcoins Are There?

Every day, there are fewer Bitcoin blocks available to mine as the Bitcoin mining end date gradually approaches.

However, it’s important to understand that not every Bitcoin mined to date is in circulation — which further reduces the total supply of Bitcoins in circulation at any given moment. There are many reasons why the existing supply of Bitcoins doesn’t correlate to the total Bitcoins already mined.

One of the main reasons is the method of storing Bitcoin. Since the owner needs to protect their Bitcoin using wallets and passwords, there is no way to access the stored Bitcoins if the owner passes away without giving someone else access to the password. Bitcoin can also be rendered permanently inaccessible due to other errors on the part of its owners. Bitcoin is unlike other assets: it’s almost impossible to retrieve it without the consent of the owner.

According to a recent study by the New York Times, almost 20% of Bitcoins are trapped in inaccessible wallets. The total value of these trapped Bitcoins is estimated to be around $140 billion. These Bitcoins will likely stay trapped indefinitely, which affects the total supply of Bitcoins in circulation.

The next time someone asks you how many Bitcoins there are in circulation, the simple answer is take the circulating supply, as of this writing that number is around 19 million, and then minus any Bitcoins trapped in inaccessible wallets.

The Final Figure

Even if there were no trapped Bitcoins, it’s theoretically impossible to reach the figure of 21 million once all Bitcoins have been mined. In reality, the final figure will be very close to the Bitcoin supply cap. This is because the Bitcoin supply is never expressed in exact terms. Instead, the code Bitcoin uses rounds decimal points to the closest integer. As a result, a supply of 6.2589 Bitcoins is represented by 6 Bitcoins.

Bitcoins are split into smaller units, known as satoshis. One satoshi constitutes one 1/100 millionth of a Bitcoin. Due to these smaller units — and the rounding off of figures — experts suggest the Bitcoin supply cap will be limited to 20,999,999 instead of 21 million Bitcoins.

Is the Amount of Bitcoin Fixed?

Total Bitcoin supply and the maximum number of Bitcoins up for mining are fixed — unless the stakeholders decide to do something about it. When Satoshi Nakamoto invented the virtual currency, he did it as an open-source project. For those worried about what happens when all Bitcoins are mined and the impact it could have, if stakeholders decide to change the code and increase the Bitcoin limit, it’s possible if the majority agrees. Despite the incentive to do so, the potential impact of such a change is highly debatable and controversial.

Incentive To Increase Total Bitcoin Supply

Bitcoin mining is popular because there’s a huge incentive for miners who can successfully mine the maximum amount of Bitcoin for their own gain. The incentive is paid in block rewards, which is a fixed number of Bitcoins distributed to miners. Besides receiving Bitcoin, miners also receive a part of the transaction fees associated with a block.

When the currency was launched, the reward was 50 Bitcoins for confirming a block of transactions. After four years, this reduced to 25 bitcoins, and this cycle will continue until there are no more bitcoins left to mine.

Currently, after three halvings, miners receive 6.25 Bitcoins for confirming a block. Despite the reduction in reward, the higher value of each Bitcoin makes up for the halving effect. Transaction fees have also increased as a result of Bitcoin going mainstream. While Bitcoin transaction fees are expected to rise, it is not necessary for all Bitcoin transactions to be settled to the blockchain. Additional layers such as the Lightning Network provide cheaper, faster ways of transferring bitcoin and will likely help with mass adoption.

There is no doubt that getting block rewards is a major incentive for miners. This monetary incentive not only keeps miners interested in mining, but also helps the entire ecosystem thrive. Under these circumstances, it makes perfect sense to ask what may happen when all of the Bitcoins have been mined.

Some experts believe that incentive isn’t an issue at all — because the transaction fees, which make up only 6% of the existing revenue for miners, will increase substantially, making up for the loss of block rewards. Still, this isn’t a satisfying answer for many stakeholders who are actively engaged in the Bitcoin industry. They still want to know what will happen when all 21 million Bitcoins have been mined, and if there’s something they can do about how many Bitcoins there will be in the future.

Changing the Bitcoin Supply Cap

It’s theoretically possible to change the total Bitcoin supply by altering the underlying code. Since Bitcoin itself is software, experts agree that it can be changed. To do it will require developers, stakeholders and the community at large to agree to alter the code. If an agreement were to be reached, the developers would write a code to integrate those changes in the Bitcoin Core.

For everything to work properly, the next step would be to ensure that all nodes on the Bitcoin network accept the changes — or are forced off the network. However, getting every node to accept the changes is no trivial task, since the Bitcoin platform was primarily designed as a stand-alone system that requires no changes. At this stage, the developers would need to deal with a hard fork. A hard fork is a consensus change that makes a previously invalid behavior valid. In the perfect scenario, all the nodes would be upgraded to accept the proposed changes.

Another scenario would have only some Bitcoin users favoring the existing 21 million Bitcoin limit. In this situation, miners and nodes who didn’t accept the change would continue to operate on the existing Bitcoin platform. These dissidents would likely compete with the new Bitcoin platform to capture market share. This is known as a contentious hard fork as it would create another chain that splits the miner base, and one such example is Bitcoin cash.

What Happens When All Bitcoins Are Mined: The Impact on Stakeholders

At this time, no one can accurately predict what will happen when all available Bitcoins have been mined. Irrespective of any future efforts to change the underlying Bitcoin Core, experts continue to speculate on the future once the maximum limit is reached.

Several analysts favor the idea of using higher transaction fees to compensate for the absence of block rewards. New technologies will likely help to cut the cost of mining, which will eventually result in more profit for miners. Another theory suggests that Bitcoin platforms will only be used for large transactions of very high value, which will offer sufficient revenue to keep stakeholders satisfied. There are other theories as well which speculate about proof of stake and mining cartels.

