What happens when all the bitcoins are mined?
Unlike traditional fiat currencies, Bitcoin is finite. Unless the protocol changes, only 21 million coins will ever exist and 80% of them have already been mined and are in circulation. So with just four million coins left, what happens when all the bitcoins are mined?
What role do miners currently play?
Bitcoin doesn’t have a central issuing agency, a Federal Reserve tasked with doling out the currency and safeguarding the stash, but, as Bitcoin’s enigmatic creator, Satoshi Nakamoto, explained, “coins have to get initially distributed somehow, and a constant rate seems like the best formula”.
Mining takes up that role by ensuring bitcoins have a natural inlet into the system and guaranteeing their distribution takes place gradually. This system of dependable drip-feeding removes the occurrence of flooding or over-supply, which diminishes a currency’s value, as history has seen happen with fiat currencies (as happened in Zimbabwe a decade ago when the Zimbabwe dollar was so worthless a loaf of bread cost Z$45,000 and houses cost billions, such was the government’s “profligacy” and reckless money printing).
To reward a successful miner’s contribution to powering the blockchain, every time a new block is mined they claim the reward of bonus bitcoins and transaction fees that come with it. At first, the bonus reward was 50 BTC, then in 2013 the difficulty rate adjusted and the reward halved to 25 BTC before it halved again to 12.5 BTC in 2016, where it currently stands. Bitcoin Block Reward Halving estimates the bonus mining reward is expected to halve again to 6.25 BTC on 31 May, 2020 and will wittle to 0 by 2140. It’s what happens then that’s interesting.
Satoshi’s prediction for a future with no coins left to mine
Naturally, Satoshi gave thought to what might happen to Bitcoin after there are no more coins to mine. The Satoshi Nakamoto Institute has collected the writings of the pseudonymous genius, who hasn’t been heard of since 2012. Responding to a question on a BitcoinTalk forum, the most memorable quote of Satoshi’s on the topic of what comes after mining, goes as follows:
“In a few decades when the reward gets too small, the transaction fee will become the main compensation for [mining] nodes. I'm sure that in 20 years there will either be very large transaction volume or no volume.”
How a post-mining world could play out
There is a number of possible ways that a post-mining world could play out. The simplest theory, and the one Satoshi himself foreshadowed in the above quote, is that miners no longer receive the bonus bitcoin reward for solving blocks, but continue their operations for the reward to be earned in transaction fees alone. In late 2017, one miner confirmed a block whose fees were greater than the 12.5 BTC block reward, so a fee-only system could be lucrative enough for miners to continue their work, particularly if the market price of Bitcoin and its transaction volume continue to rise as they had until December, 2017.
There’s also every likelihood that Bitcoin’s code may change significantly by 2140 so that the “proof-of-work” system is replaced altogether, and thus the reward system nullified. Bitcoin has come under heated criticism on account of its environmental footprint in recent months thanks to the electricity consumed by all those overclocked miners working overtime to compete for the BTC reward that comes with a verified block.
Proof-of-work is seen as a more secure consensus mechanism than its leading counterpart, proof-of-stake, and thus there are compelling reasons why bitcoin mining has remained largely unchanged since day one, but it would be foolish to assume that this will remain the case for the next 122 years. From proof-of-authority to proof-of-reputation, the names and methods of consensus algorithm keep growing and it’s too early to say which of these will prove more effective than the existing algorithms. But it seems likely that Bitcoin, along with every other cryptocurrency, will adapt and improve as the years pass.
The good news for the world’s emerging army of miners is that any changes to Bitcoin’s protocol will be unhurried and thoroughly tested, preferably on other cryptocurrencies, before they’re deployed on Bitcoin itself. That was the case with improvements like SegWit, which was applied to Litecoin and other altcoins before making its Bitcoin debut, and it will be the same with any new consensus algorithms that emerge. With block rewards halving periodically and dependably, the mining evolution will be gradual and there’ll be time for miners to keep pace.
Bitcoin’s a survivor
The truth is, between now and 2140 the range of events that could affect Bitcoin, both positively and negatively, are almost too many to fathom. Quantum computing could break all internet encryption; nuclear war could send us back to the Stone Age; a nimbler crypto could rise to usurp Bitcoin, relegating it to MySpace status – an altcoin also-run.
Of course, those are just the dystopian scenarios. In the utopian version, Bitcoin rises to become the world’s leading currency, and the network is secured by millions of grateful citizens running nodes for free. We’ve already seen the green shoots of that future, with Bitcoin starting to proliferate into mainstream society. Several well-known retailers and brands have embraced the payment method, houses have been put up for sale in bitcoins, and an emerging list of Bitcoin poker sites and other gaming platforms are turning to the more secure method of money transfer.
Whatever happens to Bitcoin, long after most of us have gone developers will find a way to make it work. As Satoshi recognized from the start, Bitcoin will either fly or crash. To date, it’s fair to say it’s flown. The currency has already survived almost six years without its mysterious figurehead at the helm. During that time, it’s shrugged off threats to ban it, attempts to tar it with the brush of “Terrorism”, internecine fighting, contentious forks, and all manner of other threats.
The fact that no one has successfully hacked the protocol or launched a 51% attack, rolled back, or double spent a single transaction on the network since its inception instills confidence, and as the amount of hashpower concentrated on the network increases, and the length of the blockchain increases, confidence in Bitcoin and its proof-of-work algorithm will also increase.
The future is bright
If it’s still soaring in the future, securing a decentralized network for confirming bitcoin transactions will be top of the community’s to-do list. If bitcoins are worth anything in 2140 they’re likely to be worth a lot, and even the slenderest bitcoin fractions may be enough to incentivize miners – or their future replacements – to continue confirming blocks. And if it’s crashed and burned, Bitcoin will have already secured an enduring victory for changing the world and influencing every digital monetary system that comes after it.
At current rates, it is estimated that the last bitcoin will be mined in 2140. When that occurs, we’ll be entering into a brave new world devoid of newly minted coins. One assertion, at least, seems safe to make: if Bitcoin is still active after the last coin is mined, it will have operated on a blockchain that’s spanned 131 years, surely making it history’s most trusted distributed cryptocurrency ledger.