What Will Happen When All Bitcoins Are Mined?

Last updated on December 12th, 2017 at 10:45 pm

There are only 21 million Bitcoins available for mining. Once all of those Bitcoins have been mined, no  more new Bitcoins will ever be created. This stands in stark contrast to national currencies, which are constantly expanding. Governments like to encourage inflation, so they generally increase the money supply. This leads to the devaluing of currencies, however, and in practice, it can reduce the wealth held by individuals and families.

For Bitcoin, there is no parallel devaluation. If anything, Bitcoins should become more valuable over time as the number of Bitcoins entering the system decreases. Not only is the total supply of Bitcoins capped at 21 million, but the flow of new Bitcoins into the market has also been tapering off. Roughly every four years, the number of Bitcoins awarded for mining a block is cut in half.

When Bitcoin miners “mine” a new block of transactions they are rewarded freshly minted Bitcoins. Originally, 50 Bitcoins were earned for mining a block. Then it dropped 25 Bitcoins, and then to 12.5 Bitcoins. In 2020, it’ll drop to 6.25 Bitcoins.

Thus, while a government may constantly increase its money supply, Bitcoin has built-in features that encourage the exact opposite. The decreasing flow of new Bitcoins and the 21 million cap will help ward off inflationary pressures.

Also, there are many “lost Bitcoins” that were stored on old hard drives that were thrown away and can no longer be recovered. This makes the total supply of Bitcoins actually lower than 21 million.

Bitcoin Mining: A Quick Review

If you’re already familiar with the whole bitcoin mining process and how the blockchain works, feel free to skip down to the next section. If not, we’ll quickly bring you up to speed.

Bitcoin mining refers to the process of hashing, or using computers to solve complex algorithms. When an algorithm is solved, a new block of transactions is created and added to the blockchain. The blockchain is the public record, or ledger, of all Bitcoin transactions.

Whenever Bitcoin transactions are carried out, they’re first broadcasted to the whole network and then get added to the blockchain via the miners. The process of hashing is therefore vital to deciding which transaction takes precedence (since not all transactions can fit inside a single block). If miners stopped mining, the entire Bitcoin system might actually collapse.

In order to compensate miners for their efforts they are awarded with new Bitcoins, but that’s not all. Miners are also awarded the transaction fees that were attached to all of the transactions they confirmed in their block. So miners get paid twice – once with newly created Bitcoins and once with transaction fees.

Who pays these fees? Anyone sending a Bitcoin transaction that wants to get “ahead in line” and have his transaction approved as fast as possible (hopefully in the next block).

Bitcoin after Mining

At some point in the future, probably around 2140, the last Bitcoin will be mined. Once 21 million Bitcoins have been created, no more Bitcoins will ever be created. This, however, doesn’t mean that the Bitcoin world will come crashing down. Since besides awards for hashing, the Bitcoin protocol also provides transaction fees. Currently, these fees amount to only a small amount in comparison to the block reward of 12.5 Bitcoins; however, as Bitcoin rewards go down, the fees will likely increase.

Eventually, these transaction fees should become valuable enough that miners will be encouraged to keep on mining. So while new Bitcoins will cease to come into existence, Bitcoin miners will still get paid.

Bitcoin’s Value Must (and Will) Continue to Rise

In order for Bitcoin transaction fees to become lucrative enough to encourage mining, Bitcoin’s value is going to have to rise substantially. Luckily, certain traits are built right in to Bitcoin to ensure just that.

Every other fiat currency has an essentially unlimited supply, and governments love to increase their money supplies at will. The problem with increasing the money supply, however, is that the value of the individual currency unit, such as the dollar, decreases.

Increasing the money supply tends to spur investment because companies and people are encouraged to spend money before it loses too much value. In other words, governments will often intentionally try to decrease the value of your wealth. With Bitcoin, the money supply will increase until 2140. However, because the money supply is predictable, this doesn’t have the deprecatory effect of whimsical government money supply increases.

In fact, in July 2016, the new supply of Bitcoins awarded for hashing was cut in half, dropping from 25 to 12.5. In the run-up to this, Bitcoin’s price increased substantially, rising from under $450 to over $750.

Some say that the run-up in price was in part due to the halving of the block reward. Others argue that since this reward havling is known in advance it shouldn’t have a dramatic effect on Bitcoin’s price.

Bitcoin in the (Distant) Future

As Bitcoin’s price rises, the value of transaction fees will increase. First because Bitcoin becomes more valuable and second, because people are willing to pay more in fees in order to get their transaction confirmed faster.

However in order for this increase to be enough for transaction fees to encourage mining on its own, the value of Bitcoin will have to increase substantially.

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22 Comments on "What Will Happen When All Bitcoins Are Mined?"

