What happens to miners when all Bitcoin (BTC) is in circulation?
BTC mining

What happens to miners when all Bitcoin (BTC) is in circulation?

By MichDon | MichDon | 6 Apr 2020


In the year 2140, the last bit of "new" bitcoin enters the market. From then on, all bitcoin that will ever exist is in circulation. If it gets that far, what about the miners? Can they still do their work?

Bitcoin and gold

Bitcoin shares some of its properties with those of gold. A much praised feature of the BTC is that there is not an infinite amount of it. In addition, Bitcoin cannot be made from scratch, but it is mined. So Bitcoin takes the benefits of gold, but goes a step further.

Because of the physical properties of gold, people have opted for lighter substitute substitutes (bills), while the gold is kept in the banks.

After all, the gold standard has already been abolished. This forces people to trust the banks that have full power over value. Since Bitcoin is a digital currency that works outside the current financial system, it bypasses this negative trait. However, there are still many uncertainties surrounding Bitcoin.

For example, a maximum of 21 million Bitcoin can come into circulation, of which more than 18.2 million have already been mined. But what happens to the Bitcoin when all Bitcoin are mined?

Why is Bitcoin being mined?

Bitcoin stimulates the miners by means of a reward for every valid block that they find and that is added to the blockchain. This reward is in the form of new Bitcoin.

When the Bitcoin was just introduced, a miner got 50 BTC for a found block. In 2012, this reward was halved to 25 BTC and in 2016 it was halved again to 12.5 BTC.

The next halving of the reward will take place in May 2020. In addition to the reward that miners receive for a new block, they also earn from the transaction costs that are included in a block per transaction.

When all Bitcoins are mined, the transaction costs will be the sole source of income for the miners. But how long until all Bitcoin has been mined?

In just over 11 years, 86% of the total available Bitcoins have been mined. Looking at this pace, you would say that the limit will be reached soon.

However, it is estimated that the last Bitcoin will not be sold until 2140. The goal is to find a new block every ten minutes on average. Bitcoin uses two measures to maintain this pace.

Halving

The first is the aforementioned halving of the reward per mined block. This measure directly influences the attractiveness of mining, but it also has a second function. Thus, halving the reward prepares the miners at a constant pace for the event that they will eventually no longer receive a reward.

Difficulty

The second measure is the difficulty of mining new blocks. This measure aims to ensure that less new Bitcoin continues to circulate every now and then. When new blocks are mined, less and less rewards are distributed.

To keep creating new blocks at a steady pace, mining difficulty changes every 2,016 blocks created. When there is more competition for mining Bitcoin, this results in more computer power.

In this situation, the difficulty of finding a new block will increase. On the other hand, a low number of miners makes for a more insecure blockchain. When this happens, the difficulty level will decrease to make mining more attractive.

This means that more computer power must be used again. In this way, the network not only ensures that the Bitcoin stock does not run out too quickly, but also that the network remains safe.

The effect on the miners

Bitcoin miners are essential for maintaining the blockchain. When all Bitcoin is mined, transaction costs will be the sole source of income for the miners. Many people wonder if this will be enough for the miners to make ends meet. This is mainly due to the large costs that miners currently have.

However, we don't know how much mining a Bitcoin will cost in 120 years. It is quite possible that very cheap equipment will become available by then that can make mining a block profitable again. In addition, it is also possible that the transaction costs increase due to a growing demand for Bitcoin transactions.

Another option is that mining a block becomes much more energy efficient and therefore cheaper. A large part of the total costs of mining Bitcoin consists of energy costs. Reducing these costs can ensure that transaction fee income is enough to keep miners interested.

Finally, the limited amount of Bitcoins can increase the value of the Bitcoins received from transaction costs. This can happen because the supply of the Bitcoins will no longer grow in 2140, but the demand can still grow. In this way, the rewards for the miners are increasingly worth without extra effort.

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Conclusion

In short, although many Bitcoins have already been mined, it is likely to take up to 2140 before the entire supply is put into circulation. To regulate the speed of mining, two measures are used:

Halving the reward for mining a new block;
Adjusting the difficulty level every 2016 blocks.
By using these two measures, it is not only ensured that the Bitcoin stock does not run out too quickly, but also that enough computer power remains within the network.

When the Bitcoin stock has run out, there are still various ways for the miners in which mining can remain profitable. For example, mining costs may decline so far that it becomes profitable for miners to derive their earnings from transaction costs. In addition, the Bitcoin that the miners get can also be worth more because of the transaction costs themselves, because the supply remains the same and the demand increases.

The miners need not be afraid of a sudden change, because halving the reward will stably prepare the miners for making money without the reward.

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MichDon
MichDon

Crypto entousiast, father, taekwondo


MichDon
MichDon

Crypto-enthousiast dad with an aim to try to inform readers of new and interesting projects, upgrades and updates to projects and of course any news of interest on the Crypto spectrum.

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