What Will Happen When All Bitcoins are Mined?

Exploring the implications of reaching the end of Bitcoin mining and the future of the crypto market

According to the M2 approach, the money supply in the US has expanded by more than 40% since January 2020. As has been seen throughout history, inflation occurs when there are no clear constraints on the supply of currencies and when governments are free to issue money whenever they like. Given this result, Satoshi Nakamoto, who invented Bitcoin, set a limit on the number of outstanding Bitcoin that could ever exist at 21 million. The miners will profit from creating new Bitcoins as they are mined to process and validate transactions; a supply cap will affect their income.

A maximum of a few million Bitcoins are left in existence after more than 19 million have already been mined. Newly created Bitcoin from "block rewards" and transaction fees from users who transact on the network are the two main sources of income for Bitcoin miners. Based on Satoshi's original coding, the supply schedule for Bitcoin block rewards is designed to reduce the reward miners receive every four years gradually.

The Bitcoin algorithm is set up so that a new block is added to the network every 10 minutes and the miner who validates and adds that block receives the block reward. Since the current block reward is 6.25 Bitcoin for each block, 900 new Bitcoin are created daily. The payout is reduced by half after 210,000 blocks or a "halving" event. A halving event has a significant effect since miners lose half of their block reward income immediately. When Bitcoin was first made available, the block reward was 50 Bitcoin for each block, but at the time, the market price of Bitcoin was considerably less than US$100. Therefore, the value of those payouts was far smaller.

The transaction fees collected when a Bitcoin block is introduced serve as the miners' other source of income because their income will be significantly impacted every four years. A transaction fee, which is paid out to a Bitcoin miner directly, must be paid for a person to transmit someone Bitcoin. Transaction fees do not now give a miner a sizable portion of their income.

Based on current pricing, a miner only makes an average of 0.14 Bitcoin for each block. Recent market pricing shows miners create around US$4,000 every block or US$576,000 daily. Although this amount is now little compared to the almost US$1 trillion in value that Bitcoin secures for the network, we may anticipate an increase in transaction fees as the ecosystem develops.

According to the current plan, all Bitcoin will be created and put into use by the year 2140, which gives the network plenty of time to expand and go global. The only source of income for a miner in 2140 will be the network's transaction fees. Even though there are no guarantees that transaction fees will ever replace the existing block rewards, many Bitcoin fans think that significant user growth and development will result in higher miner profits.

Even though there are now just a few applications for Bitcoin, and its commercial adoption as a payment system is still in flux, it is very feasible that in the years to come, more organizations, banks, and businesses may turn to Bitcoin for its settlement capabilities. It is impossible to overstate the significance of transaction fees because the long-term sustainability of the Bitcoin ecosystem depends on miners having a reliable income source. Today, it is safe to conclude that most miners will continue to derive most of their income from block rewards.