On 1st April 2022, 19th million bitcoin was mined. Now, less than two million bitcoins are left to be mined before it reaches its maximum supply of 21 million bitcoins.
What is bitcoin?
Bitcoin is a cryptocurrency that was created in 2009 by an unknown person or group of people under the name Satoshi Nakamoto. It is the first decentralized digital currency, as the system works without a central bank or single administrator.
The network is peer-to-peer, and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes through cryptography and recorded in public distributed ledger called a blockchain.
The number of bitcoins in circulation has grown steadily since the creation of bitcoin in 2009 when there were fewer than 10,000 bitcoins in circulation. As of October 2018, more than 17 million bitcoins have been mined and circulated among investors worldwide.
How does the bitcoin supply work?
Satoshi programmed a hard cap or maximum limit of 21 million bitcoin in the source code, which regulates bitcoin supply. The limited supply makes it an in-demand commodity and has helped increase its price historically.
New bitcoins are added to the market at a fixed rate of one block every 10 minutes and get cut by half every four years, so there's an imminent decrease in the supply.
The bitcoin protocol specifies that the reward for adding a block will be halved every 210,000 blocks (approximately every four years). Eventually, the reward will decrease to zero, and the limit of 21 million bitcoins will be reached in the year 2140.
In the meantime, the supply of bitcoins grows exponentially and will continue to do so. In 2140, when 21 million bitcoins have been extracted, no more blocks can be created.
Impact on miners when all bitcoins are mined
Miners create bitcoins by solving cryptographic puzzles to verify and validate a block of transactions in the Bitcoin network. When a miner adds a new block to the blockchain, they're given bitcoins and related transaction fees.
One of the challenges miners face is that the block reward that halves every 4 years. In 2012, it went down to 25 bitcoins, and in 2016 it was 12.5 bitcoins. In 2020, miners stood to earn 6.25 bitcoins for every new block.
Mining for cryptocurrency requires you to be constantly solving complex math puzzles. You will need high-tier computational hardware (such as GPUs and CPUs) that consume a lot of energy. The money you make from the block rewards can help offset your operating costs.
As rewards are halved every four years, the cost of mining will eventually exceed the profits for miners. This could make mining not a sustainable business model in the long run.
Effect on bitcoin value
With more people interested in buying crypto and with scarcity driving the price up, FOMO may lead to a rush of people trying to buy bitcoin while they still can. It's a great time for those owning crypto because they can make some good money by selling their assets. Nevertheless, there is hope that regulations will prevent volatility and foster healthier markets.