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Cori
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Cori

I see comments about gold and bitcoin and how either will fail. The truth is either can fail. Instead of arguing about it, we can learn the best way to invest for your own future. I personally want to invest a small amount to have as part of my rainy day fund and put into my business. And yes I know about bitcoin business loans, just not sure how to take advantage since most of my vendors don’t accept bitcoin as payment.

wizardinblack
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wizardinblack

Wasn’t bitcoin invented to get away from banking transaction fees ?

Jason Casey
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Jason Casey

You’re all marked of the beast

Jason Casey is an idiot
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Jason Casey is an idiot

you’re marked as an idiot

Ve Clarke
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Ve Clarke

Yea good on ya dic hed.

jkenwell
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jkenwell

“Currently, these fees amount to only a small amount—just a fraction of a cent;”

This information appears to be outdated. Currently, it appears fees are more than $20 equivalent per transaction. However, when the Lightning Network comes online, this is expected to drop the fees back down.

Richard Dela Dorkenoo
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Richard Dela Dorkenoo

If I invest 1000 USD into cloud mining today,for a year, how much would I be earning every month

Dan brown
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Dan brown

If you put 1000 USD into the platform I get my contracts from you’d make roughly 5/6k USD in year one **affiliate link removed**

Zsofia Elek
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Zsofia Elek

Hi Delakelly, cloud mining is not the same as the bitcoin mining referred in this article, I would suggest you start reading this post. https://99bitcoins.com/cloud-mining-profitable-just-evolution-scam/ Most of the cases it just turns out that cloud mining platforms are scams.

Mask
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Mask

Not all of them are scams. For example HashFlare (since 2013) and Crypterra (since 2017) are paying, communicating with customers and looking for new workers (to handel the customer support requests).

fbi
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fbi

…Zzzzz

Dave
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Dave
Same old shit by someone who has interest in pumping this bubble.. i’ll tell you what will happen instead. When transaction fees will rise and as soon as a lot of miners will quit mining, making a payment with Bitcoin will become nearly impossible because of the time needed to acknowledge the transaction (which is today around 30 minutes already, it’ll take days as soon as miners will quit) and the even higher fees. BTC will become worthless and lot of people will see their dreams of an easy richness disappear in a blimp. This, given BTC will survive so… Read more »
Jim
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Jim

Worst case scenario BTC will be a store of value like gold. I do however see Bitcoin scaling to compete with some of the faster yet completely un-tested in the market of sheer volume that BTC has right now. I think BTC will definitely survive as it’s infrastructure is 10 years ahead of the next best crypto.

Kim
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Kim
Based on what I know so far I couldn’t disagree more. Gold is a tangible item that has many practical uses. If currencies disappear, we could revert back to the good old days of trading gold. BTC on the other hand lives completely in the digital world. If people stop accepting BTC because the cost is too high and they take too long, miners will quit, and as more miners quit, the less BTC is accepted, until there are no more miners left to verify transactions and no one left to accept them. At that point, BTC becomes completely worthless.… Read more »
Jim
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Jim
Bitcoin has 1000’s of use cases also, sure it’s not tangible, but you can’t walk into a store with Gold and buy anything. BTC as a store of value can purchase homes and large items. It’s fees are very high for small items right now, so If a store a value it will convert immediately for purchasing large Items, and do so discreetly and convert to any countries currency. Gold you must find a buyer, transport it safely and than sell it person to person. Bitcoin can be sent to another country and purchase a home without all the middlemen… Read more »
elitemoney
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elitemoney
Mr. Beigel, I loved your article, this has been a concern of mine since I started learning & investing in Bitcoin! I feel like there are many other ways to make money through Bitcoin, one of which is a program I’m in called Bitcoin X4! It’s a unique program for the fact that they’ve combined a 2 by 2 unautomated matrix system with member-2-member crowdfunding! The CEO, Robert Matias created this to help people build up their bitcoin so they’ll be able to invest into the bigger programs like UCI, Bitconnect, & all the other goodies out there that require… Read more »
Anon
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Anon

Sounds like a good ‘ole pyramid / ponzi scheme!

Jim
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Jim
Pyramids and Ponzi schemes have a central authority and is centralized like the Federal reserve, that prints money out of thin air. There is no central authority with Bitcoin, there is no early adopter bonus. The only thing we have here is a decentralized asset that costs 1000’s to make with electrical power and is finite at 21 million. It can’t be counterfitted or hacked. It is secure without a bank and can be accessed from anywhere in the world and sent anywhere in the world within hours, and soon seconds when it scales correctly. Bitcoin is freedom from the… Read more »
elitemoney
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elitemoney

I thought so too, but I’ve cycled a few times & have made a lot of money! Plus, I’ve become friendly with several people using the program & they’ve been getting paid too! I’m as skeptical as they come, trust me, but everyone is entitled to their opinion… I’m not offended, but don’t knock it until you try it… I love reading your articles & have a lot of respect for you, this won’t affect me from following your articles!

divyap
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divyap

Thanks for sharing nice article