How Many Bitcoins Are Left to Mine?
The supply of Bitcoin is capped at 21 million units, so how many Bitcoins are left to mine?
The cap is established by the source code of Bitcoin, written by its creator, Satoshi Nakamoto, and which cannot be modified. Once every Bitcoin is mined, the number of coins in circulation will be fixed indefinitely.
In comparison, central government money has no set boundaries. Governments can issue as many dollars or rupees as they need if they do not mind the resultant inflation. Before Bitcoin, digital cash had the problem of double-spending. Until its development, the only method to ensure a party did not spend money twice was for some central authority to track coins transferred and received, updating users' balances – just like the existing banking system.
However, Nakamoto's discovery enabled computers running a piece of software to impose rigorous spending constraints that prohibited a digital representation of value from being spent twice for the first time – or made it prohibitively expensive to do so. Previously, miners would sell their freshly created Bitcoin on the market to fund operational expenditures in US dollars. However, mining companies are increasingly adding their created currencies to their balance sheets and issuing Bitcoin-backed loans. As a result, Bitcoin has become even rarer as a more significant proportion of the entire Bitcoin supply is locked up for the long term.
As of January 2022, 18.9 million Bitcoins had been mined, with around 2.1 million Bitcoins left to be mined. The block reward - or the number of new Bitcoins awarded to crypto miners for creating a new Bitcoin block - determines how long it takes to mine one Bitcoin. At the moment, 6.25 Bitcoins is the block reward, and a new block is generated every 10 minutes or so. Every 1.6 minutes, a new Bitcoin is mined.
Production of Bitcoin
According to the Cambridge Bitcoin Power Consumption Index, the production of Bitcoin requires 143.5 terawatt-hours of electricity per year, which is more than in Ukraine or Norway. As of August 2021, mining a single Bitcoin would need nine years of household-equivalent power. Application-specific integrated circuits, or ASICs, are necessary computer hardware and can cost up to $10,000. ASICs consume massive quantities of energy, which has sparked criticism from environmentalists and restricts miners' profitability. Joining a mining pool is one method to share some of the hefty costs of mining. Pools enable miners to share resources and increase capabilities, but shared resources imply shared incentives. Therefore, the potential payment is lower while using a pool.
Surprisingly, the Bitcoin protocol's supply restriction of 21 million is not stated in its white paper or code. Instead, the ever-decreasing quantity of Bitcoins paid by each block, together with the decentralised network of computers enforcing that reward, allows the network to implicitly forbid the issuing of Bitcoin beyond the limit.
Nakamoto set the restriction to make the money rare and to minimise inflation that may result from an infinite supply. The idea is simple: if there is a limited amount of Bitcoin, its value would eventually grow due to increased demand and less supply. The difficulty is that Bitcoin achieved 90% of its maximum supply earlier this month. The most significant effect of approaching and eventually exceeding Bitcoin's supply cap is that mining will become significantly less economical. However, the procedure will take more than a century. Bitcoin miners will still be compensated, but only through transaction fees rather than newly generated coins. Since the cryptocurrency's inception in 2009, about 19 million bitcoins, or 90% of the total, have been mined.
Nonetheless, recent predictions indicate that the final Bitcoin will not be created until about 2140. The rate of new Bitcoin left to mine is expected to diminish over time. Every 210,000 blocks, the pay-out for mining each block of bitcoin, which is done every 10 minutes, is cut in half. This occurs every four years. The reward per block had decreased from its original value of 50 BTC per block in 2009 to just 6.25 bitcoin by 2022. By the end of 2024, miners are scheduled to receive just 1.56 Bitcoins for confirming a block of transactions.
The History of Bitcoin Mining
Mining was swift at first: according to research firm Messari, half of the 21 million potential Bitcoins had already been mined by late 2012. In 2021, issuance dropped significantly, with fewer than half a million BTC mined for the entire year. If demand for Bitcoin continues to rise, reaching the supply limit would certainly raise its price. This is because everyone desiring to acquire Bitcoin will have to do it from another person, giving sellers influence over the price. Even if all Bitcoins are produced, far less than 21 million will be actively circulating. Chainalysis, a data analytics firm, believes that nearly one-fifth of all coins created have been lost. Bitcoin is stranded in wallets with lost keys, by the physical loss of hard drives where those keys were kept, or even in wallets belonging to deceased owners who never passed on the credentials required to access them. If Bitcoin in 2140 is mainly used as a store of value rather than for everyday purchases, miners can still profit - even with low transaction volumes and the absence of block rewards.
Miners can charge hefty transaction fees to execute high-value or big batches of transactions, with more efficient "layer 2" blockchains like the Lightning Network collaborating with the Bitcoin blockchain to allow everyday Bitcoin spending. However, because the rewards are half every four years, the cost of operating the enterprise will soon outweigh the miners' earnings. Mining may become an unsustainable economic model. Transaction fees will, however, eventually climb because only a limited number of transactions may be validated every 10 minutes. This would be compensation for miners suffering a lack of block rewards, but the transaction amount is dependent on the network's future state. Miners might also employ innovation to improve energy efficiency and reduce expenses.
If the number of network transactions grows in the future, the pace of the transactions may slow. Bitcoin's architecture prioritised accuracy and integrity over speed. If the volume of transactions in the network falls, Bitcoin could become a reserve asset. That would push out small retail traders, which would be replaced by substantial institutional players, raising transaction costs and making trading more expensive.
Furthermore, if Bitcoin mining becomes unprofitable in the absence of block rewards, the following damaging effects may occur: Groups of miners may create cartels to dominate mining resources and charge higher transaction fees.
Selfish mining happens when miners agree to hide new legitimate blocks and then release them as orphan blocks. The Bitcoin network has not verified these new blocks. This method can lengthen block processing delays and guarantee that fresh blocks are subject to large fees when they are issued to the blockchain.
Scarcity will undoubtedly contribute to increased Bitcoin buying. FOMO (fear of missing out) cold create a rush to purchase the rare asset, and those who already own it will be in an advantageous position to sell. However, there is also hope that prospective rules will help keep volatility under control.
Furthermore, if supply stagnation continues to increase Bitcoin's value for the next 100 years, consider this thought experiment: a home worth one Bitcoin now would be worth half a Bitcoin in 10 years, one-tenth of a Bitcoin in 30 years, 0.05 Bitcoin in 40 years, and so on. Such a system would not function in the same way we expect rupees and dollars to, which explains both the excitement and concern about what Bitcoin in its current shape may do to our economic system.
Bitcoin doesn't just bring scarcity to the digital domain. It offers a predictable monetary policy that can be planned over time, and which differs from the present monetary system in which governments and policymakers can expand the supply of money, as we have seen in recent years. As a result, currency depreciation is impossible in Bitcoin, and its users' purchasing power is safeguarded. In addition to safeguarding people's buying power, Bitcoin's predictable policy allows users to prepare for the future because they can be confident that no one will debase their money. Important societal improvements may be possible through a strong commitment to long-term labour and investment, rather than short-term bets.
The price of Bitcoin in US dollars might be viewed as a lagging reflection of humanity's comprehension of the technology and its revolutionary value proposition. So, while the Bitcoin price may eventually trend to infinity, it will not be a reality until most of the global population or most of the world's money realises it.
Author: Emmanuel Baiden
7 years experience within the financial services sector most notably in Sales, Trading, research and writing articles within the crypto space. I have a bachelor's degree in International Business and a Master's in Investment and Risk Finance . I am also an associate member of the Chartered Institute for Securities and Investment.