Why the Supply of Bitcoin is Limited to 21 Million

Why the Supply of Bitcoin is Limited to 21 Million

Bitcoin has been designed with blockchain technology with the principle of controlling its supply, which means only a fixed amount of newly mined Bitcoins can be mined each year until 21 million coins are mined. The supply of Bitcoins is fixed at one block every 10 minutes. The number of Bitcoins released in these blocks will be reduced by 50% by halving every 4 years. When all the Bitcoins are mined, the miners will be forced to process transactions with fees.

Bitcoin Supply

  • Bitcoin is one of the most popular digital currencies, and its availability is scarce. It is one of the leading cryptocurrencies by market cap; the scarcity of Bitcoin is already embedded in the design, and only 21 million Bitcoins can be created on the whole.
  • When the miners mine Bitcoin, a fraction of Bitcoin will be given to the miner as a reward for mining when they find the next hash as a part of the proof-of-work protocol. Initially, the reward started with 50 Bitcoins, and it was halved every 210,000 blocks, which makes it a scarce digital currency. This will help Bitcoin to maintain its store of value for a very long time.
  • When the Bitcoin miners have mined all the Bitcoins, their supply will be exhausted. Recently over 18.5 million Bitcoins have already been mined, which leaves less than 3 million Bitcoins that are yet to be added to the circulation.
  • When all the Bitcoins are mined and let out for circulation, the miners have to depend on the transaction fees to maintain their operations. A small incentive might be provided to the miners who provide their CPU power for making the currency secure; finally, the lack of rewards might lead to the reduction of miners.
  • One of the adverse effects might be when all the 21 million Bitcoins are mined and circulated. There will be a steep increase in the Bitcoins price; this might lead to an accumulation of Bitcoins, and it might be spent when there is scarcity. This might lead to centralization and capitalism of the currency, which is against Bitcoin rules.

Why do we only have 21 million Bitcoins?

  • When the miners have finished mining, the total amount of Bitcoins will exhaust the supply, which might lead to more demand for Bitcoins and holding them for a better price. 
  • There are also other theories regarding the supply of Bitcoins; Few people believe that the 21 million limits for Bitcoin were set by Satoshi Nakamoto when he made major decisions. Bitcoin should add a new block to its blockchain on an average of every 10 minutes, and the reward that is paid to miners halves every 210,000 blocks, which means every four years.
  • Initially, the reward for miners is 50 Bitcoins for each block mined, and it was halved to 25 Bitcoins in 2012. In 2016, it was reduced to 12.5. It was 6.25 Bitcoins in 2020. When the block reward hits zero, the number of coins that are mined will be under 21 million. 

What Happens to Bitcoin After All 21 Million Are Mined?

The miners get block rewards for newly mined Bitcoins, and additionally, they also get transaction fees. When the inflation drops to zero, the miners can generate income only from the transaction fees, which will be an incentive to allow the mining process to make irreversible transactions. When all the coins are generated by the miners, there will be no more Bitcoins for mining. To mine additional Bitcoins, it is only possible if there is an alteration in the Bitcoins Protocol, which will allow an abundant supply of these coins. Else the Bitcoins market cap will remain at 21 million Bitcoins. 

When will the 21 million Bitcoin limit be reached?

It will be tricky to guess when Bitcoin might reach its maximum limit, but few crypto enthusiasts say that if the mining power of Bitcoins remains the same as when they had mined the first block, the last Bitcoin might be mined by 8th October 2140. Others state that if Bitcoin is used as a currency and functions as a fiat currency, there are more possibilities that it might be stabilized.

Final Thoughts

It takes more time to mine one Bitcoin, and it will take more than 100 years when the Bitcoin network mines the very last Bitcoin. In the year 2140, miners might get a tiny portion of Bitcoin as a reward for mining. This decrease in rewards can take the mining process to the next level even before the 2140 deadline, which might lead to an increase in the transaction fees of Bitcoins. Apart from that, If you want to invest in Bitcoin to make a good profit then Bitcoin Profit is the best-suited platform for you. Check authentic Bitcoin Profit Review to know more about this amazing platform.

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