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The total amount of available Bitcoin for mining is 21 million. Once all of those Bitcoins have been mined, no more will ever be created. This cap is built into Bitcoin’s protocol by Satoshi Nakamoto. The purpose of this cap is to combat inflation and devaluing of the digital currency and to increase scarcity. With fiat currencies a healthy dose of inflation is encouraged by governments so they can increase the total money supply.

For now the total circulation of Bitcoin is over 16.8 million. This means that more than 80% of all Bitcoin that will ever exist has been mined. This milestone was marked January 13th and is pretty important for Bitcoin’s life cycle. Obtaining Bitcoin will become harder when all 21 million Bitcoins are mined. Bitcoins should become more valuable as the number of coins entering the ecosystem decreases.

Scarcity creates demand, which makes the coin more valuable. The decreasing flow of new Bitcoins and the cap will help protect against inflation. Also many Bitcoins are lost forever, either on old hard drives that were thrown out or other ways of losing them forever. This makes the total circulation lower than 21 million.

 

Bitcoin Mining

Not every cryptocurrency can be mined like Bitcoin. There are different technologies out there, some are quite different. Some cryptocurrencies are created with the entire supply of coins. Some release them immediately others release them at a certain rate per time. For example, Ripple has created 100 billion coins, but only 38 billion are in circulation. The rest will be released at a rate of 1 billion per month. This is done to not overflow the market, but also makes Ripple one of the most centralized cryptocurrencies out there. Other examples of non-mineable currencies are IOTA, NEO, NEM and more.

Miners receive rewards for their work in the form of cryptocurrencies. This is awarded to them for the Proof of Work they do through hashing. With Bitcoin, miners race towards mining a block. The fastest gain the most. That’s why if you want to make a profit from Bitcoin you need a lot of computational power. Miners receive not only the newly formed Bitcoins, but the transaction fees too.

With blockchain mining the difficulty threshold increases as more blocks are mined. Satoshi Nakamoto’s protocol requires that the mining reward is halved every 210,000 blocks. At first the reward for mining was 50 BTC per block. Now the reward is 12.5 BTC and it should be 6.75 by 2020.

This is estimated to be every 4 years and the next difficulty increase is expected to be in 2020. This estimation depends on the hashrate of mining and the big groups of miners who arguably control Bitcoin’s network. Why? Because they have so much computational power that without them Bitcoin may experience a halt in the movement of transactions and may collapse entirely.

 

Can you increase Bitcoin’s supply?

This should be theoretically possible. Some methods can be used like a Sybil attack which is difficult to explain. These methods may cause undesired effects to Bitcoin’s healthy system and can throw balance out the window in an already not so balanced network.

 

What will happen when all Bitcoins are mined?

The unlimited supply of fiat currencies means that it is essential for the value of a single unit to decrease with time. Governments love to increase the money supply so the whole economy is incentivized to spend more before their money depreciates. The incentive for miners, are the Bitcoins they get. So what will happen when all Bitcoins are mined? Well the system will not collapse, but in order to keep it running, it is natural that the transaction fees will increase.

We are already seeing this happen as Bitcoin’s transaction fees have increased drastically the last months. This is not good news for Bitcoin, because the transaction fees are already becoming too high. If they increase drastically again in the future, the whole network may stop being viable. Other competitors are already introducing no-fee structures that can destroy Bitcoin. This can be counteracted a bit by the increase of Bitcoin’s price and value, but only time will show.

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