What Happens When All Bitcoins Are Mined?
Searching for what happens when all Bitcoins are mined? You have landed on the right place! Bitcoin is a digital asset and powers a decentralized financial economy. It features similarity to gold except for the fact that it is a virtual asset rather than a physical one. What happens when Bitcoin mining ends is a favorite question for many novices planning to start with Cryptocurrency mining. Bitcoin is deflationary and has a finite supply. In addition, the supply of Bitcoin also reduces after every block halving, which happens every four years. Before we jump on to the answer for what happens when all Bitcoin is mined, let us discuss Bitcoin’s supply.
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Bitcoin has a finite supply
There are only 21 million Bitcoins that will ever exist. As at the time of this post, less than four million Bitcoin remains in the protocol to mine. The lesser Bitcoin remains to mine, the higher the Bitcoin price will be. After hitting the 21 million supply, it will be impossible to mine any new Bitcoin.
The mechanism suggests that Bitcoin is not similar to paper currency, which can exist out of thin air and is inflationary. Instead, Bitcoin’s scarcity and deflationary characteristic derive its intrinsic value, which helps push the price to newer highs. Although it will take the year 2140 to mine all of Bitcoins, this doesn’t mean that people like us would not wonder as to what happens when all Bitcoins are mined.
Cryptocurrency supporters love Bitcoin’s fixed supply because it features the good old days of gold money. Bitcoin is finite in supply, similar to gold and comes into existence through mining. There are many other similarities between these two assets, and they are likely to be an appealing commodity during a financial crisis.
Bitcoin Mining: War of Hashes and Difficulty
One thing that will probably happen when bitcoin mining is about to end is the increasing war between the hash rate and difficulty. Bitcoin mining involves solving complex algorithms using computers. When a miner solves the algorithm, the protocol awards him new Bitcoins and the transaction fees.
Bitcoin mining is a lucrative business, and this inspires many individuals to set up their ASIC miners. The constant addition of new mining machines increases the mining difficulty, which makes it harder to find blocks. Once Bitcoin mining is about to end, there will be a lot of miners struggling to catch every bit of the asset. Such a situation will make it difficult for people to find and solve blocks to earn a reward. You can also read our complete Bitcoin mining guide to know more about this process.
What happens when all bitcoins are mined?
In 2140 when the miners mine the last Bitcoin, the block reward for miners will cease to exist. As of now, Bitcoin mining is an incentive activity because of the block reward and transaction fees. When a miner picks and solves the block, he receives two different rewards for his work.
However, when all bitcoin is mined the industry will only remain incentive for the transaction fees. Many people think this event would cause the price of Bitcoin to crash, which is not the case. With the passage of time, Bitcoin transaction fees and price will increase, keeping the mining industry lucrative. As at the time of this post average Bitcoin transaction fee is $2 and at some point, it was as high as $25.
The statement is also stated in the whitepaper of Bitcoin by its founder
“Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.”
It is also likely that the Bitcoin global mining hash rate at this point will gradually start to decline. Bitcoin miners will switch their mining hardware to other Proof of Work (POW) Cryptocurrencies.
Will Bitcoin Mining remain profitable?
It is a fact that when all Bitcoins makes it to the market, the transaction fees will be the only source of revenue for miners. For Bitcoin miners to continue running their ASIC miners, the Bitcoin price and transaction fees should become lucrative to encourage mining. Throughout history, Bitcoin mining fees have constantly changed leading to an increase in mempool size and transaction time. Here is a chart displaying the historic daily average Bitcoin transaction fees in dollars.
However, no one is entirely sure as to what will happen to the mining industry itself. We are behind a century for the event for what happens when all bitcoins are mined. Maybe, technology would change, and we can have more specialized mining hardware available at affordable rates to provide a cost-effective solution for Bitcoin mining.
In addition, it is a known fact that when Bitcoin price increases, the transaction fee does the same. There are also several questions and concern in the community that whether a rising fee will prevent and push people away from using Bitcoin. In simple words, for Bitcoin mining to remain profitable, the price and transaction fee of Bitcoin must continue to rise.
The Expected Scenario by Author
I have been in Bitcoin and Cryptocurrencies since 2016. I had my first Bitcoin when it was floating around $700 and I have seen Litecoin priced at $3. Experiencing the long run of Bitcoin from $1000 to $20000 is something I will never forget. However, there was a lot of tension in the community during the time when Bitcoin went All-Time High (ATL). The hash rate was constantly increasing along with the price and so was the transaction fees. I remember paying $20 to send my Bitcoins out of my personal wallet to an exchange.
Based on my personal experience, here are the things I expect as to what happens when bitcoin mining ends.
- The global Bitcoin mining hash rate will gradually start to decrease. Since miners will be unsure about profitability many will switch off their ASIC hardware or will divert their resources to other Cryptocurrencies
- Bitcoin price at that time will be pushing to newer highs and one Bitcoin mining would cost more than a thousand dollars.
- The transaction fee just before the event will be skyrocketing and I expect it to be somewhere around $100 or more. However, the transaction fees will start to fall once all of the Bitcoins make it to the market.
- Once bitcoin mining for block reward ends, the global hash rate and fees will become stable.
Bitcoin mining is a lucrative business until the next decade. Buying some of the best Bitcoin mining hardware and configuring it with the pool can give steady returns on your investment. However, once the Bitcoin mining ends, the industry will only remain profitable for Bitcoin transaction fees and the global hash rate and mining difficulty will gradually decrease.