There are thousands of cryptocurrencies that you can publicly trade today, as others continue to get into the market. Most of these cryptocurrencies don’t have much trading volume and aren’t well known.
In today’s blog post, we dive into the world of bitcoin and explain what will happen to this cryptocurrency after all 21 million are mined.
Hopefully, you would know all about bitcoin and its prospects by the end of this post.
But before diving into the details of bitcoin, let us first understand the term “cryptocurrency” and the blockchain technology its dependent on.
You would develop a better understanding of bitcoin and its functions by learning about the technology that powers it.
What is cryptocurrency?
Also known as “crypto,” cryptocurrency is a digital currency that serves the same role as physical currency, which is to facilitate the sale, purchase, or trade of goods and services between parties.
So, people can use cryptocurrency as a medium of exchange, but it is mostly used as a speculative type of investment asset.
Cryptocurrency utilizes blockchain technology to keep a record of transactions in a ledger system. A blockchain is simply a digital ledger of transactions that uses electricity, a computer network, and cryptography to build blocks of data.
One of the important aspects of blockchain technology is anyone can view it publicly, but no person or entity can control or manipulate it. This makes cryptocurrency almost impossible to counterfeit and secure for online transactions.
Bitcoin is the world’s most popular cryptocurrency. It was created by Satoshi Nakamoto, who has never revealed his true identity to this day.
Satoshi wrote the bitcoin white paper in 2008, where he laid out the basic concept of the cryptocurrency. He designed the bitcoin program such that people could transact on a peer-to-peer network, without the need for middlemen, trusted or otherwise. The first bitcoin trade was between Satoshi and Hal Finney on Jan. 3, 2009.
Satoshi later scooped 1.1 million bitcoins on April 23, 2011 packed his bags and left the community he had founded. No one has heard from Satoshi since his disappearance, and he has never sold a single one of his bitcoins.
While the circumstances surrounding the creation of bitcoin may forever remain mysterious, that has not millions of its believers all over the world from putting billions of dollars into the cryptocurrency.
How bitcoin is mined
Unlike valuable metals such as gold which are generally acquired by mining underground, the process of mining bitcoin is done digitally.
Individuals who engage in this process are known as bitcoin miners. These people secure the entire network and transact using high-tech software and equipment specially made to run the mining process.
While gold miners break hard rocks in a bid to find these treasures, miners of bitcoin crack extremely complicated mathematical equations to be rewarded with bitcoin.
Unlike precious metals which are often hidden in sturdy and hard rocks, bitcoin is hidden inside data blocks. These blocks are mined using a unique algorithm that was developed by Satoshi.
Benefits of mining bitcoin
Bitcoin miners gain rewards for every successful block they confirmed in the network.
Those who mine bitcoin receive incentives that come from transaction fees and a portion of the cryptocurrency for every verified block. These rewards are paid to the miners in exchange for their help in verifying and processing each transaction.
Higher fees mean higher incentives for miners and this is also the reason why they prioritize a transaction in the bitcoin network. If you pay a transaction fee, miners will give more priority to your transaction and act quickly.
Bitcoin’s risks and price action
Like any other asset, bitcoin prices can vary. Since the notion of cryptocurrencies is still fresh as opposed to traditional assets, bitcoin’s value has experienced wild swings in price in its 12-year history.
In 2021, bitcoin has swung between $30,000 and $65,000, making it one of the rockiest periods that the cryptocurrency has witnessed in its brief life.
As it hovers around $56,000, crypto experts and market analysts appear divided over whether the digital coin is still in the middle of a record-breaking bull run or at the start of a bear market.
Even if you’re putting your money in generally secure areas like the stock market, there will always be some risks you’re likely to face. But being a successful trader necessitates taking knowledgeable and measured risks, which is also true in the case of cryptocurrencies including bitcoin.
It is important to lessen the risks associated with trading bitcoin by taking a cautious and smart approach about how you invest in the cryptocurrency and conducting a comprehensive research.
So, what’s going to happen when all bitcoins are mined?
When Satoshi created the bitcoin blockchain 12 years ago, he set it up around the principle of controlled supply. One of the more important rules he made was that miners will mine 21 million bitcoins only.
This means that only a fixed number of newly minted bitcoins can be mined each year until a total of 21 million coins have been minted.
After all the bitcoins are mined (probably in the year 2140), there won’t be more coins available to mine. The only way there can be more bitcoins to mine is if the cryptocurrency’s protocol is changed and to allow for an additional supply.
However, there haven’t been any confirmed plans to raise its supply limit twelve years after it was created. With that, we can safely assume that bitcoin’s maximum supply cap will remain unchanged at 21 million coins.
How is thing going to affect bitcoin miners and price?
Once all bitcoins are mined, those who engage in the mining process won’t receive block rewards because there will not be additional coins to be mined. Miners are only going to receive rewards for the transaction fees collected from every verified transaction.
In addition, given that there are only about 2.2 million bitcoins that are yet to be mined, the cryptocurrency’s supply will be little and that could ultimately cause a huge spike in price.
Bitcoin appeals to a wide range of investors.
Today, some institutions and companies see it as a venture capital-backed asset since it has gained more acceptability as an alternative asset in the financial world.
But the total number of bitcoins that will ever exist is 21 million. That’s it! Once all the coins are mined, which as we earlier mentioned should happen around 2140, no new ones are going to enter circulation.
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