Nearing the BTC Cap
There are some major differences between fiat currencies and bitcoin, by far the most profitable digital currency on the market. One of the most striking differences, however, is its predetermined limited supply. From the time twelve years ago when the first coins were mined, the supply was capped at 21 million with no option to simply mint new ones. The cap on bitcoins makes the asset scarce and therefore deflationary by nature.
Now, according to Blockchain.com data, as of December 12, 2021, we know that 90 percent of all bitcoins have been mined. We also know that close to 80 percent of mined coins are deliberately being kept out of circulation largely by “holders” speculating that prices will soar.
When Will the Bitcoin Cap Be Reached?
Despite the relative speed at which miners reached the 90% mark, experts don’t expect the remaining 10% to be completely mined until around 2100. This is largely due to a process called halving, which occurs approximately every four years.
So how does it work? Crypto miners are rewarded for their efforts with a mix of bitcoins and also transaction fees. In 2008 miners earned 50 bitcoins for each block of transactions confirmed. The number was halved to 25 in 2012, and halved again to 12.5 in 2016. Presently, the current 6.25 bitcoins received for each block mined will be cut in half again in 2024. The process is designed so that the returns on the digital currency will gradually diminish over time.
What Happens When We Get There?
When we reach the point when there are no new bitcoins to be mined, it stands to reason there would be no incentive for miners to continue to do their work and to protect the blockchain system. Would the whole cryptosystem then simply fall apart?
More likely the incentive for miners will become altered, and they will lean more heavily on earning transaction fees on crypto networks. But it’s really far too early to speculate. The BTC ecosystem is still in its early stages of development and there is still a plethora of unanswered questions such as what to do about “lost” bitcoins where people have died or lost their private keys. Additionally, because bitcoin is an open-source cryptocurrency, the entire system may be adapted to meet the changing situation.