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16 Nov 2022

What Will Happen When the Supply of Bitcoin Runs Out?

Bitcoin appeals to any aggressive investor for being the most valuable and prominent cryptocurrency by market shares. The group that invented Bitcoin mimicked the availability of physical gold by setting the maximum number of coins that users can ever mine, including a possible worldwide adoption and more trade on reputable exchanges like the BitAlpha AI. The value is 21 million, with at least 19 million coins already mined. A currency performs well if there's just enough of it in circulation. Flooding the market with an excess number of digital coins would have made Bitcoin more susceptible to inflationary effects. 

So, the main reason for restricting the number of minable Bitcoins from the system was to make this cryptocurrency scarce, and the concept works. Adding significantly to Bitcoin's deflationary mechanism are the halving events that reduce the block reward by 50% after every 210k transactions (Approximately 4 Years). And this indicates that the number of coins entering the Bitcoin market decreases consistently. 

People must transact on the Bitcoin network for miners to generate more coins. To send some Bitcoins to another user, you must first sign the transaction from your digital wallet. You'll then hit the SEND button and wait for the transaction to process. During this time, your wallet providers' network broadcasts the transaction data to the Bitcoin blockchain network for processing. That's where the mining nodes kick in. Mining entails validating your transaction request and adding the information to the blockchain. This process usually takes roughly ten minutes.

How Do New Bitcoins Enter the Market?

Transactions are essential in adding new Bitcoins to the network. Bitcoin transaction processing happens through a process called mining. As a miner, you earn a certain amount of Bitcoins called the block reward for every transaction block you add to the public ledger, blockchain. Block reward comprises newly created Bitcoins from the system and a portion of the transaction fees users pay. Check the below equation to understand what we mean.

Block Reward = (Transaction Fees + Newly Generated BTC)

Since the miners will mine the last Bitcoin by around 2140, experts are already brainstorming the possible outcomes when that time eventually comes. Here are some of the most likely effects of Bitcoin's supply running out. 

Unusually High Transaction Fees

Currently, only a portion of what Bitcoin users pay as transaction fees goes into block rewards. Miners earn most of their income from the new coins added into circulation. As a result, Bitcoin transactions are currently very affordable to everyone. However, Bitcoin's supply running out will mean block reward will come only from transaction charges. So to ensure the profits remain sustainable, the Bitcoin mining pools might resolve to raise the transaction charges. 

Everything Might Remain Intact

Since the last coin will likely enter the market in at least a century, Bitcoin technology has enough time to improve and stabilize itself. Therefore, cryptocurrency technology will have achieved a lot by 2140. So, there would be enough daily Bitcoin transactions to keep the platform running without additional supply. That's the reason an end to Bitcoin's supply may never hurt the cryptocurrency in any way.

A Financial Crisis

Bitcoin's threat to the conventional financial system has become more complex lately. The danger has almost doubled over the past few years, and ending further Bitcoin supply may result in unmanageable financial situations. That's because Bitcoin's value might grow bigger after mining all the coins. The trend will likely arise from an increased scarcity of Bitcoin in various cryptocurrency Markets. Unfortunately, the high price per coin may prompt many Bitcoin holders to sell their assets, thereby inducing a massive lack of liquidity in the sector. 

Key Takeaways

Bitcoin is the most lucrative and attractive cryptocurrency currently. So far, at least 19 million Bitcoins are in the market. If Bitcoin technology advances are interrupted, the last coin will get into use by roughly 2140. Various things may occur in the cryptocurrency market once miners have generated all the 21 million coins because Bitcoin is the most significant crypto asset. The three most likely outcomes include; a financial crisis, very high transaction costs, or everything remaining intact.

 

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