From a stakeholder’s perspective, the following is a brief overview of what will happen when all Bitcoins are mined.

Miners

Miners are responsible for keeping the Bitcoin blockchain alive and updated through mining. Mining is the process of verifying transactions and adding new blocks to the Bitcoin network. In order to do this, Miners have to solve complex mathematical puzzles which nowadays require costly ASIC computers to produce large computational powers and also uses a lot of electricity.

To compensate for their effort and cost to secure the network, miners are awarded block rewards (a set number of bitcoins) and transaction fees.

Currently, most miners and mining firms use this block reward to offset the cost of mining and still make a profit. But as mining rewards are halved every four years, it is expected that bitcoin mining costs will eventually exceed the bitcoin rewards that miners make, way before the fixed supply is reached.

However, if the price of bitcoin increases enough over time, it can offset a decrease in block rewards. Currently, using a regression model, the average cost of mining a bitcoin by miners is roughly $17,600, and the most efficient miners using AntMiner S19 XP can still mine at breakeven between $7,700 and $10,560 depending on the network difficulty and cost of electricity. All miners from the previous generation of 2016 to 2018 are no longer profitable and many of the mining rigs between 2019 and 2020 are also no longer profitable.

As of this writing, companies that had ambitious growth plans in 2021 and placed large orders of bitcoin mining equipment orders and built expensive infrastructure may not be profitable and may have to continuously sell their bitcoin reserves or take out loans against their Bitcoin, ASIC miners or even infrastructure in order to stay afloat.

In the next Bitcoin halving around 2024, these breakeven prices will double if more efficient mining rigs are not created or cheaper sources of electricity are not found, and this could spell trouble for miners if Bitcoin does not increase enough to reach those levels, creating a potential death spiral for Bitcoin. A Bitcoin death spiral is where too many miners stop mining as it becomes unprofitable and there is not enough hashpower to mine sufficient blocks for the mining difficulty to readjust within 2 weeks, however this is a highly improbable event. If other miners are forced to shutdown due to the halving, miners who managed to remain profitable should see increased returns because their relative share of the total hash rate has risen. When the total hash rate declines, the difficulty of mining declines as well. For miners who continue to mine, a halving can increase profitability by weeding out competition and increasing their likelihood of finding a block and claiming the reward.

The only question is, what happens when all the coins are mined. Theoretically, if a miner validates enough transactions, the fees earned can help make up for the missing block rewards. But the transaction fee amount will depend on the state of the network in the future.

Miners need some kind of incentive to keep them interested in Bitcoins. Apart from increasing the transaction fees as mentioned, another way is to change the underlying code and release more than 21 million Bitcoins.

If the current limit of 21 million isn’t breached, one of the existing scenarios will need to occur: higher transaction fees and reduced operational costs should be enough to keep things rolling; or, at the opposite end of the spectrum, miners may form cartels to control the supply and demand of Bitcoins, as practiced in oil production and in diamond mining industries.

Retail Investors and HODLers

As Bitcoin mining nears its limit, the value of Bitcoin is expected to rise. Assuming that Bitcoin remains popular, the limited supply and investment value will tempt people to use Bitcoin as an investment commodity that acts as a store of value rather than for transactional use.

The price graph of Bitcoin favors this extrapolation because the price of Bitcoin has consistently risen, despite the decrease in reward per block. HODLers and retail investors will hoard Bitcoins in their wallets instead of releasing them. These actions will further decrease the supply and keep Bitcoin’s value high.

In the future, whenever a new crisis emerges, central banks around the world are likely to print more money to combat the crisis, causing a devaluation to the currency. Citizens of that country may choose to use their highly inflationary local currency to buy Bitcoin, a disinflationary digital currency that cannot be controlled, as a store of value, regardless of the supply of Bitcoin as long as it remains fixed.

Institutional Investors

A growing number of companies are eager to test the crypto waters. Already, Tesla, Square, Morgan Stanley and many other brands have long-term plans to adopt crypto. Even Goldman Sachs is looking to buy crypto. If the popularity of cryptocurrencies continues unabated, the interest is likely to attract more institutional investors who will be ready to take first-mover advantage.

According to Philip Gradwell, Chief Economist at Chainalysis, institutional investors are treating Bitcoin as digital gold. Due to Bitcoin’s mining limit, scarcity and potential price increase, institutional investors will use virtual currency as a hedge against inflation, just like they’ve used precious metals in the past.

Governments

Bitcoin and other cryptocurrencies have proven to be a double-edged sword for governments around the world. While many countries don’t accept Bitcoin as legal tender, they’re keenly watching the impact of Bitcoin on the world’s economy. As of now, El Salvador is the first country to legally adopt Bitcoin, but more countries are likely to become friendlier with Bitcoin, or outright follow suit and legally adopt Bitcoin.

Instead of the take-it-or-leave-it approach, policymakers will probably favor a middle ground, such as approving a Bitcoin ETF. Governments will adopt Bitcoin — but they’ll try to regulate every aspect of its operations. Rather than waiting to find an answer to what happens when all Bitcoins have been mined, there’s a strong possibility that individual governments, including the U.S., will create their own versions of digital currencies to compete with Bitcoin, also known as a CBDC, or central bank digital currency.

The Bottom Line

Given the popularity of Bitcoin, we can safely assume that the future of Bitcoin will continue to attract stakeholders even when the total Bitcoin supply is reached. Reaching the maximum number of Bitcoins won’t create a doomsday scenario unless Bitcoin loses its demand and traction. In a likely scenario, the Bitcoin ecosystem will continue to adapt to the changing patterns in the global economy, giving it a stable outlook for the future.