What happens to Bitcoin after all 21 million are mined?

Bitcoins are not limitless in their quantity. Satoshi Nakamoto, whose name appears as the creator of this cryptocurrency (but nobody knows who is behind that name), created it as digital gold. And because of that, its stockpile is also limited to simulate the final quantity of physical gold. On average, a new block is mined about every 10 minutes, and a new bitcoin every 1.6 minutes. Each block consists of a stack of pending transaction records in the Bitcoin storage pool, usually selected based on the number of transaction fees they offer miners. In exchange for opening a block, the miner receives a fixed number of Bitcoins as a reward.

The number of Bitcoins mined in each block is reduced by half after every 210,000 blocks. So it happens every 4 years. That is, over time, the reward for the block becomes less than half. There have already been three such cuts; the last was in May 2020. Since then, the reward has been 6.25 BTC. The next reduction is due in 2024.

Transactions peaked in December 2017 and lasted until mid-April 2021. The total amount of commissions per day during that period reached 1,495 BTC, and Bitcoin was worth $14,000. Miners earned $21 million daily, about half of what they earn on block fees. 

Some experts do not rule out that the rewards mechanism may change shortly before the final block is mined.

There are only 21 million Bitcoins. And it is estimated that the last tokens will be mined in 2140 (but also, it can be 2078). Once the amount of BTC received reaches its maximum, miners will stop being rewarded for the blockchain. Given the current protocol, it will be a bonus for transactions. This process will drag on for 120 years precisely because the process of creating new Bitcoins is getting slower and slower because of the cutbacks dubbed halvings.

And yet, to date, 19 million Bitcoins have already been mined (about 90%). Thus, there are less than 2 million left. This poses a reasonable question: what will happen when all the Bitcoins are mined? It is especially interesting to know this for those who are saving or actively mining BTC, putting big money into equipment, or investing.

Will the number of bitcoins ever reach 21 million?

An interesting calculation is that the number of Bitcoins issued can never reach a total of 21 million. This is because the Bitcoin network uses bit-shift operators. They round some decimal points to the nearest integer. A down rounding can happen when the bounty for creating a new Bitcoin block is halved, and the amount of the new bonus is calculated. This reward can be expressed in Satoshi (0.00000001 Bitcoin). Satoshi is the smallest unit of measure in the Bitcoin blockchain and is not divisible. Therefore, when the network is instructed to divide a Satoshi in half to calculate a new reward amount, it will round up to the nearest full integer. So, even if you don’t count the Bitcoins locked up in the lost wallets, the limit will be limited to 20,999,999 Bitcoins rather than 21 million.

In addition, Bitcoin owners can lose access to their savings (which has happened more than once). According to a study by analytics company Chainalysis, up to 20% of issued Bitcoins could be irretrievably lost (as of June 2020). So, even if you don’t count the Bitcoins locked up in the lost wallets, the limit will be limited to 20,999. That’s why the number of Bitcoins will never reach 21 million. 

What happens after all 21 million bitcoins are mined?

Upon reaching the maximum number of Bitcoins, even if that amount is less than 21 million, there will be no more new coins. Blocks will still appear and be processed, and miners will still get their perks. But most likely in the form of rewards for processing transactions.

Transaction fees alone may not be enough. Researchers at Princeton University concluded in 2016 that this would have “alarming consequences” that could negatively impact Bitcoin’s security.

While it is not Bitcoin’s finest hour, the closer the limit, the higher the price will be. And if it remains popular, its limitation and value will cause Bitcoin to become an investment commodity. Therefore, retail investors and HODLers will seek to accumulate Bitcoins in their wallets, and their actions will raise the already high value of Bitcoin even further.

Suppose Bitcoin by 2140 serves as savings rather than regular purchases. In that case, miners will also make a profit even if the transactions are not frequent, for example, by charging high fees to process high-value or large batches of transactions.

However, if it ceases to be profitable, miners will begin to form alliances to control mining resources and receive higher transaction fees. This is one possible scenario.

Or they will collude to hide the new valid blocks and later publish them as orphan blocks not validated by the Bitcoin network. This could negatively impact block processing times and make the fees for new blocks higher when they hit the blockchain.

According to Chainalysis’s chief economist, institutional investors view Bitcoin as its creators intended — digital gold. Due to Bitcoin’s production limit, deficit, and potential price growth, institutional investors will use it as a hedge against inflation (and all prerequisites for the next economic crisis are already visible).

As for the governments of different countries, Bitcoin is not yet popular worldwide. Many countries do not accept Bitcoin as legal tender. Perhaps El Salvador is the only one that has fully legally accepted Bitcoin. Other states will probably accept it in the future. But they will try to control all flows and users.

There is also the possibility that individual governments will start creating their versions of digital currencies to compete with Bitcoin (this is known as CBDC or central bank digital currency).

How many bitcoins are left now?

As of June 2022, there were just under 19 million Bitcoins in circulation. That leaves under 1.9 million left — meaning over 90% have already been mined.

Takeaway

Despite the triple-digit price drop from peak values, Bitcoin remains popular. This suggests that the future of Satoshi Nakamoto’s creation will continue to attract many interested people even after the limit of 21 million is reached. Reaching the maximum number of Bitcoins will not lead to a collapse and loss of coins. Rather, the Bitcoin ecosystem will adapt to changing mining conditions and new global economic models.

On the other hand, it will probably have a greater impact on miners and investors. They may experience negative consequences.