By 2140, all 21 million bitcoins will have been fully mined. After that point, no new bitcoins will be created, and miners will no longer receive rewards from newly mined coins.
Currently, miners are crucial to maintaining the Bitcoin network, and a large share of their incentive comes from these block rewards. However, once the supply cap is reached, a critical question arises: What will happen to the Bitcoin network when all bitcoins are mined? Without the creation of new coins, what will drive miners to continue supporting and securing the network?
In today’s article, we’ll explore what the Bitcoin network might look like once all bitcoins have been mined and how miners could continue to be incentivized to maintain the system.
Bitcoin Scarcity
Bitcoin is unique because it has absolute mathematical scarcity, meaning there will only ever be 21 million bitcoins in existence, a limit that can be verified by anyone in the network. This scarcity is governed by Bitcoin's source code, known as Bitcoin Core, which rewards miners with new bitcoins when they successfully create a block.
The reward miners receive for adding a block is halved approximately every four years in an event known as the "halving." The reward started at 50 bitcoins per block, dropped to 25 bitcoins in late 2012, and further reduced to 6.25 bitcoins in 2020. The most recent halving, which occurred on 20 April 2024 at 12:09 AM UTC (with block number 840,000), reduced the block reward to 3.125 bitcoins. This will continue until around the year 2140, at which point no new bitcoins will be generated, as the issuance will decrease from one satoshi per block to none.
Although the total supply of Bitcoin is capped at 21 million, the actual number of bitcoins in circulation is likely to be significantly lower. This is because many bitcoins may become inaccessible over time due to reasons such as users losing their private keys or passing away without sharing their wallet details. In fact, a 2020 study by crypto forensics firm Chainalysis estimated that up to 20% of the bitcoins that have been issued may be permanently lost, further reducing the available supply.
Bitcoin Deflationary Concerns and Economic Impact
While the halving strengthens Bitcoin’s scarcity, it also brings challenges for miners, whose earnings are reduced by half during each event. This decline in profitability may force some miners to exit the market, potentially impacting Bitcoin’s security. Critics worry that a reduced number of miners could weaken the network's resilience and negatively affect the value of Bitcoin, particularly as the system becomes increasingly reliant on transaction fees.
Bitcoin's deflationary nature also raises questions about its ability to function as a global currency. With its inflation rate halving every four years, Bitcoin becomes progressively scarcer. Economists argue that this deflationary trend might limit its use in retail transactions due to high prices and potential hoarding behaviors. However, Bitcoin’s divisibility into 100 million smaller units, known as satoshis, ensures that even small fractions can retain purchasing power, providing a buffer against concerns of scarcity.
This deflationary characteristic becomes even more pronounced as Bitcoin's price rises, influencing user behavior and shifting priorities from immediate spending to long-term holding for value appreciation. Critics often argue that such a shift could stifle economic activity, as individuals may delay purchases in anticipation of further price increases. However, this perspective overlooks the adaptability of markets and the diverse ways people use money. While Bitcoin might encourage saving over instant consumption, it doesn’t eliminate spending altogether. Instead, it encourages individuals to prioritize meaningful and well-considered purchases. Proponents of Bitcoin believe this approach aligns with its role as a store of value, fostering a culture of financial discipline and long-term planning that benefits both individuals and the broader economy.
Miners’ Motivation
As Bitcoin moves toward its supply cap over the coming century, miners are expected to adapt by shifting from block rewards to transaction fees as their primary revenue source. Already, transaction fees have shown significant potential, as demonstrated on April 20, 2024, when they surpassed block rewards, accounting for over 75% of miner earnings during a surge in network activity. With continued adoption and increasing transaction volumes, these fees are likely to provide a sustainable income stream for miners, ensuring the ongoing security and stability of the network beyond the year 2140.
Bitcoin’s finite supply could further solidify its role as a store of value, driving demand and leading to higher transaction fees as users compete for processing priority. This economic shift is expected to support mining profitability, even without new coin issuance, as higher fees compensate for the eventual disappearance of block rewards.
Additionally, ongoing integration of advanced technologies, such as renewable energy and artificial intelligence, could help reduce operational costs and improve mining efficiency. Innovations like repurposing excess mining heat for industrial or residential use could create secondary revenue streams, further reinforcing the economic viability of Bitcoin mining.
Ultimately, Bitcoin’s adaptability, along with the ingenuity of its mining community, suggests that the network will remain secure and sustainable as it transitions to a transaction fee-based model after 2140. This shift demonstrates the resilience of the Bitcoin ecosystem, ensuring its long-term success even after the final coin is mined.
Conclusion
Once Bitcoin reaches its supply cap and the final coin is mined, the network will undergo a major transformation. While the end of block rewards might seem like a challenge for miners, transaction fees are poised to become the primary source of revenue, providing a sustainable model for network security. With growing adoption, increasing transaction volumes, and Bitcoin's finite supply driving demand, the economics of Bitcoin mining are likely to remain strong even after 2140.
Technological innovations and efficiency improvements, such as the use of renewable energy and AI, could further support miners, ensuring their continued participation in securing the network. As Bitcoin solidifies its role as a store of value, it may become less reliant on inflationary mechanisms, fostering a more resilient and secure network. Ultimately, the combination of Bitcoin's adaptability and the ingenuity of its mining community will ensure its sustainability for generations to come.