Maximum supply of bitcoins
We are all very familiar with probably the most important feature of Bitcoin, which is its limited supply of only 21,000,000 coins. This characteristic makes it similar to other goods that have a limited supply, such as gold . But what happens when we mine all 21 million bitcoins? How will miners continue to earn, and who will maintain the network? Find out in today’s blog.
Source: cointelegraph
Bitcoin mining
To begin with, we will briefly recall how bitcoin mining works. New bitcoins come into circulation through the process of so-called mining (Eng. Mining). Miners, that is, specially specialized computers for mining, add blocks in which transactions are stored, and in return receive a reward (Eng. Block reward). In the beginning, when Satoshi invented Bitcoin, each block awarded miners 50 bitcoins as a reward. This reward is halved every 210,000 blocks, or approximately every 4 years. Thus, we have had a total of three halvings so far, and the current reward per block is 6.25 bitcoins, and the next halving is scheduled for approximately April 2024. year, after which the reward per block will drop to 3,125 bitcoins. In short, you can see where this is going, over time the block reward will drop to 0 bitcoins. The question here is what will encourage miners to continue mining, and thus consume electricity, if there are no more rewards for them.
Source: cointelegraph
What will encourage miners?
If we take gold as an example, miners are not necessary. If all the gold miners disappeared tomorrow, gold would still be able to be traded because there is no network that the miners maintain, no transaction history that they have to keep. On the other hand, with Bitcoin, miners are essential, because it is they who validate or verify transactions and secure the network. They receive two types of rewards for their work: block rewards and transaction fees. A block reward is a fixed number of bitcoins awarded to the miner who first solves a mathematical problem and creates a new block, and transaction fees are small amounts that users pay miners to include their transactions in a block. According to estimates, the last bitcoin will be mined around 2140. years. After that, miners will have to rely only on transaction fees as a source of income. Will it be enough to cover their costs and ensure their profitability? The answer to that question depends on several factors, such as the price of bitcoin, the number of transactions, the size of the fees and the competition among miners. If we assume that bitcoin will be a highly demanded and valuable currency in the future, then it is very likely that transaction fees will be high enough to encourage miners to continue their work. For example, if the price of bitcoin is $100,000 and the average fee per transaction is $10, then a miner who creates a 1 megabyte block (which can contain about 2,000 transactions) would earn $20,000 in fees alone. This would be more than enough to cover the cost of electricity, equipment and maintenance. However, if the price of bitcoin is low and the number of transactions is low, then transaction fees may be too small to be profitable for miners. In this case, there could be a decrease in the number of active miners, which could threaten the security and stability of the network. To prevent this, the bitcoin protocol has a mechanism that adjusts the difficulty of mining according to the amount of available computing power. This means that mining will become easier if there are fewer miners, and harder if there are more miners. In this way, the balance between supply and demand for mining services is maintained, and ensures that new blocks are created on average every 10 minutes. So we can conclude that miners will be encouraged to continue their work even after all the bitcoins are mined, provided that bitcoin remains a popular and valued currency, this is of course something we expect, and the result will be an increase in price, and even small transaction fees to be sufficient earnings for bitcoin miners. These transaction fees will be the main source of their income, and the mining difficulty will be adjusted according to market conditions. This will ensure that the bitcoin network remains secure, functional and decentralized.
Source: cointelegraph
An additional source of income
In addition to transaction fees, bitcoin miners can have another way of earning that is related to their electricity consumption. Namely, miners can participate in the balancing of the electric grid, by adjusting their consumption depending on the state of supply and demand for electricity. When demand for electricity is high, miners can reduce their consumption and thereby free up capacity for other users. On the other hand, when the demand for electricity is low, miners can increase their consumption and thus use the excess energy produced. For this behavior, miners can receive a monetary reward from the network operator or energy producer, which will thereby save on the costs of maintaining the stability and security of the network. This type of earnings is especially interesting for miners who use renewable energy sources, such as wind and solar, which are variable and unpredictable in nature. In this way, miners can help integrate these sources into the grid, by transforming the energy they produce into flexible demand. Likewise, in this way, miners can not only reduce their impact on the environment, but also contribute to the development of clean energy and the sustainability of the electrical grid.
Source: cointelegraph
Conclusion
If you believe in the growth of the price of Bitcoin, as well as its entire network, then you also believe that over time transaction fees will be a sufficient source of income for miners. This is how Bitcoin was conceived from the first day, when Satoshi Nakamoto published the whitepaper, the rewards for the found block gradually decrease until they reach zero, and the only source of income within the protocol itself remains transaction fees. There is of course the newly invented idea of balancing the electricity grid, which has already been successfully implemented in some states such as Texas. In any case, we have indicators that tell us that bitcoin miners are successfully finding solutions to compensate for the dwindling prize money. We hope you enjoyed reading today’s blog, and that you learned something new, and we would love for you to share your thoughts on what will happen to Bitcoin when all the coins are mined on our social networks ( Twitter , Instagram ).
