Bitcoin, the virtual gold has its fair share of fans as well as naysayers! The fluctuating, unstable market of Bitcoin also doesn’t stand in the way of these supporters who try to rack up the number of Bitcoins in their wallet. But all this rage over Bitcoins, is it because of its finite supply? Irrespective of the number of people on earth or their corresponding demand, the world only has 21 million Bitcoins. That is when Satoshi Nakamoto first released Bitcoins, there was a finite supply of 21 million Bitcoins which could be mined. Right now 80% of the Bitcoins in existence have already been mined. So there’s only about 4 million coins left to mine and there will never be any new Bitcoins. And unless change are made on the protocol the supply will never increase. So what happens then?
We feel that Bitcoin and gold have quite a lot of similarities. Both are portable, can be converted into fiat currencies, and are anonymous and decentralized. The most glaring one though is the finite supply of both Bitcoins and gold. Gold isn’t created, but mined from the earth. The mining process of gold is equally difficult as Bitcoin, there’s no guarantee that you’ll strike gold every time. This extracted gold is then purified and circulated in the market based on the market price.
But Bitcoin mining is a bit different from gold mining. Bitcoin mining is the process of verifying transactions on the Bitcoin network, these transactions are then recorded on the Blockchain. Bitcoin being an online currency fixed the danger of a user spending the same Bitcoin twice by using mining to verify transactions. This process require particular hardware and extreme amounts of energy. Each Bitcoin miner is awarded a pre-fixed amount of Bitcoins for each new block added to the Blockchain.
Now we’ve already established that there are only 21 million Bitcoins. Out of this only about 4 million Bitcoins are left to be mined. It is estimated that all the Bitcoins in the world will be mined by 2140 or thereabouts. But what happens after all of the cryptocurrency has been mined? What happens to the miners with all their sophisticated equipment and what profits can they expect after?
In this article we will explain our theories on what will happen after all the Bitcoins in the world has been mined.
Right now miners are compensated in the form of Bitcoins. But when all the Bitcoins are mined, what will they be compensated with? How will they earn their living with mining?
Are transaction fees enough?
Once all the Bitcoins have been mined, miners will only have transaction fees as the sole source of income. But can transaction fees alone keep miners financially afloat?
Of course we cannot use the current cost of mining to measure the required mining profitability for 100 years from now. The copious amounts of energy consumed in the current mining process makes it a very expensive venture. So for miners to just survive on transaction fees with this process is entirely impossible.
Better mining technology
But this is the future we’re talking about, so for all we know, mining technology could undergo some drastic changes over time. A small and inexpensive mining chip which can be easily fitted on all electronic devices could definitely be a possibility.
This development could make mining an integral part of daily life unlike the purposeful business decision it’s considered now. Moreover, if mining hardware is no more an energy drain and becomes energy efficient, transaction fees alone can keep miners in business.
Another possibility which might arise is that of sufficient high transaction fees which ensures mining profitability. If Bitcoin becomes the primary mode of payment, increased demand for transactions could lead to a rise in transaction fees. But this hypothetical situation could or could not happen once all Bitcoins are mined. Moreover, governments and banks will have to overcome their Bitcoin phobia for it to become the primary mode of payment.
Increasing the block size
But currently it seems unlikely that the transactions will see such a boost. Currently, the Bitcoin community has reached the consensus on a block size which increases gradually ensuring scalability of the network. But, a gradually growing block size will mean that fees for confirming transactions will be lower.
This prospect might seem unattractive to miners because they’ll have to survive on low fees after the block reward’s gone. But a block size which doesn’t increase might pose a larger threat to the network than low transaction fees. When a block reaches its maximum size, until a new block is created, transactions cannot be confirmed. If transactions cannot be confirmed, excess transactions will be dropped from the network leading to higher transaction fees. While this prospect might seem appealing to miners, it could lead to people not transacting using Bitcoin altogether. A centralized mining network also wouldn’t be able to kill the digital currency as this can.
Why we think transactions fess will suffice for miners
Though miners swill have to eventually give up on the block rewards, it’s possible that transaction fees alone will suffice. Just apply simple monetary theory here, even if there is a demand, the Bitcoin supply will not increase. This discrepancy between the supply and demand will result in a steady and gradual decrease of the price. Meaning the purchasing power of Bitcoin will increase gradually leading to more transactions.
