What Happens to Bitcoin After All 21 Million Are Mined?

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One of the chief characteristics of Bitcoin (BTCUSD) is its limited supply. Other forms of money, including fiat currencies, can be printed at will by central banks—i.e., they have unlimited supply. 

Bitcoin inventor Satoshi Nakamoto capped the number of bitcoin at 21 million, meaning there will only ever be 21 million bitcoins in existence. On average, these bitcoins are introduced to the Bitcoin supply at a fixed rate of one block every 10 minutes. In addition, the number of bitcoins released in each of these aforementioned blocks is reduced by 50% every four years. By August 2021, 18.7 million bitcoins were available, leaving roughly 2.3 million to be mined. The supply limitation makes Bitcoin scarce and controls inflation that might arise from an unlimited supply of the cryptocurrency. 

As Bitcoin reaches its capped supply, its economics will alter. The incentives for various members in its ecosystem, such as miners and traders, will change. For example, miners may rely less on block rewards and more on transaction fees to earn revenue and profits for their operations. The cryptocurrency’s network will also transform, and its participants will be different from the retail traders that populate its current ecosystem.

However, given the cryptocurrency’s relatively undeveloped ecosystem, it is difficult to predict with certainty the effect of Bitcoin reaching its capped supply.Key Takeaways

  • There are only 21 million bitcoins that can be mined in total.
  • Bitcoin will never reach that cap due to the use of rounding operators in its codebase.
  • As of Aug, 2021, 18.77 million bitcoins have been mined, which leaves roughly 2.3 million yet to be introduced into circulation.
  • When Bitcoin reaches its supply cap, block rewards will vanish, and miners will depend on fees from transactions occurring on the cryptocurrency’s network for revenue.
  • Bitcoin’s network may evolve from its current unfinished state to becoming a bridge for monetary transactions and trading.
  • Bitcoin the cryptocurrency will have a defined identity in the financial ecosystem.

Will Bitcoin Ever Reach the 21 Million Cap?

Before delving into the implications of Bitcoin’s 21 million cap, it might be interesting to consider the question of whether it will ever reach that figure. Based on the cryptocurrency’s current codebase and mining process, some observers say that Bitcoin may fall just shy of the 21 million figure.

To recap, Bitcoin is “mined” by miners who solve cryptographic puzzles to verify and validate a block of transactions occurring in its network. Block rewards, consisting of a set number of bitcoins, are distributed to miners who successfully confirm a transaction block. The rewards are halved every four years.The rate that bitcoin are produced cuts in half about every four years. Investopedia

When the cryptocurrency was launched, the reward for confirming a block of transactions was 50 bitcoins. In 2012, it was halved to 25 bitcoins, and it went down to 12.5 in 2016. In May 2020, miners stood to earn 6.25 bitcoin for every new block. Block rewards for Bitcoin miners will continue to be halved every four years until the final bitcoin is mined. Current estimates for mining of the final bitcoin put that date somewhere in February 2140.

The Bitcoin mining process provides bitcoin rewards to miners, but the reward size decreases periodically to control the circulation of new tokens.

According to Andreas M. Antonopoulos, author of a book about Bitcoin’s workings, the 21 million figure is an “asymptotic cap” on the number of bitcoin in existence. In simple words, this means that, while it may reach very close to figure, the cryptocurrency will never reach that limit. This is because block rewards and Bitcoin supply are never expressed in exact terms. Bitcoin’s code uses bit-shift operators—arithmetic operators used that round decimal points to the closest smallest integer in certain programming languages. Therefore, a total supply of 6.2589 bitcoins will be rounded out to the closest smallest integer, in this case 6.

While it makes calculations easier, the practice leads to losses in satoshis, Bitcoin’s constituent units, during each block confirmation. One bitcoin is equal to 100 million satoshis. According to some, the final bitcoin block will be numbered 6,929,999, and the total supply at that time will be 20,999,999.9769 satoshis. Since bitcoin uses a bit-shift operator system, its algorithm will round off that figure to 20,999,999 and leave the cryptocurrency just shy of its 21 million targeted cap.What Happens When All 21 Million Bitcoin Are Mined?  

A consequence of Bitcoin not reaching its planned cap is that it leaves open the possibility that the cryptocurrency’s network will remain functional for a long time after 2140. No bitcoins will be issued, but transaction blocks will be confirmed, and fees will become the primary source of revenue. Ultimately, Bitcoin’s network may function as a closed economy, in which transaction fees are assessed much like taxes are.

Can the rewards be in satoshis instead of actual bitcoin? Such a practice is unlikely and would require a change in the cryptocurrency’s protocol to take effect.

That said, it is difficult to predict the effects of Bitcoin almost reaching the overall supply promised by Satoshi Nakamoto. This is partly because Bitcoin’s ecosystem is still undeveloped. The cryptocurrency was originally conceptualized as a medium of exchange but it has found more popularity as a store of value—an investing asset—instead. It is possible that Bitcoin’s ecosystem and workings might undergo a transformation, similar to the one that has occured in its identity, between now and 2140.

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