Consequently, the funds that Bitcoin miners collect in transaction fees will gain in value over time. This increase in value over time will turn mining which is fee-centric mining into a long-term investment that’s financially feasible.
Mining can be profitable
Take for example the history of the dollar. There was a time in the past when you could buy a bar of chocolate just for one cent. But now, there’s not much that you can buy with that one cent. In the last century, the dollar had a very low value. This was mainly because there was an unlimited supply of the currency and it wasn’t backed by anything. In the future, the state came up with policies which made goods more expensive thereby encouraging people to spend more.
In Bitcoin’s case though, the situation will be reversed. Remember the Bitcoin pizza story? 8 years ago, a programmer in the US paid 10,000 Bitcoins for 2 pizzas! This was when it had no value initially.
And now you can’t buy anything with even 1satoshi (0.0000001 BTC, minimal unit of Bitcoin). But when all the Bitcoins in the world have been mined, the price might decrease to a reasonable amount. And 100 years from now, you might enjoy a reasonably good shopping with the same 1satoshi.
Here’s what other people think about this:
CEO and co-founder of Exsulcoin
“When all 21 million Bitcoins are mined, there will be a pricing collapse. People might still use Bitcoins solely as a store of value, and pay miners directly to validate transactions (which is not far-fetched considering current transaction fees for Bitcoin).”
Co-founder and chief marketing officer of Coinfirm
It’s too early to worry about it
“When all Bitcoins are mined nothing will happen. Scarcity will kick in, logically value will rise. It’s over 100 years from now. Bitcoin has a long way to go before we worry about that.”
CPO of Blackmoon Crypto
Time will tell
“No mining equals no Bitcoin. The underlying costs of mining is simply unsustainable in the long run, and we can only kick the can down the road and ignore it for so long; or at least hope that coin-related valuations continue its breakneck inflation to keep pace. Thinking too far ahead is a trap. The future somehow always magically provides a solution on the horizon. Just ask George Jetson. Ultimately, the current level of blockchain technology is still in its nascent stage, waiting for a few more levels of abstraction before it can live up to its original promise. In the meantime, we work toward that goal.”
Founder of WAWLLET
“Nothing. When all Bitcoins will be mined, they will have a close to zero value and maybe after 50 years a numismatic value.”
The Bitcoin’s value will increase
“What will happen when all Bitcoins will be mined? First of all, we have to clearly define what will happen when all 21 million of Bitcoins will be on hands. If today miners earn Bitcoins first by generating of coins and second by charging users transaction fees, then in the future they will only charge users transaction fees and most likely will have to choose for mining between Bitcoin and another cryptocurrency which total limit will be developed with time.
As for Bitcoin itself, its value will increase and few factors will be responsible for it. The factor number one – the fall of the value of fiat money will continue as fiat money by its nature is unlimited and not backed by anything apart from the state guarantees. As a result in a competition of currencies on the market the currency with the limited issue such as Bitcoin will have an advantage. The factor number two – provided that all features and qualities of Bitcoin such as safety storage system, anonymity, decentralization, no need for money transfer mediators such as banks, transaction speed will be maintained and improved, the coin value will grow, taking into the account the high demand for such qualities even when there will be only 21 million coins at the market.”
Yes, it is possible for Bitcoin mining to remain profitable when there’s no more block reward. There are several different ways and the examples we’ve given are just a few in a myriad of possibilities. Besides, the block reward isn’t going to be taken away at once like a candy from a child. It is gradually decreasing over time, it was 50 BTC initially and halves at every 210,000 blocks. The block reward at present is 12.5 BTC for the creation of a block.
This gradual reduction gives miners the chance to adapt and rely more on transaction fees than revenue from mined Bitcoins. A combination of better mining technology and stable increase in Bitcoin’s purchasing power might keep miners afloat in the future.
Moreover, a rise in the price of Bitcoin can help offset the lowering block rewards. The cryptocurrency is sure to rule the market for a long time to come. If they feel that transaction fees alone will not suffice, they can always choose another cryptocurrency.
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